Employee turnover is a severe problem in many countries of the world. It is a global phenomenon. This problem has captured the attention of human resource experts and practitioners.
Meaning of Employee Turnover
Employee turnover refers to the number or percentage of workers who leave an organization and are replaced by new employees.
Measuring employee turnover can be helpful to employers that want to examine the reasons for turnover or estimate the cost-to-hire for budget purposes.
In human resource management, turnover or staff turnover or labor turnover is the rate at which an employer loses employees. It indicates the time period employees tend to stay.
Turnover is measured for individual companies and their industry as a whole. If an employer is said to have a high turnover relative to its competitors, employees of that company have a shorter average tenure than those of other companies in the same industry.
High turnover may harm a company’s productivity if skilled workers often leave and the worker population contains a high percentage of apprentice workers.
Forms / Types of Turnover
Turnover may take many forms. It can be classified as “internal” or “external.” Internal turnover involves employees leaving their current positions and taking new positions within the same organization.
Both positive (such as increased morale from the change of task and supervisor) and negative (such as project/relational disruption or the Peter Principle) effects of internal turnover exist. Therefore, it may be equally important to monitor this form of turnover to monitor its external counterpart.
Internal turnover might be moderated and controlled by typical HR mechanisms, such as an internal recruitment policy or formal succession planning.
Internal turnover, called internal transfers, is generally considered an opportunity to help employees in their career growth while minimizing the more costly external turnover.
Many internal transfers leaving a particular department or division may signal problems in that area unless the position is a designated stepping stone.
Voluntary versus Involuntary
The two general types of turnover are voluntary and involuntary.
Voluntary turnover is when the employee chooses to leave for whatever reason. The term “quits” can be called voluntary turnover, and dismissal is an example of involuntary turnover.
Employees give several reasons for leaving their jobs. They may be accepting employment with another company, relocating to a new area, or dealing with a personal matter that makes it impossible to work.
When an employee voluntarily terminates the employment relationship, he or she generally gives the employer verbal or written notice of intent to resign from his/her job.
Involuntary turnover is caused by layoffs and similar actions where the company decides to leave, not the employee.
The employer initiates involuntary turnover due to poor performance or reduction in force.
Employee termination for poor job performance, absenteeism, or violation of workplace policies is called involuntary turnover — also referred to as termination, firing, or discharge. It’s involuntary because it was not the employee’s decision to leave the company.
Desirable and Undesirable Turnover
Turnover often has a negative connotation, yet turnover is not always a negative event.
For example, desirable turnover occurs when an employee whose performance falls below the company’s expectations is replaced by someone who meets or exceeds expectations.
It is desirable because poor job performance, absenteeism, and tardiness are costly – replacing a poor performer with an employee who does his job can improve its profitability.
Desirable turnover also occurs when replacing employees infuse new talent and skills, giving an organization a competitive advantage.
Conversely, undesirable turnover means losing employees whose performance, skills, and qualifications are valuable resources.
Demerits of Turnover
Turnover is costly. It causes many inconveniences for an organization. The main demerits are discussed below:
- There are both direct and indirect costs. Direct costs relate to the living costs, replacement costs, transition costs, and indirect costs related to production loss, reduced performance levels, unnecessary overtime, and low morale. Turnover involves different types of costs, such as the cost of replacement and opportunity costs.
- The impact, however, is not only financial; it also adversely affects employee morale. Although hard to quantify, poor morale creates a domino effect that negatively impacts efficiency and effectiveness.
- Another demerit is, decreased performance in the workplace. Less experienced workers are less likely to sell higher-value solutions and deliver optimized service.
- Many of the negative effects of turnover relate to performance quality. Companies with higher turnover may struggle to complete all necessary or important daily functions.
12 Causes of High or Low Employee Turnover
Organizations must first understand why employees leave for other positions to reduce turnover rates. Good people don’t leave good organizations-they. They leave poor managers! Good employees quit for many reasons.
The following is a list of the causes of employee turnover.
Rude behavior
Studies have shown that everyday indignities hurt productivity and result in good employees quitting.
Rudeness, fixing blame, backbiting, playing favorites, and retaliation are among the reasons that aggravate employee turnover. Feeling resentful and mistreated is not an inducement for a good work environment.
Work-life imbalance
With increasing economic pressures, organizations continue to demand that one person does the work of two or more people.
In such cases, employees are forced to choose between personal life and a work-life. This does not fit well with the younger workforce, which is compounded when both spouses work.
A mismatch between the job expectations
It has become too common for a job to significantly vary from the initial description and promised during the interviewing stage.
When this happens, it can lead to mistrust.
Employee misalignment
Organizations should never hire employees (internal or external) unless they are qualified for the job and in sync with the organization’s culture and goals.
Managers should not try to force a fit when there is none. This is like trying to force a size nine foot into a size eight shoe. Neither management nor employee will be happy, and it usually ends badly-employee turnover.
Feeling undervalued
Recognition does not have to be monetary. Everyone wants to be recognized and rewarded for a job well done. The most effective recognition is sincere appreciation. When employees lack recognition, their sense of dignity pursues them to leave the organization.
Coaching and feedback are lacking.
Ineffective managers put off giving feedback to employees even though they instinctively know that giving and getting honest feedback is essential for growth and building successful teams and organizations.
This may lead to employee turnover.
Decision-making ability is lacking.
Micromanagers appear insecure regarding their employees’ ability to perform their jobs without the manager directing every move. Organizations need employees to have ownership and be empowered!
Empowered employees have the freedom to make suggestions and decisions. But when there is a lack of decision-making ability, employees might try to quit!
People skills are inadequate.
Many managers were promoted because they did their jobs well and got results. However, that doesn’t mean they know how to lead. Leaders aren’t born; they are made.
People skills can be learned and developed, but it really helps if a manager can naturally get along with people and motivate them. Otherwise, they try to escape from leading.
Organizational instability
Management’s constant reorganization, changing direction and shuffling people around disconnect employees from the organization’s purpose.
Employees don’t know what’s happening, their priorities, or what they should do. This causes frustration leading to confusion and inefficiencies- finally, turnover.
Raises and promotions were frozen.
Raises and promotions are often frozen for economic reasons but are slow to be resumed after the crisis has passed.
Organizations may not have a goal to offer the best compensation in their area. Still, if they don’t, they better pay competitive wages and benefits while making their employees feel valued! This is a critical combination.
Faith and confidence shook.
When employees are asked to do more and more, they see less evidence that they will ultimately share in the fruits of their labor.
Organizations should look at their overall compensation packages when revenues and profits increase along with workload. Employees know when a company is doing well and expect to be considered critical enablers of that success.
Organizations must stop talking about their most important asset while treating them as consumables or less than valuable.
If an organization wants to empower employees to put out quality products at a pace that meets customer demand, they need to demonstrate appreciation through actions.
Growth opportunities not available
A lot of good talent can be lost if the employees feel trapped in dead-end positions.
Often, talented individuals are forced to job-hop from one company to another to grow in status and compensation.
In addition, the lack of career opportunities and challenges, dissatisfaction with the job scope, or conflict with the management can also be cited as predictors of high turnover.
However, each company has its unique turnover drivers, so companies must continually work to identify the issues that cause turnover in their company.
Further, the causes of attrition vary within a company such that causes for turnover in one department might be very different from the causes of turnover in another department.
Companies can use exit interviews to determine why employees are leaving and the problems they encounter in the workplace.
Ways of Reducing Employee Turnover
Employees are important in running a business; without them, the business would be unsuccessful. However, today’s employers are finding that employees do not remain for a long time in the same organization.
When companies hire the best-talented people, they should maximize the return on each employee’s investment.
They should listen to employees’ problems and make them feel involved, creating loyalty, reducing turnover, and allowing for growth.
Here are some tips for reducing employee turnover.
- Interview candidates carefully to ensure they have the right skills and fit well with the company culture, managers, and co-workers. This is highly practiced in Japanese firms.
- Encourage employee creativity with benefits, flexible work schedules, and bonus structures when necessary.
- Recognition and praise are cost-effective ways to maintain a happy and productive workforce.
- High employee turnover hurts a company’s bottom line. Experts estimate it costs upwards of twice an employee’s salary to find and train a replacement. And it can damage morale among remaining employees. The employee starts to think, “What else are they not being truthful about?” When trust is missing, there ‘can be no real employee ownership.
There are some other ways to lower turnover in the organization.
- Hiring the right people from the start
- Setting the right compensation and benefits.
- Reviewing compensation and benefits packages at least annually. In the early days of the management study, Frederick Winslow Taylor wrote that what workers most want is high wages – which would help them fulfill their basic physiological needs.
- Paying attention to employees’ personal needs and offering more flexibility.
- Make sure your best people are personally committed to the organization’s goals.
- Ensuring talented employees feel they are playing a significant role in reaching those goals.
- Recognizing and praising might be the most cost-effective way to maintain a happy, productive workforce.
- Creating a satisfying workplace.
- Praising after a project.
- Outlining challenging and clear career paths. Peter Drucker wrote, “Making a living is no longer enough,” and “Work also has to make a life.” If you want to keep good people, their work needs to give them meaning – they are doing something important and fulfilling their destiny. At the end of the day, these psychological needs are likely to be more important, perhaps more important, than the salary you pay”.