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  • Will Pemble

Employee Turnover - How Much Is Too Much?

Updated: Sep 16, 2021



The goal of this article is to learn why employees leave their jobs and what you can do to keep them. We will talk about how to measure employee turnover and how to reduce it so your business stays under control. The tools and processes you can use to achieve the right levels of employee turnover are straightforward and easy to implement.


Employee Turnover & Employee Retention


The first step in getting control of employee turnover is understanding how much it costs your company when an employee leaves. When you calculate the cost, don't forget to add in all of the expenses related to replacing that employee - things like advertising for open positions, interviewing new employees, training them on systems and processes they need to know...all of these are considered "turnover-related costs." Beyond these direct costs are the ripple effect costs your company will suffer when an employee leaves.


Calculate what each role at your company makes per year or month depending on if their pay varies or not. Add up the total annual salary plus benefits divided by 12 then multiply this number by the amount of time a replacement employee stays with your organization (the average is around three months). That's how much money you will spend while recruiting someone new who likely won't be as good at their position compared to your employee who just walked out the door.


Harvard Business Review puts the cost of employee turnover at around $30,000 when exit interviews are done. This number likely increases with the size of your organization and how long employees stay in their positions.


Finding out where employee turnover is hurting you: employee retention analysis

To get a better understanding of what's going on with employee turnover, take an honest look at who's leaving your organization and why they're doing it. Employee attrition analysis - also called employee retention/turnover analysis - can offer some clues into this question by looking at patterns that exist between high-performing staff members (the ones staying) and low performers (the ones leaving). It helps to follow up these conclusions by asking direct questions like "Why did our top performer quit?" or "What about losing them makes us feel


Factoring In Ripple Effect Costs


When an employee leaves a firm, most of the concerns center on the direct ramifications. What work are they not doing? Which clients are they not servicing? Some CEOs and executives may even console themselves by adding up their savings from not paying that salary for a month or two, or three. Ripple effect costs extend beyond the immediate expenses and can go a lot farther than you think.


One employee leaving can have a negative ripple effect on the employee morale of the remaining team. People may start to question why that particular person left and what could happen if they leave also? They might even go as far as assuming it's because there was something wrong with everyone already at their company, which is likely not going to make them feel better about staying where they are.

The loss of an employee from one department often impacts other parts of your business too - everything from sales teams who rely on referrals or past customers for future deals, to managers working closely with key employees in order to get projects done on time...all these roles suffer when you lose crucial people like this.


How To Measure Employee Turnover


When companies track turnover closely, the national average for employee turnover is around 20% - that means every employee who works for you will quit, on average, once a year. This number can be even higher in some industries like retail and customer service where the turnover rate is closer to 30%. The good news is this also means that 70% of your employees are sticking with their jobs for at least one full year.


Now, let's talk about you and your company by measuring your employee turnover employee retention rates. If you can collect the last five years of employee turnover data, you'll be in great shape to start understanding this crucial aspect of your business and increasing employee retention rate.


When measuring employee turnover rate, you'll need to know who all of your employees are, and how long they've been with the company. It might be helpful to have employee turnover rates for each department as well so that you can look at which areas are more likely candidates for churn.


The math is super simple when measuring employee turnover. Divide the total number of leavers in a month by the average number of employees for the same month, and you get your monthly turnover rate. For example, if you had 100 employees last month, and 2 of them left, that's 2/100, or 0.02. Expressed as a percentage, you have a 2% monthly employee turnover rate. This would be the overall employee turnover rate which breaks down into voluntary turnover (resignations) and involuntary turnover (firings). As irony would have it, sometimes the best way to reduce voluntary turnover is to increase involuntary turnover rates.

When you extrapolate that 2% number out to a 12 month timeframe, however, you end up with a staggering 24% employee turnover rate for the year assuming the average number of employees stayed the same.


That's 24 exit interviews (you're doing structured, data-driven exit interviews, right?), 24 job posts, at least 24 job interviews (closer to 96 if you're doing it right), 24 new 90 Day Onboarding Plans (you're doing 90 Day Onboarding Plans for all new hires, right?), and 24 rounds of direct employee turnover costs and 24 rounds of ripple effect costs.


Put simply, employee turnover is extraordinarily expensive, especially when one or two simple retention strategies can be used to boost employee retention.


Nobody likes to calculate employee turnover rate. It's depressing, embarrassing, and frustrating to confront a subpar employee retention rate. But having the courage to look that employee retention rate in the eye is the best way to manage employee turnover.


So, let's talk about how to reduce employee turnover by improving employee retention.

Making Sense of Your Employee Turnover Rate


Understanding the reasons why employees leave is both challenging and important. Do employees quit or are they fired? What are the reasons they give for leaving? Do employee retention issues differ based on any employee characteristics like years of tenure, age groups, gender or race?


The use of employee engagement and survey tools could help you identify employee satisfaction issues before they lead to employee turnover.


To find solutions for reducing employee turnover , it's important that organizations be able to pinpoint areas where efforts should be focused. This means knowing who is leaving and why - without this information, managers simply won't know which employees need attention or how best to impact them through training or incentives programs.





It's All About Job Satisfaction


When it comes to job satisfaction, something most people don't realize is that employee retention is a two-way street. As the old saying goes, "If you love what you do, you'll never work another day in your life." Unfortunately for many employees this simply isn't true.


In fact, up to 70% of job satisfaction can be attributed to three things: your relationship with coworkers and supervisors/managers; how much autonomy employees have over their tasks and projects; and whether or not they're able to use their strengths on a daily basis while doing meaningful work that makes an impact on others' lives outside of their office walls.


Employees want leaders who will challenge them both professionally and personally - it's easy for people get stuck in ruts at jobs where they feel unchallenged or where they aren't learning new things.


Employees want to feel like their work matters and that it's making a difference - if employees don't see how what they do every day makes an impact on the business, you'll have employee retention problems in no time flat because workers will get bored and become disengaged.

Team morale has got to be high in order to reduce turnover and retain employees. Labor statistics show again and again that employee engagement leads to higher productivity, lower turnover rates and increased customer satisfaction.


The best way for organizations to encourage employee retention is by building a culture where employees don't feel like cogs in an economic machine but rather as part of something bigger than themselves; this means creating opportunities for collaborative problem solving, allowing them the autonomy they need to do their jobs well (without micromanaging), providing learning opportunities that keep them interested in what's happening at the company now and within your industry over time, focusing on meaningful work done with others who are committed to achieving common goals - not just individual ones.


Brand Drives Culture And Process Drives Employee Retention


Your company culture is what employee retention is all about - it's the "secret sauce" that makes your organization stand out from others.


Your culture includes everything you do as an employer, including how employees are treated on a day-to-day basis, employee compensation and benefits programs, employee development activities (training opportunities), performance management processes and more.


While some companies have cultures that revolve around highly competitive environments or even cutthroat business practices where people view their colleagues more as competitors than teammates, there are also organizations with company cultures built around collaboration rather than competition.


One way to grow employee retention rates within these collaborative firms is by creating great workplace experiences for all of your employees through process design.

Specifically, employee retention is about making sure that the processes by which you make decisions and solve problems are inclusive of everyone in your organization.


This means giving employees access to decision-making practices like budgeting for employee training programs according to priorities set by people who work alongside them (and not just at their level), process design committees where front line workers can offer input into how certain projects or activities should be handled within the company - even down to establishing a customer feedback loop that allows customers' views on employee experiences with your business impact future employee development opportunities.


It's easy to Google around and come up with a few buzzwords or great ideas that might improve staff retention for a given time period. The best employees retention strategies are those that keep employee turnover rates down and employee engagement numbers up over the long haul.


That means making sure that you're not just focused on improving employee retention for a month or two but rather building your company culture around an authentic employee experience, communicating to employees how their work makes a difference within the larger context of what's happening inside your organization at any given time - because for many people this is more important than salary when it comes to deciding if they want to stay with one employer or move around every few years in order to continue growing as professionals. However, doing things like creating career paths where workers can see themselves moving up through organizational ranks based on dedication and hard work isn't enough either; you also have got to make sure that employee development plans are actually being put into place and followed through on!


Doing all of this requires a lot more than just establishing employee retention as an organizational goal; it also means putting in the work to make sure you're continually evaluating yourself (and your company) against what other organizations - both within and outside your industry - are doing.


Organizations need to be constantly asking themselves: "What's working? What isn't?" If they aren't, then chances are high that employee turnover rates will continue climbing throughout their organization.


The best way to build a strong business is by having employees who stay with your company for years rather than months or weeks - which can only happen when leadership teams create cultures where people feel like they're part of something bigger than themselves.


Stop Trying To Hire The Best People


Many companies spend time and money trying to attract top talent and high performers. Sadly, they fail to pay attention to whether the best team members are a poor fit or whether they actually create a competitive advantage in areas such as customer retention. Competitive salaries and retention efforts rarely work when employees feel that they lack the resources or professional development to realize professional and personal goals. Skilled workers are crucial to your success. But only if they have the right skills to grow your business.


If your business is growing and you're hitting revenue targets, it's easy to assume that employee turnover isn't a problem for you. But the reality is that employee retention challenges often exist even in successful organizations - especially if they don't have clearly defined career paths or meaningful opportunities for professional growth and development within their companies.

The best employees are more than just great at doing specific tasks; they also provide insights on improving existing processes while suggesting creative ways to solve problems by applying lessons from other industries, professions or experiences.


Employees who want to grow with an organization develop new skills through training programs and workshops offered either externally (by third parties) or internally (i.e., company-sponsored Those who feel stagnant in terms of professional development are more likely to seek out new challenges and opportunities with other companies.


Prioritizing employee retention is essential in today's business landscape where organizations face increased competition for talented employees, customers and investors alike.

Measure, Reward, Repeat


Measure what matters. For every employee in your organization, create a set of Key Metrics or KPI's (Key Performance Indicators) that not only measure employee engagement but also ensures the metrics are directly tied to company revenue and growth objectives.


For example, you might find that customer satisfaction is a strong predictor of employee retention rates. If so, then create KPIs designed to ensure your customers' experiences with your brand meet or exceed their expectations every time - this helps achieve better employee productivity levels and increases employee morale and job satisfaction in turn!


Reward what works. Create incentives for employees who go above-and-beyond when it comes to achieving KPI's by rewarding them either financially (i.e., bonuses), through promotions over co-workers or even public recognition from senior leadership teams within your organization during group meetings or other internal gatherings.


Repeat what's working. In some cases, employee retention goals can be met by simply continuing with the same strategies and tactics that have so far been successful in reducing employee turnover rates within your organization - especially when it comes to senior-level managers who are responsible for leading large teams or departments throughout your business. If you find yourself facing challenges related to employee retention at every level of your company, however, then chances are good that there is another issue present somewhere within its organizational structure (or perhaps even outside of it). There may not always be a fix-all solution but the key is identifying where problems exist and determining whether they're an external or internal issues before attempting any fixes!




In Conclusion


Employer Branding campaigns are fun. They're fun to think up, they're fun to implement, and they're even fun to pay for. But that is only 25% of the work. Branding Drives Culture. Culture Drives Process. Process Drives Results.


Unless you've got all four components in place and operating all day, every day, you will continue to struggle with employee turnover.

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