The Pros and Cons of Employee Turnover

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Employee turnover is expensive.  Job churn boosts hiring, onboarding, training, and engagement costs.  Depending on the level and skill of an employee at separation, you could pay from half to twice the cost of their annual salary to land a good replacement candidate.

In August, the Bureau of Labor Statistics (BLS) reports there were 2.7 million quits in August of this year.  Quits are voluntary separations undertaken by an employee.  The number of quits remained steady in the last few months, with a slight uptick over a 12-month span.  Employees quit for a lot of reasons, oftentimes because they find more engaging, appropriate, or higher-paying work.

After an employee quits, it is easy to focus on dollars lost, and the restart of the hiring cycle. Instead, step back and consider the composition of the workforce you are trying to build.

What you lose by job churn

If you are a start-up, you may run on fewer than 15 employees.  It is easy to see when a particular hire is creating more friction than value.  Larger, or more established, companies are likely to carry a poor-performing hire for a long time—particularly if his or her performance is good, even if that employee’s fit with your company culture is bad.

A couple of bad actors, especially in management positions, can directly impact job satisfaction for high performing, good-fit talent.  When a valued employee quits, the results reverberate throughout the workforce in ways that include:

  • Loss of information: When talent walks out the door, they take more than specific job knowledge.  They take the reciprocity acquired while they were within your workforce—relationships, efficiencies, and institutional knowledge.  These assets are irreplaceable and must be redeveloped by the new hire, over time and with job-specific training.
  • Morale: When a well-regarded employee leaves, it impacts those on their team and in their office.  It is human nature for remaining employees to wonder about the workplace, and whether they should also be looking elsewhere.  For some, it may be a reminder of their own dissatisfaction. Depending on a decision to replace the employee, remaining workers may be pressed to take on more.  Team members overwhelmed by extra responsibility become less engaged—eventually taking their own walk out the door.
  • Overall productivity: When a well-trained, well-liked employee quits, regardless of their position, it is a loss to the overall productivity of a company.  If they were on the customer front line, the churn is more visible, and disruptive.
  • Hiring cycle: You know the costs of the recruiting and onboarding journey.  If a good employee quits, it is a loss across the board.

Change happens.  But when it happens too much, it is time to take a look at your hiring and retention processes.  Notes the Wall Street Journal, “hiring the right people from the start, most experts agree, is the single best way to reduce employee turnover.”

Create an adaptive workforce

The loss of any employee offers opportunity.  For poor performers, there is a good chance to correct the situation with a new hire.  When skilled talent quits, it requires a look at engagement.

There has never been a better time to take advantage of HR tech tools.  Reduce time spent on repetitive and detail tasks by using high quality staffing software.  Use your software to fine tune choices, maintain records, and keep recruiting efforts organized.

Spend more time with managers, and administrators, to create a holistic plan for building a workforce that meets your present and developing needs.  Recruiting is never finished—it evolves into engagement of the talent you put in place.  As we discussed in an earlier article, key drivers of engagement include:

  • Company concern for careers: Provide training, career planning, and skills refresher courses at all levels of your organization.  In addition to growing a skilled workforce informed about compliance and regulatory issues, you create a culture that shows value for the individual journey.  Individual engagement is essential in the current job market.
  • Competitive pay: A competitive salary, benefits, and bonus package builds engagement.  Everyone takes note of fair, appropriate compensation packages that include health, and life insurance, as well as opportunities for retirement contributions.  For some, lack of job flexibility, like telecommuting, can be a deal breaker.
  • Company culture: Create, and maintain, a company culture that invites employees to care about the bigger picture.  When your employees feel your company is a great place to work—they are less likely to look elsewhere.

Employee turnover is not always a bad thing.  Whether it is a loss—or gain—keep your hiring practices sharp as you work to build a relevant, adaptive workforce for your company.

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