New Year – All New Faces? A candid discussion on turnover truths
Turnover. One of the most popular buzzwords in Corporate America…and also one of the most avoided.
Yet, as with many things in life, sometimes we have to force ourselves to address the ugliest problem in order to round up solutions. In this two-part series, we’re going to first travel down the road of cold, hard facts regarding turnover, and how high rates inevitably affect more than just your bottom line. Then, for my next post, be sure to check back, because I’ll be discussing another buzzword, “Retention”, and providing some solid tips for promoting retention.
But first things first; get ready to read about some difficult realities, and five turnover truths.
(Warning: this content might sting a bit, but I promise these words are for your own good)
1) No industry is safe that’s right; not even yours. High turnover rates are not just present in lower-paying service or retail industries; they exist everywhere. Therefore, even if it’s uncomfortable, no company can afford not to know exactly where they stand on a turnover front. Now that we’ve acknowledged this fact, and I have your attention, let’s move on.
2) “Voluntary” still counts- as in, turnover is not entirely comprised of layoffs, downsizing, or reorganizations. According to the most current data provided by Equifax’s Workforce Solutions analysts, voluntary turnover (which also goes by the alias “quit rate”) has been steadily increasing, and trends continue to support the growth of this rate. In fact, the voluntary turnover over the past few years has surpassed involuntary turnover and not just by a little. In Q3 2014, for example, in the chart below, you¹ll see that approximately two thirds of the total separations were voluntary.
Why are so many employees leaving their jobs on their own terms? The answer is almost a double-edged sword: on one side, an increase in voluntary turnover is an indicator of an improving economy. On the other side, employees are experiencing far more opportunities to willingly change jobs, and are feeling more confident leaving one employer for another (read the Bureau of Labor Statistics’ latest news release on job openings here). This may be a challenging state for an HR Department, but the good news is that your organization can implement strategies to make employees want to stay!
(I’ll go over retention strategies in Part 2 of this series)
Source: Equifax HR Solutions; above percentages were obtained through compiling data from various resources, including the BLS¹ monthly JOLTS (Job Opening & Labor Turnover Survey). Click here for more information and methodology explanation
3) Turnover is expensive! Okay, so you’ve read up to this point, and viewed the graphic above. Now, it’s time to highlight the why behind the importance of increasing retention rates and decreasing turnover. Let’s turn our attention to the almighty dollar sign, because numbers don’t lie.
Though there are numerous studies devoted to uncovering the true cost to replace one employee with estimates ranging anywhere from six to nine months of salary to up to 1.5-2x annual compensation one thing remains consistent: hiring and training a new employee is costly.
For our purposes here, we will lean on scaling the research gleaned by the Society for Human Resource Management (SHRM), which estimates a cost of $3,500 to replace a full-time employee making $8/hour. This percentage boils down to 21.03% of the annual compensation of said employee. It’s also worth mentioning here that SHRMŒs figures were actually the lowest of over 15 nationally respected organizations that performed such calculations. Moreover, just to err on the side of caution and conservativeness, we are going to whittle that number down to an even 20% for the table below:
|Example Average cost to replace one full time employee making:
* For the record, most resources estimate that replacing a high-level employee making $100K+ / year ends up costing up to 200%+ of salary, or up to $200,000+. Just something to ponderŠ
Now you’re really listening, right?
Side note: for those still skeptical an ’employee replacement cost’ can truly be uncovered, I urge you to reference this handy worksheet and this report from SHRM / American National Standards Institute, complete with equations and algorithms. Both of these resources are gems any data-driven numbers enthusiast would appreciate
4) Plummeting morale numbers aside, a very real issue one arguably as important as dollar cost is the matter of workplace culture. Think about it; once daily water cooler and cubicle-to-cubicle interactions with a certain fellow employee are suddenly gone. The environment seems vacant. And, honestly, maybe things feel a little sad. Employees find themselves asking, ‘why?’. ‘Why did my colleague leave the company? Should I be worried?’ Such sentiments never enhance a corporate culture, and can be difficult to bounce back from. The higher the turnover rate, the longer it takes to recover.
5) Workload upped, productivity lost during the time it takes to recruit, screen, hire, and train a new employee, current employees are left to pick up responsibilities now unaccounted for and left behind by the newly-vacated position. This causes additional stress and strain on the existing workforce, and any projects the former employee was managing inevitably fall through the cracks. Moreover, once a replacement employee is finally hired, studies have shown that it may take that new hire one to two years to reach the productivity level of an existing employee. What does this mean in real talk? It means the company culture shifts into a grumpy, overworked, under-productive environment. AKA, the opposite of ideal.
So there you have it; five turnover truths that weren’t necessarily pretty to read, but necessary to acknowledge. Knowing the facts is the first step to implementing real change.
And the second step is to make a plan of action! Stay tuned for the next post, with workforce retention tips.
PS: I¹m curious to hear how turnover has affected your particular industry. Do high turnover rates impact your business? What are some of the turnover trends you’ve recognized within your organization?
To your organization’s success!