What is Turnover? Voluntary versus Non-voluntary
Turnover is a blanket reference in that it actually refers to positions left and filled; the entire process from exit interview to on boarding anew, and everything in between. The word Attrition is typically used interchangeably with turnover, however attrition is specific to when the position is not refilled. The decision to not re-fill the role could be for a variety of reasons including organizational structure change; retirement; job elimination; or death. In a situation of true turnover, while the position is vacant, job sharing or the spreading out of job duties is common. This can lead to increased stress by piggybacking responsibility amongst remaining employees, broadening the burden of loss. The impact of turnover can ripple across the department involved, or depending on the position, the entire organization.
Voluntary turnover occurs when a valuable asset to your company leaves – the worst kind of turnover that an employer would evidently want to avoid. The organizational impact of losing high performance talent is much greater as high achievers perform anywhere from double to ten times more than average or mediocre talent. As high success contributors, companies should be actively attempting to retain these individuals. Companies that identity high-performance turnover and develop strategy to decrease it are ahead of the curve. Start the conversation by addressing the Big Bad T, rather than avoiding it, or worse, accepting turnover as inevitable by casting blame on the competitive marketplace.
Is there such as thing as good turnover? Yes, some Involuntary Turnover benefits an organization company such as lay-offs or dismissals due to some form of misconduct or unsatisfactory job performance. When low performing talent leaves the company, it allows opportunity to open the role up to a higher achiever or someone better suited, save the company salary costs through attrition, without subjection to production and/or operational impact. Regardless of the position to be filled, the replacement process requires considerable effort from Management and HR. The difference is, involuntary turnover is worth the effort, a positive trade-off in consideration of future outcomes.
The Cost of Turnover
Instead of factoring in turnover as an inevitable deficit item in your company budget, why not work towards it becoming a positive? It is possible, and it starts with understanding turnover in all its complex forms.
Most employers are aware that turnover comes with significant costs. Hefty headhunting fees, external training costs and loss of business are some quantifiable examples of direct costs. If your recruitment efforts are internal, turnover can be difficult to measure by a monetary value as the cost of time for an unfilled role is subjective. Let’s face it - time is money. The time, effort and associated costs of successful placement is what it takes to start seeing a return on your investment. In the “investment zone”, the employer is poring time and money into the new employee. In the “return zone" the employer is benefiting from the employee’s contribution to the company. The way to get there varies on the systematic path of successful on boarding and training. The goal for the employer is to get into the return zone as quickly as possible, all while ensuring the new employee is fully trained, engaged, satisfied and suited in their new role.
Turnover comes with significant costs that can be quite difficult to measure by a monetary value. Indirect costs include the burden of reactive measures to refill a role. Some examples of this include overtime, employee burnout and stress. Turnover can have a negative, indirect effect or “cost” on current employees as the unfulfilled job duties of the departed employee often falls on the backs of existing staff. A vacancy can also put the hiring manager into overdrive and force co-workers to pick up the slack. Indirect costs affect your bottom line, as productivity decreases, as does morale. Commitment depletion is damning to any organization, as commitment is an extremely difficult thing to regain from the employee base. What employers fail to recognize is the indirect cost of the trade off, and how it can offset workplace harmony.
You Can’t Manage What You Can’t Measure
If you don’t understand the true cost of employee turnover, and you don’t measure it, you can’t positively impact it. Peter Drucker is known to say “If you can’t measure it, you can’t improve it.” With the advancement of HR technology, it is now easier to measure the true cost of employee turnover.
Before commencing the recruitment process, a savvy employer would first complete a job analysis to gather insight into what contributions the departed employee had on success of the organization and what variables of the job affected their turnover such as long hours, high stress environment, work life imbalance, etc. These insights could in part be collected through the following avenues: employee exit interview, having conversations with the individual’s supervisor and colleagues or reviewing pulse survey results to get a feel for common departmental issues and complaints relevant to the role. Any newfound insight from the analysis can be utilized to fine-tune the role, positioning the next person for greater success.
Finding ways to engage employees especially within the first six months to a year is crucial to long term retention. Instilling a sense of belonging that in turn builds an employee’s commitment to the company should remain a hot topic for top executives. In addition, a strong HR team that can maintain steady human capital growth whilst exploring the hidden benefits of turnover and maximize them are key components to the overall strategy. Companies who reserve the necessary bandwidth to maximize desirable turnover initiatives address the good and bad components of turnover.
Measuring Turnover Costs
Companies with a strategy to address both good and bad turnover know their numbers so that they can craft realistic and achievable retention goals. Furthermore, successful organizations maximize their employee talent through desirable turnover strategy by creating and executing their targets to eliminate the bottom 5-10% of their employee performance population. That bottom population represent the underachievers, making room for higher talent with greater company fit. Within the same strategy, employee engagement and recognition efforts are made to keep the turnover rate of top performers (involuntary turnover) as close to the 0% mark as possible. With a strong recruitment team focused on organizational growth in addition to having the bandwidth to maximize on desirable turnover initiatives, managers can then tend to the needs and expectations of their largest population in their organization, the average performers.
By knowing where you are and where you’d like to be, employers can craft realistic and achievable retention goals. A general rule of thumb is to keep the involuntary turnover rate as close to the zero mark as possible through employee engagement and recognition efforts. Knowing the right way to turnover is having the right attitude towards it. It’s not just about getting your employees through the door, it’s about making them feel at home. By listening and tending to individual needs and expectations, employers create greater flexibility for job fit and cultural alignment as they build a progressively inclusive and diverse workforce.
The key to finding ways to engage employees is by instilling a sense of belonging. Fast-tracked commitment is hot topic throughout the recruitment cycle as many employees realize within the first six months of a new job whether they can see themselves working there long-term. The headache and logistical nightmare of an employee quitting within the first year can be prevented. Like any employer, you want candidates to be successful in their new roles and perform their expected job duties. However, employers should place equal importance on a new employee finding cultural fit and company alignment, and finding it fast. Otherwise, employers risk the development of turnover intention, and it’s harder to backpedal out of a situation of doubt than working with a blank canvas of promising opportunity.