Staff turnover can often feel like an uphill battle in retention management. Imagine carefully selecting a new team member, only to watch them slowly slip away, leaving you scratching your head, wondering where things went wrong. This blog will delve deep into the causes of staff turnover, helping you understand the intricate reasons behind it and, most importantly, providing you with tools to prevent it.
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What Is Staff Turnover?
Employee turnover is when employees leave an organization for any reason, typically in search of better opportunities.It also includes the number of employees let go by the organization. An employee turnover rate accounts for how many employees leave a company in a specified time period.
According to the Bureau of Labor Statistics, employee turnover increased by almost 800,000 from 2020 to 2021. This massive exodus of workers from their employers, dubbed the Great Resignation, has plummeted employee morale, productivity, and work satisfaction, among other negative consequences.
There are also two types of turnover: voluntary and involuntary.
1. Voluntary turnover is the number of employees who choose to leave for their own reasons.
This is the group we will target most with the strategies discussed.
2. Involuntary turnover refers to those forcibly terminated due to departmental reductions or poor performance.
Companies with high employee turnover rates suffer dire consequences like lower productivity and increased workload on remaining workers, which leads to employee burnout, lower work satisfaction, and more. If unchecked, turnover can turn into a vicious cycle as new workers who are overloaded with work and lack the necessary skills leave for better workplaces. Unfortunately, this cycle leaves your organization right where it started.
How Do You Calculate Staff Turnover?
To calculate your employee turnover rate, add up the number of employees lost in a specific period of time. You'll also want to gather the average number of total employees you have.
The turnover calculation goes as follows:
Subtract the number of any temporary or seasonal employees from each amount. Typically, employee turnover rates don't include temporary workers. They can skew your numbers.
Now, divide the sum of employees who left by the average number of employees at your organization. Move the decimal two places (or multiply by 100) to get your turnover rate.
What is a good employee turnover rate
Of course, you can never completely eliminate employee turnover. There is a general consensus that 18% is a good benchmark for average annual employee turnover. Of that, approximately 6% should be expected due to involuntary turnover. It is important to remember that, just like any other metric, what a successful turnover rate looks like will differ widely between different companies, industries, roles, and even locations.
For instance, an acceptable turnover rate for a startup will in no way be the same as that of a Fortune 500 company. Some have even suggested that a 10% turnover rate is a healthy benchmark and anything over is concerning. The average turnover rate should simply be a guide to keep in mind what is realistic while setting goals that accurately reflect the state of your company.
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How Does A High Turnover Rate Affect Your Business?
Losing an employee comes at a price, especially for small businesses. High employee turnover can lower employee morale, which damages employee culture. Since you'll be down a team member, other employees must pick up the slack. This leads to increased workloads for your remaining employees. This can decrease overall productivity and lead to employee burnout. One quick tip we noticed that helps reduce burnout, is to help your employees run their company provided computers at peak speeds. We noticed that the other storage was taking up a lot of space in our computers, and once we cleaned up that space, our employees were able to run their computers significantly faster and more satisfied with their day to day work.
The greatest turnover cost is hiring a new employee to take their place. According to Built In, the average cost of replacing an hourly employee is $1,500. And this number only scratches the surface, as certain positions will cost more to replace.
15 Top Causes Of Staff Turnover
1. Lack of growth and progression
Lack of growth and progression is one of the main factors affecting turnover. According to a report from Gallup, 87% of millennials shared that opportunities for growth and development are one of the most important factors for career satisfaction. Roughly 70% of professionals in other generations echoed the sentiment.
Ambitious professionals are not content to secure a good job and collect paychecks until retirement. Many modern workers have career plans and desire to advance within their fields. Plus, professionals who keep their skills sharp typically spend less time unemployed if unexpectedly laid off. Calling a career a “dead-end job” is one of the most devastating professional insults. Human beings crave progress and aim for continuous professional improvement. Employees who stop learning, growing, and setting higher goals grow bored, restless, and anxious, and are likely to start seeking new opportunities elsewhere.
2. Overwork
When team members are required or feel obligated to work long hours or overtime, they may experience burnout and mental or physical fatigue. This can lead to reduced productivity and increased dissatisfaction. Conditions like long working hours, poor work-life balance, and excess responsibilities can contribute to overwork. These are some ways to avoid overwork: Reasonable time expectations, Realistic and manageable goals, Breaks between shifts and tasks.
3. No innovation
Meaningful work is a necessary condition for job satisfaction. Many employees long to contribute to society, solve complex problems, and affect change. Generating new ideas and ushering in the future is an enticing prospect. When companies fail to innovate and evolve, bright employees feel stagnated. Top talent may leave organizations for the chance to engineer a new product, found a company, or launch a service. If companies fail to innovate, employees may wonder about future job security, as companies who fail to evolve rarely continue to dominate the market.
4. Inconsistent management styles
Managers and supervisors ensure that teams set and meet goals, have the resources and training they need and receive constructive feedback. Sometimes, these leaders can be inconsistent in giving feedback to and disciplining team members. This can lead to team members feeling unsupported, unfairly disciplined, and unsure of how they can improve in their role, which can all impact team member satisfaction and turnover rates. When team members see that managers and supervisors use the same standards of evaluation and discipline for all team members, they are more likely to feel like equal parts of the team. In addition, consistent and regular feedback gives team members direction and purpose, which can help team members feel supported and encouraged to succeed.
5. Pay and benefits
Employee compensation is often a top reason for voluntary turnover. This is usually due to a lower-than-expected annual salary or a lack of raises. Inadequate employee benefits can also cause your talent to leave for better opportunities. According to a Pew Research Center survey, 63% of workers quit their jobs in 2021 due in part to low pay. 43% said poor benefits or a lack of benefits were factors in their departure.
To retain your employees, you need to stay updated on what your competitors are offering their employees. If your contenders offer a more comprehensive benefits package or a more competitive salary, they'll entice your employees to apply. Establishing yearly cost-of-living wage increases and offering benefits is a great way to keep your employees engaged and improve employee satisfaction.
6. Burnout
A job is important, but it often isn't everything to your employees. Your employees have a life outside your organization, and they shouldn't spend all of their free time working. If your employees constantly put in overtime, don’t take breaks, or never go on a vacation, their work-life balance will suffer. While this can lead to employee turnover, there are other adverse effects. Burnout can also cause physical and mental health issues such as depression and heart problems for your employees. You can offer breaks, paid time off (PTO), or flexible schedules to avoid employee burnout. You should also set realistic expectations for your employees.
7. Lack of Flexibility
Even before the pandemic, work redesign initiatives revealed a positive relationship between flexibility and voluntary turnover. For instance, Best Buy implemented flexibility in working hours which reduced turnover by up to 90% and increased productivity by up to 41%.
COVID-19 caused massive disruption to our work, prompting almost all organizations to switch to remote work. Although many have returned to the office, the disruption isn’t over as more workers clamor for hybrid work—a model where workers can work out of the office or from home. According to Microsoft’s Work Trend Index, flexible work is here to stay, and an approach to hybrid work is crucial for attracting the best talent and retaining existing workers. With more than 70% of workers preferring flexible work options, any current employer that fails to provide these options sees an increase in worker attrition.
8. Lack of Employee Recognition
Employee recognition is the timely formal or informal acknowledgment of a worker’s behavior or effort that aligns with the organization's goals and values. Recognition has plenty of benefits. Everyone wants a pat on the back for a job well done, and workers respond positively to such commendation and the accompanying recognition.
So, it’s unsurprising that bad managers who fail to recognize employees’ efforts and hard work have high turnover rates. Aside from recognizing good performers, employers must also lift workers who aren't performing their best. With tools like Nectar, you should be able to spot potentially underperforming workers, give them the support they need, and see more great performers on your team.
9. Incompatibilities between team members and management
Sometimes, managers and team members may not get along or collaborate well, and not effectively addressing these incompatibilities can lead to team member dissatisfaction for leaders and team members alike. Assessing how and why management and team members conflict can help organizations identify teams that can be reorganized to have people with similar or complementary personalities, work styles, skills, and interests. A sense of belonging and respect between team members and managers can improve communication, efficiency, and overall satisfaction.
11. Poor onboarding process
Onboarding is a way to set your new hires up for success by providing them with all the information and resources they need to do their jobs effectively. Some organizations fall short of this goal. According to the Society for Human Resource Management (SHRM), the absence of an onboarding process results in lower productivity and higher employee turnover. While most organizations want new hires to feel welcomed, culture integration only accounts for 27% of onboarding processes.
To avoid a high new hire turnover rate, your hiring and onboarding processes should help new hires feel welcomed and prepared. Introduce your new employees to their co-workers and show them around. Answer any questions they may have and inform them of any employee perks or benefits.
12. Absence of mentoring programs
Mentors are promoted five times as often as those not enrolled in mentorship programs. Their retention rates are also much higher than those without formal programs. One of the top reasons employees leave jobs is lack of career advancement. Mentoring programs are a fantastic way to attract talent and accelerate the growth of existing employees.
It’s not easy to start and launch a mentoring program. A mentoring platform that manages everything from registration to pairing and reporting can be beneficial.
13. Absence of true diversity, inclusion and belonging
78% of the workforce says that diversity, equity, and inclusion are important in the workplace. A study from Momentive also found that organizations prioritizing diversity, inclusion, and belonging are more likely to have advancement opportunities available to their staff. This is obviously an area of great concern for most of the workforce and, therefore, should be prioritized to continue reflecting employee desires.
14. Job Insecurity
Research by Glassdoor revealed that business outlook is a significant driver of employee attrition. Companies with a good outlook are more likely to retain their workers because they offer workers an expanding set of opportunities. On the other hand, struggling businesses will have difficulty keeping their workers.
Winckworth Sherwood’s report surveyed 1,004 employees and discovered that 51% of them see job security as a fundamental reason for staying with their employer. Job security is one of the critical things employees consider when assessing an organization's culture. Employees are more likely to be dissatisfied with the organization if their job is insecure.
15. Life events
Occasionally, employees leave organizations because of extenuating life circumstances and not due to any fault of the employer. Reasons for these departures may include moving, having children, caring for an ill family member, tending to medical conditions, enrolling in school, or starting a new business. The employee may simply need to take time to rest or may desire a career change. Continuing to work while tending to such situations may not be viable.
16. Organizational restructuring
Organizational restructuring is one of the main causes of involuntary turnover. Conditions such as changes in leadership, organizational sales or mergers, financial hardships, global events, or company pivots could trigger layoffs. In this case, the company decides to terminate employees instead of workers leaving of their own volition.
7 Effective Strategies For Preventing High Staff Turnover
1. Focus on the hiring process
When it comes to preventing staff turnover, the hiring process is crucial. Ensuring that you hire the right candidate for the job is essential. Employees who are not a good fit for their role are more likely to leave your organization despite any other retention strategies you implement. To prevent this, create a detailed job description outlining the qualifications, skills, and experience required for the position and information about your company culture and work environment. By providing a clear picture of what working at your organization entails, you can attract candidates well-suited for the role and deter those not.
Many organizations struggle with high turnover due to ill-suited hiring processes. It's crucial to not only focus on preventing current staff turnover but to improve the quality of incoming candidates through better sourcing and recruitment strategies. For those interested, exploring effective tools for sourcing candidates could be a game-changer in retaining potential talent who are a perfect fit right from the start.
2. Build employee engagement
Employee engagement is a critical factor influencing staff turnover. Studies show that only 21% of employees consider themselves highly engaged, and disengaged employees cost the U.S. over $450 billion annually in lost productivity. To combat this, encourage employees to voice their opinions to create an engaged workforce.
Using an engagement platform to ask the right questions can help reveal how employees truly feel about their roles, teams, and managers. Instead of lengthy annual surveys, consider using pulse surveys—short sets of questions sent regularly to measure employee engagement in real-time. HR chatbots can provide an always-on channel for employee feedback.
3. Get recognition and rewards right
Recognition and rewards are key components of employee retention. Employees who feel appreciated tend to work harder and stay longer. Unfortunately, over 80% of American employees do not feel recognized or rewarded. To build a culture of recognition, prioritize frequent and specific acknowledgment. Utilize a recognition platform that allows employees to accumulate and redeem points for rewards that are meaningful to them.
The Brandon Hall Group found that companies that recognize employees multiple times a month are 41% more likely to see increased employee retention and 34% more likely to see increased engagement.
4. Provide professional development opportunities
Offering professional development opportunities can significantly impact employee retention by establishing a link between learning, growth, and loyalty. Research shows that 94% of employees would stay with their current employer if they invested in their long-term learning. Implementing formal training programs can equip employees with the skills and knowledge necessary for their current roles and future responsibilities. Mentorship programs and stretch assignments can also be crucial in employee retention by facilitating knowledge transfer and creating a supportive environment for personal and professional growth.
5. Offer flexible work arrangements
Many employees now value remote or flexible work arrangements in light of the pandemic. Offering flexible hours, remote work options, part-time roles, job-sharing, and compressed workweek options can significantly increase employee satisfaction without compromising performance. Establishing core "in-office" days or allowing employees to choose when to work remotely can help maintain a healthy work-life balance and collaborative work environment.
6. Pay attention to communication
Effective communication is essential in preventing staff turnover. Strong communication skills can help resolve issues before they escalate and contribute to a positive work environment. Investing time in improving communication can prevent misunderstandings and promote collaboration among team members.
7. Offer competitive base salaries or hourly wages
Proper compensation is crucial for employee retention. It involves paying employees fairly for their time and work, adjusting wages for inflation, and increasing compensation as employees gain experience. Offering competitive wages compared to industry standards can help retain top talent and prevent high turnover rates. Proper compensation demonstrates that employees are valued and appreciated, fostering organizational loyalty and commitment.
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