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Understanding and Remedying Employee Turnover

By Joel Handelsman | June 29, 2012

High turnover is a tell-tale sign of low morale and dissatisfied employees. Employees who are satisfied with their jobs generally don't give them up, so high turnover usually indicates a problem.

That's not to say that every employee who leaves your company is dissatisfied--after all, some will retire, leave town, quit because of family circumstances, desire to change professions, or even start a business of their own. But if you have high turnover and you're losing good employees, you may want to give some thought to the possibility that there is a morale problem.

The causes of turnover are related to the same factors that contribute to absenteeism and low morale. If workers aren't interested in their jobs, they will either stay away or leave. But being unhappy in a job isn't the only reason people leave one employer for another. If the skills that they possess are in demand, they may be lured away by higher pay, better benefits, or better job growth potential.

While you can't control other companies, you can take steps to improve morale at your business and make those employees who are with you happy and productive. That's why it's important to know and recognize the difference between employees who leave because they are unhappy and those who leave for other reasons.

Following are some of the more common reasons for high turnover in businesses:

  • A bad match between the employee's skills and the job. Employees who are placed in jobs that are too difficult for them or whose skills are underutilized may become discouraged and quit. Inadequate information about skill requirements that are needed to fill a job may result in the hiring of either underskilled or overqualified workers.
  • Substandard equipment, tools, or facilities. If working conditions are substandard or the workplace lacks important facilities, such as proper lighting, furniture, clean restrooms, and other health and safety provisions, employees won't be willing to put up with the inconvenience for long.
  • Lack of opportunity for advancement or growth. The job should be described precisely, without raising false hopes for growth and advancement in the position.
  • Feelings of not being appreciated. Since employees generally want to do a good job, it follows that they also want to be appreciated and recognized for their work. Even the most seasoned employee needs to be told what he or she is doing right once in a while.
  • Inadequate or lackluster supervision and training. Employees need guidance and direction. New employees may need extra help in learning an unfamiliar job. Similarly, the absence of a training program may cause workers to fall behind in their level of performance and feel that their abilities are lacking.
  • Unequal or substandard wage structures. When two or more employees perform similar work and have similar responsibilities, differences in pay rate can drive lower paid employees to quit. In a like vein, if you pay less than other employers for similar work, employees are likely to jump ship for higher pay, if other factors are relatively equal.

Measuring Turnover

You can learn a lot about your workforce by keeping track of employee turnover. A little simple analysis can reveal problems with the bundle of duties you've created for each position within your business.

Follow these steps for tracking turnover:

  • Keep a list or file of employees that leave. Include the length of time that the employee worked for you, the position that the employee held, and the reason that the employee left (information from an exit interview can help here).
  • Over time, try to spot trends in turnover. Are there positions that you have trouble keeping filled? Do employees tend to stay for the same length of time before they leave your employ? Do employees seem to be leaving for similar reasons (like receiving more pay or a more responsible position)?
  • If you suspect there is a problem with one or more positions, try to remedy or prevent the problem. If possible, redesign a job by adding more attractive duties and reassigning some less desirable ones. Examine the working conditions closely to ensure that employees aren't being asked to meet unreasonable demands or deadlines, or to work with the most difficult customers or employees.
  • If you suspect that you're not paying enough, find out what other businesses are paying for similar positions.
  • If you suspect that people are leaving because positions elsewhere allow them more growth, emphasize in the hiring process that the position has limited growth potential so that applicants know what to expect.

Turnover Costs

Monetary and hidden costs associated with employee turnover are also of concern. When an employee leaves your business, it costs your company in:

  • Productivity. When the employee leaves, productivity will usually take a downturn because other workers may have to add the former employee's duties to their own workload, at least temporarily.
  • Money. In addition to the costs associated with lower productivity, you may have to pay employees overtime to get them to take up the slack left by the former employee until a replacement can be found. You may also have to face unemployment claims and pay for the cost of recruiting and hiring a replacement.
  • Time. Not only may you be distracted from your regular duties to cover for a former employee, but you'll have to spend time and money advertising, interviewing, and hiring a replacement employee. And don't forget the time that you spent training and hiring the former employee.

Once you find and hire a new employee, you'll still experience flagging productivity while the employee learns his or her new job. In other words, it costs your business money every time an employee leaves because it takes even more resources to return to the same level of productivity or level of performance that you had before.

Sometimes, though, if the worker in question was a problem performer, productivity may not suffer. In fact, you may be better off than if the dissatisfied employee had stayed on the job. On the whole, though, you're going to want to prevent turnover as much as possible because of the high costs associated with it.

Preventing Turnover

If a business wants to ensure that employees remain with the business, it has to identify and emphasize the positive aspects of the business that make employees want to stay.

Some internal factors that may influence your employees' desire to stay are benefits and compensation, pleasant working conditions, opportunity for growth/advancement, and job security. In addition to the internal factors that make employees want to leave or stay, there are also outside factors that can influence your turnover. You can't do much about these factors, which include family responsibilities, financial obligations, marketability of their skills, and jobs offered by other companies. What you can do is try to make the job as desirable as possible, to minimize the chance that external factors will lead your workers to leave.

To minimize turnover, give employees perks that are perceived by them as benefits that make or break a job. Trade on your strong points. Job perks like flexible hours or better-than-average benefits might keep employees in a job that they would otherwise leave. Attempt to make work fulfilling and rewarding for your employees.

Sometimes the jobs that you have may not be particularly exciting or offer a great potential for growth, but they are still important and must be done. So how can you handle this sticky situation? Some possible options are to hire temporary employees, or to use part-time workers who are simply looking for a low-effort paycheck.

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