When gauging the health of your business, employee retention is a pretty important measure. Generally speaking, the lower the turnover number, the better it is. Though the number alone is only half the story.
For instance, say you employ 50 people, with an annual turnover of just 6%. While this rate of turnover is nothing to worry about, if the three people that jumped ship each held critical roles, there’s going to be considerable collateral damage. This includes a negative impact on your other staff in terms of morale, performance and productivity.
Replacing workers is costly
You can expect to spend at least one-fifth of an employee’s annual salary on replacing that worker. This includes everything from advertising the position, the time and costs associated with recruiting, onboarding and training new hires. It also takes into account lost productivity while new employees come up to speed and master their new roles.
So, lose three employees on $65,000 each, and you’re looking at a $39,000 hit off your bottom line just to replace them. Of course, if you lose key executives, this cost will be much higher. In fact, replacing a highly specialised role can cost you as much as double the initial salary.
Zero voluntary turnover not the holy grail
Equally, even achieving zero voluntary turnover may not necessarily be a good thing, especially if your business is changing and your people are rooted to the past. It’s important for any business to bring in new talent and with it fresh ideas, different experience, and new perspectives. In fact, healthy turnover can actually help rejuvenate a business.
Healthy vs. unhealthy employee turnover
The key to managing employee turnover is to first identify whether your current turnover is healthy or unhealthy. And while this is influenced by your industry, profession, and where you’re located, as I said earlier, it all depends on who’s leaving.
Whereas, there’s no one magic number for employee turnover, company culture plays a pivotal role in employee retention.
Culture key to retention
In fact, in any firm that is considered a great place to work, culture plays a key role. For instance, look at Salesforce, which topped this year’s Best Places to Work list of employers with more than 100 employees. The company puts its success down to a workplace culture built around the spirit of “Ohana”, which means “family” in Hawaiian, and the close-knit ecosystem of employees, customers, partners and communities that the company has built.
Likewise, for Rackspace Australia which topped the list of great places to work for companies with fewer than 100 employees. The company takes its culture very seriously with a team of ‘culture instigators’ who allocate a percentage of their time to making sure everyone feels included and has a say.
Exit interviews
When people do leave your business, exit interviews are an important learning tool. Candid feedback here is invaluable. But rather than asking them to tell you why they are leaving, ask them for suggestions on how you could improve the business.
Stay interviews
Of course, rather than leaving it until the horse has bolted, an alternative to exit interviews is to hold regular “stay interviews”. Instead of finding out why someone is leaving, find out what you could do to make sure that person sticks around. You can conduct these interviews as part of your regular employee happiness surveys.
Remember, it’s expensive to recruit a new employee. If your company culture is the reason why your employees leave, then it’s a perfect time to have a good look at how you recognise performance, provide opportunities for growth, and the quality of manager-employee-co-worker interactions.
How is your business supporting the most important needs of your employees for meaningful work, market compensation and benefits?
