Top Reasons for High Employee Turnover

  • Posted by: J. Kent Gervasini |
  • 3/31/16 |
  • 8:48 PM
  • 2226 Views
Top Reasons for High Employee Turnover

Let's Think About It!


What is Employee Turnover?
In its basic sense, employee turnover refers to the number or percentage of workers who leave an organization and are replaced by new employees. Another thought is that employee turnover is a measurement of how long your employees stay with your company and how often you have to replace them. Any time an employee leaves your company, for any reason, they are called a turnover or separation.



Two Main Categories of Employee Turnover

  1. Voluntary turnover is when an employee quits. This can be due to finding a better position, conflict with a supervisor, a personal reason, such as to stay home with a family member, or simply, for no specific negative cause other than wanting a change.
  2. Involuntary turnover is when an employee is laid off or fired, generally due to reduction of staff becasue of a business downturn or change in business direction and reorganization.  On the other hand, the employee takes some action that is cause for termination, such as theft, or not meeting a basic minimum performance standand, such as on-time attendance. 

Employee turnover is an important statistic for any company, organization or government agency—it assists you in determining how often you will need to hire new employees. A high turnover rate means that your employees average a shorter tenure with your firm; when the turnover rate decreases, average employee tenure goes up. What does this mean for your firm? 

Lower Turnover Could Mean Increased Profit Margins for Your Firm
The lower the turnover rate, the less money your firm spends on:

  1. Advertising and internal recruiting
  2. External recruiting fees
  3. Resume review
  4. Prescreening - telephone, Skype or FaceTime 
  5. Interviewing (you know, that long process... HR interface, 1st, 2nd, 3rd and "team interviews", wait for the CEO to return from vacation...etc.)
  6. Background checking and drug testing
  7. Employment verfications
  8. Onboarding to include legal workforce verification (I-9, federal E-Verify and Colorado Affirmation of Legal Work Status)
  9. New-hire administrative expenses - payroll and benefit set-up, computer and email assignment and log-on; cost of business cards, security cards and badges...etc.
  10. New-hire orientation and training
  11. Supervisory and management time
  12. Overtime paid to employees who have to cover for employees who are no longer there and
  13. Any other costs associated with replacing employees for your organization 
  14. Unemployment costs for those who no longer work for the firm


Employee Turnover Rate - A Simple Example
An organization's turnover is measured as a percentage rate, which is referred to as its turnover rate. Turnover rate is the percentage of employees in a workforce that leave during a certain period of time, usually over a fiscal or calendar year. The turnover rate for your company tells you, on average, how many times a single position within your company was occupied by a different employee throughout the year.
 

Example - Turnover Rate Calculation

Beginning of the year a business had 40 employees; during the year 9 staff resigned with 2 new hires, thus leaving 33 staff members at the end of the year. The organization's turnover rate is 25%.

NELDY
              _________________   X 100%
(NEBY + NEEY) / 2

                                  NELDY = Number of Employees Who Left During Year
                                  NEBY = Number of Employees Beginning of the Year
                                  NEEY = Number of Employees End of the Year



Top 6 Reasons for High Employee Turnover

  1. Higher Pay: Some employees are only motivated by higher pay and develop their entire career using this strategy. It is what it is, so let's move on. At minimum, Denver employers must stay abreast of wages and benefits in their industry, especially and specifically for those key positions that make a day-to-day sustainable difference to their organization. The Denver employer knows that our candidate market is highly competitive at this time, and dialed-in employers know that Denver's February unemployment rate is a mere 3.1%. Therefore, to stay competitive, employers in the Denver area are offering higher wages and other perks to attract and retain top talent.  
  2. Not Engaged: Possibly they were not the right hire to begin with...and more importantly, not the right cultural fit.
  3. High Performers are Bored: Some of us need to be challenged frequently or we get bored. There are many root causes for boredom and you may never get the answer...so focus on employee development and challenge them with newly expanded roles or special projects.
  4. Employee is Poorly Managed: In many employee's job titles, the word "Manager" is included, but yet they have never managed anything, let alone managing employees, one of the most important business responsibilities. Have you ever witnessed a dysfunctional employer / employee relationship. The direct relationship between employees and their managers is paramount. Who is currently managing or supervising your employee assets? Take a look, think about it!
  5. Coaching, Mentoring, Feedback: Effective managers know how to improve employee performance by consistently coaching and giving feedback to their employees. Most importantly, they communicate clearly and directly.
  6. Work-Life Imbalance: Are any of your employees working an extensive amount of overtime (nights, weekends)? Also, remember it's 2016, and our workforce has changed and continues to change. For example, be aware that the millennial workforce of today does not necessarily embrace the "man in the grey flannel suit" philosophy. How are your millennials performing? Let's think about it; they might need a little bit of #5, and throw in some #3 while you're at it.

Source: Amercian Staffing Association, wikipedia.org

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