07. Impact of Employee Turnover in SHRM

 

Employee Turnover (Verlinden, 2022)

    Employee turnover is the percentage of workers who leave a business over a specified time period (typically on an annual basis), represented as a percentage of the total workforce. The phrase is used generically to refer to all voluntary and involuntary withdrawals, including those caused by resignation, retirement, or layoffs, in which case it relates to overall, or "crude," employee turnover. Additionally, it is possible to determine more detailed breakdowns of turnover data, such as levels of resignation or redundancy-related turnover, with the latter being particularly helpful in evaluating the efficacy of people management techniques (CIPD, 2021).

Key Takeaways 

• Employees who leave an organization within a specific time frame are measured as turnover. No matter the reason, everyone who leaves the company is considered to have been separated.
• There are two sorts of turnover: voluntary, where employees leave on their initiative, and involuntary, where employees have been fired or were part of a seasonal layoff or force reduction.
• Employees who voluntarily leave their employment frequently do so in search of better pay and benefits, professional advancement, a better work-life balance, or to get away from a toxic or incompetent manager.
• Gallup estimates that the cost of turnover is between one-half and two times the salary of the individual being replaced (Holliday, 2021)

Causes of Employee Turnover

• Lack of opportunity for career development.
• Toxic Work environment.
• Internal promotions of transfers.
• Natural career progression.
• Family or life event.
• Negative feelings toward management.
• Felling overworked.

    Apart from the above, Verlinden (2022) published the following findings presented by three researchers who compiled all of the literature on employee turnover in 2000. This led to a meta-analysis of more than 60.000 workers. It demonstrates the factors that influence employee churn and can result in a high turnover rate.

 

   Out of all the above causes of employee turnover, can be segregated into two main categories named Voluntary Turnover & Involuntary Turnover. 

    An article published by Bonusly (2022) explained that when an employee chooses to leave their job, it is considered a voluntary termination of their employment. Reduction of these resignations is typically the main objective of retention initiatives.  Although retirement is essentially a form of voluntary turnover, companies regularly report retirement rates separately since they are not a primary target for lowering turnover. When an employee leaves their job without their consent, it is known as an involuntary termination. This can be due to poor performance or a redundancy-related layoff.

    The average annual turnover in the United States is estimated to be around 20%, with roughly two-thirds of that turnover being voluntary, according to a recent report by analyst firm Mercer (Holliday, 2021).

Examples of High Turnover Jobs

    There are many studies that display typical turnover rates by industry (and/or nation). Checking the statistics is therefore a pretty simple approach to determine how well the organization is performing; if the number is (far) above average, then probably has a high turnover rate to deal with. Sales & Marketing, for instance, has the greatest turnover rate of any occupational category in the UK today at 31%. On the other side, staffing (352%) and hotels (300%) have the greatest turnover rates in the US Verlinden (2022).

Turnover by sector in UK (Verlinden, 2022)

 

Turnover by sector in USA (Verlinden, 2022)

Sales and Marketing:- Anything can be sold if you have good sales skills, including yourself. Therefore, it should come as no surprise that salesmen gravitate toward positions where they can earn the most money, which causes high employee turnover in this line of work.

Retail Sector:- Retail work is difficult. It frequently involves working long hours, including weekends and evenings, for poor pay, and physical exhaustion is a consequence. The retail sector as a whole is evolving. There are fewer workers working the floors as the industry transitions from brick-and-mortar stores to online sales.

Hospitality:- When it comes to working conditions, the hospitality sector is very similar to the retail sector. The hours are unpredictable, the clients are picky, and many positions in the hotel industry are also physically demanding.

IT & Tech:- Software engineers are in high demand, and there is frequently a shortage of qualified candidates, which leads businesses to ask (too much) of their staff. Data analysts and user experience designers are two other tech jobs with significant turnover rates. LinkedIn claims that this is most likely a result of the increased competition between firms and job offers (Verlinden, 2022).

Ways to Reduce High Employee Turnover

Find the Right Talent

    Every organization has a unique hiring procedure. Procedures might be more successful if can choose workers that not only have the necessary talents but also share the same cultural and behavioral values as the company. Asking behavioral interview questions is one method for determining a candidate's personality and character (Walden University, 2022).

Recognize and Reward Employees

    Employees require praise and acknowledgment. This might be promoted by providing each people manager with thoughtful human resource training. Employee productivity increases by 12% on average when people are satisfied at work. Encourage the staff members when they go above and beyond by expressing gratitude. Creating a positive workplace atmosphere enables staff to prosper, feel valued, and maintain motivation (Walden University, 2022).

Identify a Clear Career Path

    Promoting and investing in employees is a component of honoring and appreciating workers. Don't let the staff members feel that their position is constant. If not, they might begin to look for alternative opportunities. Encourage managers to arrange regular team meetings to talk over goals and how the organization can support them in achieving them (Walden University, 2022).

Encourage a Healthy Work-Life Balance

    Benefits and bonuses were reportedly one of the top factors for 57% of respondents when deciding whether to accept a job offer. Employers may benefit from differentiating themselves by providing benefits like annual travel reimbursements or unlimited maternity and paternity leave for the first year of a child's life. It might also be advantageous to be able to operate in flexible workplaces and schedules (Walden University, 2022).

Create Learning and Development Programs

    Learning and development are beneficial to the organization and boost employee morale. Companies can lay out a clear learning and development plan and provide their staff the freedom to follow their interests (Walden University, 2022).

Key Difference Between Employee Turnover and Employee Retention

Holliday (2021)

    Employee engagement is closely related to turnover and retention. According to the research of more than 112,000 business units by analytics firm Gallup, organizations with higher levels of employee engagement have lower turnover rates – as much as 43% lower for companies that have less than 40% yearly turnover. Additionally, there is a connection between employee engagement and organizational success, and a key consequence is that organizations with lower turnover are more successful and have greater consumer loyalty. Gallup discovered a difference in profitability and customer loyalty of 23% and 10% for business units and teams with top-quartile and bottom-quartile engagement, respectively (Holliday, 2021).

    Rates of employee turnover and retention are powerful measures of how effectively a company treats its employees. This covers whether it offers a competitive salary, training, and growth possibilities, as well as a favorable work-life balance for employees, and how effective management is. Low retention rates and high turnover rates indicate issues with the organization's culture and working environment.    

High Employee Turnover in a Nutshell (AIHR, 2019)

References 

AIHR (2019) THigh Employee Turnover in a Nutshell (online video) Available from https://www.youtube.com/watch?v=jnWoxEpjj2w [Accessed on 30th November 2022]

Bonusly (2022) The Ultimate Employee Retention Guide (online) Available from https://bonus.ly/employee-retention-guide/what-is-employee-turnover-retention [Accessed on 30th November 2022]

CIPD (2021) Employee turnover and retention (online) Available from https://www.cipd.co.uk/knowledge/strategy/resourcing/turnover-retention-factsheet#gref [Accessed on 30th November 2022]

Holliday, M. (2021) What is Employee Turnover & Why It Matters for Your Business (blog entry) Oracle Net Suite. Available from https://www.netsuite.com/portal/resource/articles/human-resources/employee-turnover.shtml [Accessed on 30th November 2022]

Verlinden, N. (2022) What does high turnover mean? Turnover rates, jobs, and causes (blog entry) Academy to Innovate HR. Available from https://www.aihr.com/blog/high-turnover-meaning-rates/ [Accessed on 30th November 2022]

Walden University (2022) 6 Strategies to Reduce Employee Turnover (online) Available from https://www.waldenu.edu/online-masters-programs/ms-in-human-resource-management/resource/six-strategies-to-reduce-employee-turnover [Accessed on 30th November 2022]