Turnover Defined
In a human resources context, turnover is the rate at which employees leave an organization. Simple ways to describe it are "how long employees tend to stay" or "the rate of traffic through the revolving door. "
Staff turnover can be optimal when a poorly performing employee decides to leave an organization, or dysfunctional when the high turnover rate increases the costs associated with recruitment and training of new employees, or if good employees consistently decide to leave .
Employee Turnover
Turnover can be optimal when a poorly performing employee decides to leave an organization.
Measuring Turnover
Turnover is measured for individual companies and for their industry as a whole. If an employer is said to have a high turnover relative to its competitors, it means that employees of that company have a shorter average tenure than those of other companies in the same industry. High turnover may be harmful to a company's productivity if skilled workers are often leaving and the worker population contains a high percentage of novice workers.
In the United States, the average total non-farm seasonally adjusted monthly turnover rate was 3.3% for the period from December 2000 to November 2008. However rates vary widely when compared over different periods of time or different job sectors. For example, during the period 2001 to 2006, the annual turnover rate for all industry sectors averaged 39.6% before seasonal adjustments, while the leisure and hospitality sector experienced an average annual rate of 74.6% during the same period.
Preventing Turnover
Preventing the turnover of employees is important in any business. Without them, the business would be unsuccessful. However, more and more employers today are finding that employees remain for approximately 23 to 24 months, according to the 2006 Bureau of Labor Statistics. The Employment Policy Foundation states that it costs a company an average of $15,000 per employee, which includes separation costs, including paperwork, unemployment; vacancy costs, including overtime or temporary employees; and replacement costs including advertisement, interview time, relocation, training, and decreased productivity when colleagues depart.
Research on employee job turnover has attempted to understand the causes of individual decisions to leave an organization. It has been found that lower performance, lack of reward contingencies for performance, and better external job opportunities are the main causes. Other variables related to turnover are the conditions in the external job market, the availability of other job opportunities, and the length of employee tenure.
Providing a stimulating workplace environment, which fosters happy, motivated, and empowered individuals, lowers employee turnover and absentee rates. Promoting a work environment that fosters personal and professional growth promotes harmony and encouragement on all levels, so the effects are felt company wide.
Continual training and reinforcement also develops a workforce that is competent, consistent, competitive, effective, and efficient. Beginning on the first day of work, providing individuals with the necessary skills to perform their job is important. Before the first day, it is important the interview and hiring process expose new hires to an explanation of the company, so individuals know whether the job is their best choice.
Networking and strategizing within the company provides ongoing performance management and helps build relationships among coworkers. It is also important to motivate employees to focus on customer success, profitable growth, and the company well-being. Employers can keep their employees informed and involved by including them in future plans, new purchases, policy changes, as well as introducing new employees to the employees who have gone above and beyond in meetings. Engagement shows employees that they are valuable through information or recognition rewards and makes them feel included.
In addition, by paying above-market wages, the worker's motivation to leave the job and look for a job elsewhere will be reduced. This strategy makes sense because it is often expensive to train replacement workers.
When companies hire the best people, new hired talent and veterans are enabled to reach company goals, maximizing the investment of each employee. Taking the time to listen to employees and making them feel involved will create loyalty, in turn reducing turnover and allowing for growth.