Organizational culture: managing employee turnover

Employee turnover – the rate at which employees join or leave a company – is one metric that management and Human Resource experts use to determine the robustness of a business.

Traditionally, organizations were wary of turnover. They saw it as eroding the talent base and creating avoidable costs. Businesses rushed to monitor turnover and invested considerable effort into reducing it as much as possible. Depending on the complexity of the job and the employee’s rank, the costs of replacing a given employee could be worth months or even years of that person’s salary.

Common approaches included increasing wages, extending benefits to employees and keeping them satisfied in general. However, this thinking neglected the costs associated with hanging on to the wrong people. Yes, the business hurts when A players leave. But when turnover comes for under performing, unhappy employees, the business wins (as do the employees). In some cases, businesses may even save money when low performing individuals leave. The costs of keeping them are greater than the costs of replacing them.

Today, businesses are focusing on becoming agile in order to quickly adapt to change. They are implementing this through one of two ways: getting new employees, or transforming the people already in the organization.

But change doesn’t come easily and often people refuse to change until it’s too late. This is not a burden that the agile business can shoulder and it may be justified in acquiring different people. Businesses that accept some measure of turnover to keep their company fresh and effective are the ones that perform best in the long term.

In the end, turnover is beneficial if it brings in the right people and sweeps away the wrong ones. The best leaders review their employee turnover from the standpoint of profit, productivity and workplace culture, and not necessarily cut and dry turnover percentage.

How does your business manage turnover? Please feel free to reach out and let us know your thoughts!