Excessive employee turnover, like high blood pressure in the human body, is the silent killer of organizations. Revenue, reputation, productivity and profits are negatively impacted when employees leave unexpectedly. To reduce turnover and increase employee retention, organizations must define turnover, quantify the its costs and understand the reasons for it.
There are two broad categories of employee turnover: planned and unplanned. Seasonal workers, interns, student workers and retirees are those whose turnover is planned and generally does not cause harm to the organization. Sudden resignations, terminations for cause and no-shows are examples of unplanned turnover. They are damaging to the organization, both financially and in morale.
High turnover increases the cost of doing business. Recruitment, screening, interviewing and training all take time and cost money. Estimates vary based on the industry but according to the Society for Human Resource Management, it costs a minimum of $25,000 to replace one entry-level manager trainee in the retail industry.
Skilled technical positions such as welders, heavy-equipment operators, medical technicians and truck drivers are equally costly to replace.
Also, productivity is negatively affected. There’s a constant stream of new workers at the beginning of the learning curve. It takes time on the job, months and sometimes years, to master the skills necessary to achieve an acceptable level of output. Lower productivity means reduced revenue, decreased profits and a diminished competitive advantage.
Morale also suffers when there is a revolving door in the organization. Those who remain become discouraged by the disruption of employees leaving and new people taking their place. They also begin to question their own loyalty.
Finally there is the expense of training. Newly hired workers sitting at a computer viewing training videos or shadowing a seasoned worker while being paid to learn their job have yet to contribute to the daily output. The excessive expense of hiring and training has a negative effect on the bottom line. Money that could be used for marketing, training, equipment upgrades, expansion or other productive uses is diverted to replacing workers who are leaving. This erodes the organization’s competitive position and diminishes the goodwill it has earned in the community.
To solve the problem of high turnover, organizations must first discover the reasons for it.
A good place to start is by examining the work place. Workers value safe conditions, clear communication, consistent leadership and fairness in policy enforcement above salary, according to studies. Exit interviews are valuable tools for uncovering the real reasons employees leave.
A second cause of high turnover is impulse hiring. Managers who are chronically short-staffed will sometimes hire a candidate who is unqualified for the position, just to fill a need. These hires soon fail, making the problem worse and causing more damage to morale and to the company’s good name.
Finally, people leave due to inadequate training. Like impulse hiring, this becomes a vicious cycle. Workers are not properly trained due to the organization being short staffed. They then become discouraged and quit, thereby making the staffing shortage worse.
The opposite of employee turnover is retention. That begins by hiring the right candidate, providing thorough training, clear communication and a working environment that is safe. Loyalty is earned over time through fair treatment and consistency in all aspects of the employee/employer relationship.
By reducing turnover and increasing retention, employers strengthen their financial position, their completive edge and their reputation in their industry.
Michael Boyd is the program manager for Business and Workforce Development at Hagerstown Community College. He can be reached at email@example.com or 240-500-2490.