Developing effective strategies to reduce employee turnover is very important to the organizations to retain their talented employees. A high rate of employee turnover has negative financial and non-financial implications because it is cheaper to retain employees than hire them. The costs of employee replacement include the cost of recruiting, hiring, and training of the new employee, wastage of new employee during the learning period, and others. So, every organization needs to hire the right people to avoid high employee turnover.
So, this article explains employee turnover, types, causes, and effects of the high rate of employee turnover as well as effective retention strategies to minimize it.
Strategies to Reduce Employee Turnover
What is Employee Turnover?
Employee turnover simply refers to the number of employees who leave an organization during a particular period usually a year. This includes employees who resign, lay off, retire, transfer, and die. Companies calculate the rate of employee turnover to predict the effect of employee turnover on productivity, customer service, and others. You can calculate employee turnover for a team or department or organization as a whole.
Types of Employee Turnover
Employee turnover can be grouped into two; Voluntary and Involuntary employee turnover.
Voluntary employee turnover
This is the situation when employees decide to leave an organization on their own due to marriage, getting better opportunities, and others. This can be subdivided into:
Avoidable Employee turnover
This is the employee turnover that can be avoided by a company by increasing salary pay, creating a conducive working environment, building good organizational culture, and others.
Unavoidable Employee turnover
This one occurs as a result of unavoidable circumstances such as the death of an employee.
This is the situation when the employer terminates the employment of employees as a result of unacceptable behavior, poor performance, and others. It can be subdivided into; Discharge and downsizing employee turnover.
Discharge Employee Turnover
Discharge is the situation when an organization requires employees to leave the company due to poor performance or discipline issues.
Downsizing Employee Turnover
Downsizing is the situation when a company asks employees to leave as a result of organizational restructure or a cost reduction program. This is done to enhance organizational effectiveness and shareholders’ wealth.
Employee Turnover Formula
The formula to calculate employee turnover rate is as thus;
Employee turnover example
A company has 500 active employees at the beginning of 2015 and only 432 active employees at end of 2015 due to some employees who left the company.
The employee turnover rate can be calculated as thus;
Average number of employees = (500 + 432)/2 = 466
Employee turnover rate = 14.6%Finally an easy way to get up to $5,000 at BadCreditLoans.com Get Started!
Causes of Employee Turnover in an Organization
There are many reasons for employee turnover in organizations. The top reasons for employee turnover include:
It is difficult to recruit perfect employees for an organization, but any employee that is not right for an organization’s culture or value should not be recruited. This is because any employee who doesn’t suitable for an organization’s value or culture will eventually leave the organization.
You can define pas as a return that employees get for the services rendered in a company. Poor remuneration and benefits contribute to the high employee turnover rate. When employees receive low pay in a company compared to their colleagues in the industry, there is a high chance of leaving the company. However, suitable remuneration and benefits can contribute to job satisfaction and high productivity in a company.
Lack of recognition
Recognition is an important tool for employee motivation and retention. Employees want their employer to recognize their good jobs. Recognition starts from simple “thank you” or “well done” to the bonus payment. Lack of recognition can lead to employees leaving a company.
Poor organization culture
The culture of organizations has a strong relationship with the happiness of their employees. Poor company culture can demotivate employees and less productive. This can contribute to the employees leaving the organization.
Poor personal and professional development
This is another reason for employee turnover in a company. Employees can leave a company where personal or professional development opportunities are limited to join another company with good personal and professional development opportunities. Poor personal and career development like no promotion or unfair promotion policies can negatively employee commitment to an organization.
One of the causes of employee turnover is bad managers. Good managers have the necessary skills to recruit the right employees, develop good organizational culture, set suitable compensation, cater to the personal and professional development of employees and others. It is otherwise for the bad managers. So, bad managers can contribute to a high employee turnover rate in an organization. It is important for the owners of the business to always watch their managers and listen to the feedback from employees to weed out bad managers.
A poor balance between life and work
It is natural for employees to assume more responsibilities or be overworked when the need arises. But overworking or asking your employees to choose between their jobs or life can contribute to the high rate of employee turnover in an organization.
Effects of Employee Turnover on an Organization
Employee turnover harms the organization both financially and non-financially. A high rate of turnover serves as a great threat to the profitability, quality, and productivity of an organization. It increases the recruiting costs such as the cost of selection, training, and product wastage of the new employees. Also, it leads to waste of time of recruiters, loss of morale, production destruction, and others. The non-financial cost may be so difficult to measure and it includes loss of customers, business damage, and others.
How to Reduce Employee turnover in an Organization
Organizations must develop effective strategies on how to reduce employee turnover. Possible solutions for employee turnover in a company include:
One of the strategies to reduce employee turnover is job satisfaction. Job autonomy and job content are two important factors that can motivate employees and increase their job satisfaction. The involvement of employees in the decision-making process can enhance them to put their best efforts into achieving the organization’s objectives. Suitable remuneration and other benefits, conducive working atmosphere, teamwork, training and development, and others can contribute to the satisfaction of employees on their jobs.
Suitable recruitment process
Develop as a suitable process of recruiting the right people for the organization will help the company to achieve its success. The company must recruit the right people who will be motivated to work with the company. Recruiting suitable people will contribute to the attainment of the overall corporate objectives of the company.
Training and development
Organizations must create effective communication about training opportunities available for the professional development of their employees. The provision of training for the career development of employees will have a positive impact on them and enhance employee retention.
Positive organization culture
Building of positive organizational culture can contribute to the retention of the existing employees as well as attracting new employees to the company. Positive culture enhances the happiness of the employees and so reduces the rate of employee turnover.
Suitable remuneration and benefits
When employees receive suitable remuneration and benefits that are suitable for the employee’s responsibilities and in line with compensation packages in the industry can contribute to the reduction in employee turnover. It is important to regularly review the salaries of the employees because loyal employees want the reward for their loyalty and productivity.
Good managers have the necessary skills to bring the best out of the employees and help them to improve both personal and professional development as well as recognize their contribution toward the attainment of organization goals. This is important because employees want managers who are fair, care, and recognize their good works.
top reasons for employee turnover and how to reduce employee turnover are listed above. So, it is important for an organization to quickly recognize when facing a high rate of turnover and provide the solution to enhance the attainment of its corporate objectives.
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Afeez is one of the founding partners of Marasas Consulting limited. He consults for both individuals and entities in the area of accounting, management, audit, tax, and investment. He has a wide range of experience both online and offline which allows him to provide relevant and timely professional advice and assistance to business owners with their accounting, tax, management, audit, and investment plans.
Afeez is a member of the Institute of Chartered Accountants of Nigeria (ICAN) and a member of the Nigerian Institute of Management (Chartered). He is a certified Google analyst and strategist. He earned his Bachelor degree in Management and Accounting from Obafemi Awolowo University, Ile-Ife, Nigeria, and earned an ordinary national diploma in Accountancy from The Polytechnic of Ibadan, Oyo State, Nigeria. He earned certification in “Excel Crash Course” and “Reading of Financial Statement” from Corporate Finance Institute, Canada.
Afeez is dedicated to helping clients achieve business success by helping them to establish solid and sound accounting, tax, and financial processes.