Employee Turnover: Definition, Types, Causes of Employee Turnover

Employee Turnover: Definition, Types, Causes of Employee TurnoverEmployee turnover is a serious problem in many countries of the world.

In fact, 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 the context of 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 for their industry as a whole. If an employer is said to have a high turnover relative to its competitors, it means that employees of that company have a shorter average tenure than those of other companies in the same industry.

High turnover may be harmful to a company’s productivity if skilled workers are often leaving 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, and therefore, it may be equally important to monitor this form of turnover as it is 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.

A large number of internal transfers leaving a particular department or division may signal problems in that area unless the position is a designated stepping stone position.

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 the dismissal is an example of involuntary turnover.

Employees give a number of 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 decision for an employee to leave is made by the company and not the employee.

Involuntary turnover initiated by the employer 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 an employee whose performance falls below the company’s expectations is replaced by someone whose performance 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 the company’s profitability.

Desirable turnover also occurs when replacing employees infuse new talent and skills, which can give an organization a competitive advantage.

Conversely, undesirable turnover means the company is losing employees whose performance, skills and qualifications are valuable resources.

Demerits of Turnover

Turnover is very expensive. It causes many inconveniences for an organization. The main demerits are discussed below:

  • Turnover involves different types of costs such as the cost of replacement and opportunity costs. There are both direct and indirect costs. Direct costs relate to the living costs, replacement costs and transition costs, and indirect costs relate to the loss of production, reduced performance levels, unnecessary overtime, and low morale.
  • The impact, however, is not only financial; it also adversely affects employee morale. Although hard to quantify, poor morale results in 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.

Causes of High or Low Turnover

In order to reduce turnover rates, organizations must first understand the main reasons employees leave for other positions.

Good people don’t leave good organizations-they leave poor managers! Good employees quit for many reasons.

The following is a list of what might be considered causes for employee turnover.

  • Rude behavior.
  • Work-life imbalance.
  • Mismatch between the job expectations.
  • Employee misalignment.
  • Feeling undervalued.
  • Coaching and feedback are lacking.
  • Decision-making ability is lacking.
  • People skills are inadequate.
  • Organizational instability.
  • Raises and promotions frozen.
  • Faith and confidence shook.
  • Growth opportunities not available.

Rude behavior

Studies have shown that everyday indignities have an adverse effect on 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 current, younger workforce, and this is compounded when both spouses others work.

Mismatch between the job expectations

It has become all too common for a job to significantly vary from the initial description and what was 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 culture and goals of the organization.

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

Everyone wants to be recognized and rewarded for a job well done. Recognition does not have to be monetary. The most effective recognition is sincere appreciation. When employees find an absence of 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 very 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 has a natural ability to get along with people and motivate them. Otherwise, they try to escape themselves from leading.

Organizational instability

Management’s constant reorganization, changing direction and shuffling people around disconnects employees from the organization’s purpose.

Employees don’t know what’s going on, what the priorities are or what they should be doing. This causes frustration leading to confusion and inefficiencies- finally, turnover.

Raises and promotions 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, but 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 shaken

When employees are asked to do more and more, they see less evidence that they will ultimately share in the fruits of their labor.

When revenues and profits increase along with workload, organizations should take another look at their overall compensation packages. Employees know when a company is doing well, and they expect to be considered as critical enablers of that success.

Organizations need to stop talking about employees being their most important asset while treating them as consumables or something less than valuable.

If an organization wants to empower employees putting 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 in order to grow in status and compensation.

In addition to these, 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 own 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 find out why employees are leaving and the problems they encountered in the workplace.

Ways of Reducing or Preventing Turnover

Employees are important in running a business; without them, the business would be unsuccessful. However, more and more employers today 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 their investment of each employee.

They should take much time to listen to employees’ problem and make them feel involved and this will create loyalty, in turn, reducing turnover allowing for growth

Here are some tips for reducing employee turnover.

  1. Interview candidates carefully, not just to ensure they have the right skills, but also that they fit well with the company culture, managers and co-workers. This is highly practiced in Japanese firms.
  2. Encourage employee creativity when necessary with benefits, flexible work schedules, and bonus structures.
  3. Recognition and praise are a cost-effective way to maintain a happy and productive workforce.
  4. 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 study of management, 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 offer more flexibility.
  • Making sure your best people are personally committed to the goals of the organization.
  • Ensuring talented employees feel they are playing a suitably significant role in reaching those goals.
  • Recognizing and praise might just be the single most cost-effective way to maintain a happy, productive workforce.
  • Creating a satisfying workplace.
  • Praising at the completion of a project.
  • Outlining challenging, and clear career paths. Peter Drucker wrote, “Making a living is no longer enough,” “Work also has to make a life.” If you want to keep good people, their work needs to provide them with meaning – a sense they are doing something important, that they are fulfilling their destiny. At the end of the day, these psychological needs are likely to be as more important, and perhaps more important, than the salary you pay”.
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