No other human resource area is more mismanaged and misunderstood as employee turnover.
By Chron’s definition, employee turnover refers to the number or percentage of workers who leave an organization and replaced by new employees. Given that losing employees can cost an estimated 150 percent of an employee’s annual salary, it stands to reason that we should view a high turnover rate as something negative. But is that really always the case?
An article on PayScale says that having a low turnover rate is not in any way an accurate measure of how well we foster a positive corporate culture or offer opportunities for growth. Both involuntary and voluntary turnover can be considered undesirable under some conditions, and may signify a larger problem in your organization.
Seen as Poor Performers
High turnover rates do not always mean that you have bad managers or that your company is not an ideal workplace. Remember: turnover is directly influenced by employee desirability. The reason why your employees are not being recruited by competitors may be because they are perceived as poor performers, with insufficient training and obsolete skill sets. This may be because you do not have an effective performance management process in place to identify problem areas that need to be addressed.
Weak Employer Brand
Consider as well how your company is viewed publicly as an employer. If you have a weak or negative brand image, it is highly unlikely that your employees will be targeted at all. Any form of bad publicity can arguably impact your brand, but issues like a large-scale layoff or similar scandals can prove devastating. Not only does this create a negative perception of you, it may also cause your current employees to contemplate the possibility of leaving.
Bad Managers in Hiding
At a time when the company has an overall low turnover rate, it may be hard to distinguish good managers from the bad ones, according to ERE Media. Therefore, this is not the moment to grow slack with identifying problem areas in the organization. These managers may be afraid to terminate underperforming employees or just lazy in making sure that employees under them get the development and training they deserve. Make sure to look for ways to recognize bad managers when the economy is in the tank.
A Culture of Retribution
It is understandable to want to retain your top performers, but it should never get to a point when you actively discourage employees from seeking employment elsewhere. It’s worse if your organization punishes individuals looking for outside positions enough that they don’t even return recruiter inquiries. Any way you choose to see it, fear of retaliation is one major red flag of a toxic company culture, and word about that gets around. What you can do instead is create a management succession plan that will groom middle managers to take on the role of more tenured team members should they wish to leave.
There is no right number when it comes to healthy turnover, since it will vary for every industry and organization. What’s important is the reasoning behind your turnover rate and what you will do about it.