Turnover is a dreaded but unavoidable part of human resources. Less than half of current employees believe that their company is skilled in retaining its top talent. Turnover can be problematic for any business… that is, if it’s too high and impacts the best employees. However, while lower turnover is typically considered the ideal, zero turnover should never be the goal – turnover can be healthy for your company in the right doses.
Low turnover is traditionally interpreted as a sign of human resources success: your team has hired great candidates, you’re paying them an adequate salary, and you’re keeping them engaged at work. Low turnover can also viewed as a sign of success for your bottom line, as losing employees can cost a company 150% of each employee’s annual salary.
However, low turnover is not always a sign of hiring success, nor is it always profitable. Sometimes, low turnover can indicate that your employees are complacent. It is possible that they lack the initiative to search out other job opportunities, are overpaid, or are simply undesirable to recruiters. Low turnover hinders opportunities to acquire new and potentially more innovative talent.
How to Identify Good & Bad Turnover
Turnover can be separated into two types: voluntary and involuntary. Voluntary turnover occurs when one of your valued employees chooses to pursue another career opportunity, while involuntary turnover takes place when an employee is dismissed from their position. Companies should strive to make good hiring decisions, compensate their employees adequately, and ensure a positive work environment to avoid both types of turnover. However, once a hiring mistake has been made, avoiding turnover can be costly for your company.
Gallup reports that 10% is the amount of turnover most companies should strive for, but this percentage varies based on the industry (for instance, it is generally higher in the healthcare industry than in finance).
To decide who should be part of their involuntary turnover, most Fortune 500 companies employ some sort of ranking system to rate their employees. Every company has the 10-20% of top performers, then the majority fall into the average category, and 10-20% might be on the bottom of performance. Some turnover can replace your company’s least effective workers with new talent while motivating the rest of your employees to up their performance.
How to Keep Turnover Low (in a Good Way)
While turnover can be a good thing, the most optimal strategy is for companies to hire the right people as often as possible (but not hesitate to dismiss employees for performance reasons). Companies can achieve this by asking the right interview questions, writing fitting job ads, and using pre-employment testing to find candidates who are the best fit for the role from the start.
This year, choose to turn over a new leaf when it comes to employee retention, and don’t be afraid of a little (but not too much) turnover.
Interested in knowing how your company’s turnover stacks up? Check out our article on How to Measure Employee Turnover.