Employees come and go. It’s simply a fact of running a business that, sooner or later, even your most dedicated employee may move on, whether it’s to a new career or retirement. Sometimes it’s on good terms, and sometimes it’s not. Sometimes there’s plenty of notice, sometimes there’s not. There’s only one constant: you will have employee turnover.
Just because it’s a fact of life doesn’t mean you can’t do something about it.
How much turnover you get can be influenced by a variety of factors, many of which you can control.
What makes an employee leave? You can broadly divide the reasons for turnover into two categories: voluntary and involuntary.
- Voluntary turnover includes reasons the employee decides to step away. These can be amicable between the employee and the company, such as a need for relocation, retirement, or a family illness. They can also be adversarial, such as a micromanager blocking the employee’s mobility or an interpersonal conflict with another employee.
- Involuntary turnover includes reasons the employee is forced away. These are generally adversarial, such as absenteeism, unsatisfactory performance, or a poor culture fit.
Many of these factors can be addressed to reduce turnover. For example, an interpersonal conflict can be resolved, or the employees involved separated so they don’t need to work together.
(Graphic and data provided by LinkedIn 2017 study and TalentLyft)
You might expect that the ideal turnover rate for a company is zero, but that’s neither true nor, really, possible in the long term. Companies can outlast the lifetime of their employees; turnover is as inevitable as human mortality. On a less grim note, a long-term employee retiring can be a good thing, as it allows for internal mobility for a talented successor. A highly creative employee might move on before they stagnate, having left the company better than they found it.
It’s better to have some small amount of turnover than it is to have stagnant employees, employees held captive by circumstance and a toxic culture that retains employees through fear of burning bridges throughout the industry.
What is the average turnover rate, and what can be considered a good turnover rate for your company? The actual statistics vary quite a bit from industry to industry. The Bureau of Labor Statistics provides annual Job Openings and Labor Turnover Surveys and compiles this data into an aggregate report, which you can read here. Keep in mind that data for 2020 is skewed by the Coronavirus pandemic, so looking at 2019 data might provide a better overall average.
Remember, too, that the true cost of turnover is larger than just the monetary cost of a severance package and the recruiting process to hire a replacement. The employee can take with them institutional knowledge. Their loss can reduce morale amongst the people who liked that employee, and amongst those who now have to pick up their duties.
Reducing employee turnover begins before you even hire the employee. Picking the right candidate for the role and the company culture helps ensure that they don’t leave right away and that their presence doesn’t imbalance your existing teams and drive others to leave. Thus, we’ve divided our tips into two sections: pre-hire and post-hire.
Pre-hire tips are steps you can take before you hire a new employee, to help reduce the possibility of turnover in the first year after they’ve been hired. To a certain extent, these tips need to be applied even before publishing a job posting.
Pay attention to company culture. A good cultural fit is one of the most important determining factors in employee retention, and a negative trend in internal culture can drive a spiral of employee turnover that can be devastating for a business. As Mike Kappel writes for Forbes,
“If employees don’t fit in with your work environment, I guarantee they won’t be happy. They won’t fit in, they won’t get along with their co-workers, and they’ll feel lonely. An outstanding candidate that doesn’t match the behaviors and culture of your business won’t stay around long.”
Determining whether a candidate fits in with your company culture requires understanding your own company culture. Thus, a good trick is to ask yourself (or your employees) questions similar to those that a candidate might ask to get an individual sense of your culture. The Muse offers many such questions you can use to get an idea of what the culture is in your company (if you don’t already know). Keep in mind that, especially in upper management, what you see might not be what the employees on the ground experience during the day.
Once you have a solid idea of your company culture, you can work some behavioral questions into your interview process to see how a candidate may react to certain situations, which can indicate how they would fit in with your culture overall.
Offer competitive pay and benefits. Salary negotiations are one thing, but you need a strong foundation of benefits and base pay that satisfies your best possible candidates. For example, we covered what to offer to attract and satisfy engineering candidates.
One of the key takeaways is flexibility. A lower base salary might be fine if you offer flexible hours, work from home, and loan assistance. Being able to adapt to what a candidate truly finds valuable is a powerful way to entice top candidates and keep them around.
Express company culture through your job posting. When crafting your job posting, you want to write it in a way that expresses your company’s values and culture. You don’t have a lot of space with which to express these values, so you may need to do work in developing an employer brand that conveys enough information that you can reasonably expect candidates to have basic knowledge of your company before applying.
Be honest with what you write in your job posting. Telling candidates that they’ll be working in a fast-paced environment with unique, ongoing challenges only leads to frustration if they find their day-to-day task list to be little more than busywork on repeat. The disconnect between job posting and job reality is a huge driving factor in turnover.
Once an employee has been hired, you need to uphold the promises outlined in the interviews, your company reputation, and your job posting. Moreover, you need to make sure your internal culture, your business processes, and your other employees all contribute to a positive, effective workplace.
Offer praise and recognition for good work. Studies have shown that recognition is a huge driving factor in retention. 20% of employees cite lack of recognition as a reason to seek a job elsewhere. 40% of workers say they would put more effort into daily work if they were recognized for their efforts. A mere 9% of employees feel that their managers are good at recognizing contributions.
Recognition doesn’t need to be a gamified competition to earn customer feedback or to gain a picture on the wall as an employee of the month. It can be as simple as a manager offering congratulations to employees at the end of a project. Be encouraging, be positive, and be grateful to your employees for the work they do.
Don’t be afraid to fire the toxic element. We’ve all heard stories of (or directly encountered) the bad manager whose toxic presence consistently demeans and oppresses the employees beneath them while presenting a pleasant face to their senior leadership so they’re never the target of institutional ire. In situations like this, one bad employee can result in dramatically increased turnover rates, poor job performance, satisfaction for those under them, and more.
Not all turnover is caused by an individual, but if you have a situation where it is, it’s usually worthwhile to let that employee go. As Darcy Jacobsen writes,
“No matter how effective they might be at their actual work, an employee who is a bad fit is bad for your culture, and that creates ‘culture debt.’ They will do more damage than good by poisoning the well of your company.”
Offer flexibility and keep benefits current. Flexibility and adaptability are the most important qualities in both a worker and a company. Your employees are changing and growing. They’re learning new skills and they’re progressing through the stages of their life’s journey. If you want to keep them on for the long term, you need to change and grow with them.
This means being able to continually offer growth in salary and benefits according to their skills and their role. If you hire a junior developer and train them, assist with their certifications, but fail to increase either their pay or their responsibilities, of course, they’re going to look elsewhere. They want a job befitting their skill level.
Additionally, life circumstances can change. An employee you hire while single may meet someone and decide to start a family. Suddenly, paid family leave becomes a priority they didn’t have when you hired them. If you rigidly adhere to the benefits they wanted when they were hired, they’re just as likely to quit and find a new job after raising their baby than they are to stick around.
Flexibility in raises, bonuses, benefits, work hours, and working remotely are all great benefits to keep on hand and leverage to keep employees happy.
Hire enough people. One of the biggest driving factors in employee dissatisfaction is overwhelming responsibilities. Millions of employees in every industry have experienced, or are currently experiencing, times where an employee leaves or is let go, and rather than hiring a replacement, the company divides their duties between employees already there.
For one employee and light duties, this might be fine. When it happens two, three, five times, it quickly builds up to a point where your employees are burning themselves out working too many hours, too long shifts, and doing too much. With burnout comes, at best, poor job performance. More often, employees leave, often leaving the industry entirely.
Maintain adequate staffing; the cost of replacing an entire team is much higher than the cost of keeping your department full.
Maintain transparency, accountability, and trust. Fostering an atmosphere of transparency and accountability is important for the modern workforce. In part, this helps with the tip about getting rid of toxic employees; by offering a channel where an employee can make a report (even anonymously) and trust that it will be investigated, you can help give employees a sense that they have some recourse beyond quitting.
Transparency works the other way. Holding your managers and your executives responsible, as opposed to hiding information and treating business processes as arcane secrets, builds trust in your management team. This avoids the situation where employees see a company crashing down around them while executives cash out and do nothing about it. Remember; a company is nothing without its employees, so they should be valued.
George Dickson says this:
“Instead of saying ‘do I have to share this information with the team?’, try, ‘do I have to keep this information from the team?’ If you can’t come up with a solid reason to keep something a secret, you need to question the validity of keeping it behind closed doors, especially when the alternative offers so many benefits.”
You don’t need to be transparent with proprietary information, top-level negotiations, or everyone’s salary information. Just be open with information that matters, and that doesn’t need to be kept secret.
Overall, the number one determining factor in employee turnover is happiness and job satisfaction. Happy, satisfied employees are more loyal, more productive, and better at their jobs. Hiring the right people, keeping a company culture of transparency and teamwork, and recognizing contributions are all powerful ways to keep employees happy, which in turn reduces turnover.
If your company is struggling with high turnover rates, be prepared for a major change. It takes a long time for a poor culture to fester, and it can take some dramatic action to get rid of it.