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No company can expect their workforce to stay unchanged forever. Over time it's normal for employees to leave, following new opportunities while new employees come in to take their place. But when businesses begin to see employees leave at a higher rate than usual, then it can become a problem. High employee turnover can lead to multiple negative outcomes for businesses, such as increased costs, disruption of operations and the morale of those still employed at the organization. So, what are the real causes of high employee turnover? Here’s what you need to know.
What is High Turnover?
High employee turnover refers to when more employees leave an organization than it brings on board over a certain period of time. Companies tend to see a normal average rate of turnover as part of natural staff changes due to external circumstances. A high turnover rate is usually seen when one or more of the contributing factors are higher than normal, resulting in a significantly higher rate of employee departures that is above the industry and sector average.
Why Employee Turnover is a Problem?
When an organization experiences higher than average staff turnover rates then there can be serious consequences for the business as a whole. In the most extreme cases, these can include becoming unable to operate efficiently, damaging customer relations and even financial losses.
The main problem with high employee turnover lies in its cost. The cost of recruitment, training and onboarding can be significant. Furthermore, the time lost due to not having a full staff can be even more costly. This is especially true for mission critical roles that business operations may depend on, such as in high production environments.
The situation only becomes worse when highly skilled employees or those with years of experience leave the organization in search of better opportunities elsewhere. It then requires considerable effort from the remaining workforce to train new employees and help them reach their maximum performance level and contribute towards the success of an organization.
What is a High Turnover Rate?
A high employee turnover rate is typically considered to be any rate that exceeds the industry average. This can vary depending on the sector and size of the business, so it's important to establish a benchmark for comparison purposes. An acceptable employee turnover rate would generally range from 10-20% per year, with anything higher than this usually being considered as high.
But again, it's important to recognise that different industries have different expectations for turnover. For example, the retail industry is typically known for higher employee turnover than more stable sectors such as engineering or medical services.
What Are The Causes of High Employee Turnover?
The primary causes of high employee turnover can be broadly categorized into two main categories: external and internal factors. External factors are those outside the control of an organization, such as the salary offered by competitors or changes in the economy. Meanwhile, internal factors are those that an organization can control through corporate policies, practices and procedures.
Taking these two categories into consideration, let us look at the most common causes of high employee turnover:
1. Compensation
The compensation package will always be the top, or near top priority for most employees. People need to be able to sustain their lives, pay their rent/mortgage and ensure their families can have decent medical care. If these basic necessities of life can't be met, then you can expect your employees to look elsewhere.
2. Poor Working Environment
Your employees are expected to spend a third of their entire day in the office and so this is a place that needs to be comfortable and rewarding in order for them to stay. If the working environment is poor, with cramped cubicles, inadequate facilities and a lack of resources, then this can be a real turnoff.
3. Limited Career Path
Many employees leave organizations because of their feeling that there is no opportunity for career development and progression. When there's no convincing career path available or attractive prospects, workers may look elsewhere for better opportunities.
4. Poor Management
The job of a manager is certainly not an easy one. They are expected to juggle multiple responsibilities, while also motivating and leading their team. And while it can be difficult to get the most out of your employees, if they feel that they are not being appreciated, their performance and engagement can suffer and soon they will be out the door.
It's important that managers avoid issues like favoritism, micromanagement and unrealistic expectations, as these are all factors that can lead to a high turnover rate.
5. Unhealthy Organizational Culture
A company's culture is an important part of how it functions and how its employees feel about working there. A positive organizational culture can inspire employees and lead to massive employee engagement. But on the other hand, a toxic work environment can be a major reason why employees quit their jobs.
Organizations must strive to create an open and healthy culture where employees feel valued, respected and secure. If they don't, then it's likely that they will soon find themselves with an employee turnover problem.
6. Lack of Flexibility
In today’s fast-paced world, many people are looking for employers that value their personal life as much as their professional one. When companies fail to provide adequate flexibility or fail to support their employees’ personal needs, the result often leads to them leaving for organizations who will.
Particularly now, in a post-Covid world, having the option to work from home has become a norm that many employees will expect.
7. Lack Of Training And Development Opportunities
One of the most common reasons reported by existing employees is a lack of training and development opportunities offered by current employers. Employees need to be challenged and they need to have chances at expanding their skillset. When such prospects are limited, people often look for it elsewhere.
8. Boredom
You can't expect a person to do the same thing over and over again forever without feeling bored or uninspired. If an employee is constantly doing the same task and there's no room for creativity, they are likely to start looking elsewhere for opportunities that will challenge them.
9. Poor Recruitment Process
Sometimes, in order to understand why an employee leaves, you need to look back far before they were hired. If your hiring process is flawed then it's possible you are bringing in candidates who are a poor fit for your business and will inevitably leave before long.
Poor recruitment can cause a lot of damage, so it's important to build an effective process that helps you identify the right candidates and an interview process that ensures the right fit.
10. Poor Systems
Finally, if your systems are outdated, cumbersome or unreliable then it can create a lot of stress for your employees. If they have to spend too much time dealing with technology issues or navigating complex processes, then there's no doubt they will be looking at alternatives.
How to Reduce Employee turnover?
The most effective way of reducing high employee turnover rates is to address the underlying causes discussed above. Here are five steps organizations can take to reduce their staff turnover:
1. Invest in Employee Training and Development
If you want your employees to invest their career in your company, then you need to simultaneously invest in their career. Create clear development plans and training regimes that show your staff that you're invested in their growth.
2. Create Attractive Professional Paths
A career path that offers attractive prospects should be available if an organization wants to keep its best talent. By developing clear career paths that reflect specific roles within an organization, it can provide vertical progression towards greater responsibilities and rewards as well as giving employees something tangible to work towards.
3. Offer Competitive Salary & Benefits Packages
This is an area that employers simply need to bite the bullet on. It doesn't matter how many related benefits you offer, if your compensation package isn't competitive to the industry, you simply are not going to be able to hold on to great talent.
4. Promote a Healthy Organizational Culture
A business culture is not something that can change overnight, but is still worth addressing. This involves championing your staff and ensuring they feel recognised and respected for their work, making people feel equally valued and allowing open dialogue and communication to be the norm. Once you have a culture that enshrines these factors, your employees will be more likely to not only stay but thrive.
5. Focus on Employee Engagement
Employee engagement is a critical part of any successful business. It refers to the emotional and psychological investment an individual has in their work and the organization they work for. It encompasses employees' motivation, commitment, and satisfaction with their work and workplace.
By focusing on employee engagement you can completely change the nature of the relationship between an employee and their job. They begin to view their work as their own, take pride in what they do and feel invested in the success of the business.
6.Create a Great Work Environment
Work should be a place where your staff feel comfortable and inspired to be the best they can be. This means that their work environment is safe, free of toxicity, and designed to foster creativity, collaboration and productivity. Each level of their workspace needs to be right from the actual workspace, to break out areas and even the systems that they use.
7.Offer Flexibility
Finally, it's important to acknowledge that today's workforce is looking for flexibility and options. With the rise of remote working, freelancing and flexible hours, employers aren't just offering flexibility as a bonus or reward, but rather as a key part of the employment relationship to show respect and care for the employee's time and needs.
Is It Ever Good To Have High Employee Turnover?
High employee turnover is usually seen as an undesirable outcome that should be prevented if possible; however, there are cases where elevated levels of turnover may be considered more normal. For example, in many retail businesses, staff are entry level or perhaps even part-time and are not expected to make a long term commitment to the company so turnover is to be expected.
However, it is important to note that this should not be the desired outcome. Instead, organizations should strive to reduce their staff turnover rates in order to maintain a healthy and productive workforce and ensure its long-term stability.
Summary
High job turnover amongst your staff can be hugely damaging to any company. Inability to keep your staff means you are in a constant state of having to invest in hiring and onboarding while also not being able to take advantage of the compounding value of longer term workers. By addressing the many factors that may contribute to high turnover, you can help protect your business and ensure you have a great, consistent team to help you grow.
