Understand Employee Turnover: Why It Matters & How to Prevent It

Every time an employee leaves a company, their departure will have a certain number of negative effects on the company. The employers would have to incur these detrimental effects in the company’s finance, morale, and future development. The mitigation and control on such rate of employees’ departure are essential to the overall success of any business operation.

 A low employee turnover rate is statistically beneficial in improving the quality of your company and its workforce. However, it is not an easy task to tackle. In addition to the actual problem-solving of the issue, the identification of the cause of such a phenomenon is itself a big headache for any employer.

What is the cause of employee turnover? Are the turnovers positive and negative to the company? These are all potential issues that the employers might have to face when they are in the process of understanding such figures and trying to prevent a high employee turnover.

In terms of human resource, the term, turnover, means the replacement of employees. Such a number is often calculated in percentage, and thus the name turnover rate. Employee turnover or employee turnover rate is the number of employees that leaves a company over a certain period of time.

High Employee Turnover Rate

A high employee turnover is characterized by the figure where more than 28% of an organization’s new employees leave within the first 90 days of their employment, while a healthy employee turnover should not exceed more than 10% of that same number.

Healthy Employee Turnover Rate

It is necessary to let go of underperforming personnel sometimes, and thus a healthy employee turnover rate means a proper replacement and adjustment of the current workforce. On the other hand, a high employee turnover rate can be a symptom of poor management, internal miscommunication, and many other underlying problems within the organization’s operation.

Types of Employee Turnover

As previously stated, employee turnover only suggests the leaving of employees. Yet, there are many different types of employee turnovers according to the cause and effect of the turnovers themselves. Here we will introduce 2 different classifications within which there are two types of employee turnover.

Voluntary and Involuntary Turnovers

As the name suggests, voluntary turnover happens when the employees resign from their positions willingly as a result of their own employment decision, while involuntary turnover indicates that such decision is done by the employer or other parties or factors other than the employees themselves.  

Voluntary turnover can be driven by the employees’ lack of advancement opportunities in their current work environments or better career opportunities elsewhere. On the other hand, involuntary turnover is usually caused by employees’ poor performance or staff conflict, where the employer plays a big part in contributing to such turnover type.

Desirable and Undesirable Turnovers

Rather than focusing on the cause of the turnover, desirable and undesirable turnover focus on the effects of employee turnover based on whether they are positive or negative, in the other words, desirable or not for the employers.

Undesirable turnovers are characterized by their negative effects on the business operation, such as the decline in the organization’s overall productivity and the increasing cost in hiring and training new employees. Yet, desirable turnover can benefit the company by replacing poor-performing employees, or unfit characters in the operation.

Being a crucial index in the diagnosis of a company’s well-being, employee turnover rate helps the employers better understand their operations and workforce. Such figure can be simply calculated, using the following formula:

The following list concludes some of the common reasons behind employee turnover:

1. Lack of Career Development Opportunities

Employees value career development. In some cases, they will even settle for lower compensation in exchange for better advancement opportunities. According to Zavvy, about 94% of employees would stay longer at a company where development opportunities are offered. On the contrary, turnovers can occur due to the absence of such opportunities.

2. Overwork/ Burnout

Burnout is a massive hindrance in employee retention. According to a study done by the Engagement Series by Kronos Incorporated and Future Workplace, more than 40% of HR managers believe that burnout is responsible for at least 20% of the annual workforce turnover.

3. Negative Feelings towards Management

Resentment towards management is one of the most common reasons why employee turnover takes place. Miscommunication or conflict between the management and workforce is the reason behind more than half of the voluntary employee turnover in the workplace.

4. Toxic Work Environment

Toxic work environment is not only an influential reason behind many of the employee burnout, but it is also a major contributor to employee turnover. Bad leadership, gossiping, exclusion, or simply workplace bullying, can all be reasons that constitute a toxic work environment.

5. Lack of Work Life Balance

Employee’s mental and thus psychosomatic well-being is closely related to their willingness to remain at a position. Factors such as commute or extensive off-clock workload, can affect an employee’s work-life balance greatly.

6. Involuntary Departure

Sometimes, it is necessary to cut off toxic employees or poor performers for the overall well-being of the company. Such departure will subsequently result in an increasing number of employee turnover rates.

7. Natural Career Progression

Natural career progression might influence the employee’s decision on whether they should remain at their current position. Retirement and career changes are examples of career progressions, and such departures are also considered as employee turnover.

8. Family or Life Event

Sometimes, employee turnover will have nothing to do with the bad work environment or the employee’s dissatisfaction at work but simply their circumstances in life. Underlying health problems, family issues, and personal development in life are all reasons that might change the employee’s career trajectory and thus the company’s turnover rate.

9. Internal Promotion or Transfer

For organizations that have an extensive network of branches or seed companies, internal transfers or promotions can affect the turnover rate in the branches, as individual employees transfer from one to another.

10. Better Offers from Other Companies

Capable employees are constantly offered opportunities by competitors. Voluntary turnover is often driven by employees’ acceptance to a better offer elsewhere.

As employee turnover can be inimical for business, it should be the employers’ best interest in preventing negative employee turnover. The following list should provide some insights for employers who wish to avoid employee turnover that are undesirable.

Optimize Your Recruitment Process

A right teammate is a much better solution to curb the problem of employee turnover than a later prescription to keep a wrong person for the job. Reviewing your job description and finding a better definition of the role are examples which employers can incorporate in finding the right candidates that will not only fit the job itself but the company’s culture as a whole.

Creating a Good Onboarding Experience

Initiate a first impression of the company and operational team with an onboarding process that is transparent, informative, and professional, as it is the perfect opportunity for the newly hired to set their expectations and understand the company culture. Studies suggest that a good onboarding experience can increase employee retention by 3 years.

Encourage Employees to Share Their Thoughts

Employee engagement is key in boosting the morale and productivity of the workplace and preventing toxic work environments, which consequently result in better employee retention. By encouraging employees to share their thoughts, not only can employers create a better work environment, but it provides direct information about the employees’ well-being.

Respond to Employee’s Feedback

Every feedback from your employees are potentially constructive suggestions in mitigating the underlying problems in your company’s internal operation. Therefore, employers should pay close attention to such valuable information and respond accordingly, and both parties can then establish a healthy platform for better communication.

Regularly Review Salary and Benefit Policies

As studies have shown that less than half of the employees will remain at their current positions if they do not need the salary, financial compensation is evidently a direct influence on your employees’ well-being, work-life balance and thus their willingness to stay. Employers should constantly review their compensation policies to avoid valuable personnel being poached.

Final Takeaways

Employee turnover, although necessary at a lower rate, can insidiously devastate the productivity, and worse, the morale of a company. We encourage employers to explore further on this extensive subject in addition to this article, as we summarize some key points of this article.         

•   Employees’ Welling Being
Burnouts, lack of advancement opportunities and work life balance are very detrimental to the employee’s overall performance and subsequently their willingness to stay. As burned-out employees are 50% more likely to seek other opportunities, employers should be aware of these factors to make sure that the employees are not stressed out of their positions.

•   Communication and Inclusion
Toxic environments are often a result of absent workplace inclusion, which are perpetrated by pre-existing malpractices and miscommunication in the workplace. The employer’s active presence in responding and communicating with the workforce can drastically decrease the likelihood of a discouraging work environment that is prompt to employee turnover.

•   Not Every Turnover Is Bad
A healthy organization will always experience employee turnover, as it helps filter out the bad influence and underperformers. Therefore, it is up to the employers to discern the right company policies to maintain a reasonable rate of employee turnover. They should constantly review their recruitment and compensation policies to minimize the risk of undesirable turnover.

--- Originally written by Jim Mao ---