Turnover Rate is Not Good Enough, Know ‘Who’s Resign’ From Your Company
Recruiting and retaining employees is one of the keys that affect the growth of the company. Rapid employee turnover results in financial and moral losses to both employers and employees. Referring to Gallup, the ideal turnover rate is 10% in a year. But, the ideal percentage can vary from industry to industry and one company to another.
However, the term turnover is not a good enough metric to analyze the root of the problem. A company that performs an ideal turnover rate based on Gallup standards, could experience a significant effect on its bottom line. Furthermore, the company should see ‘Who is out’ to find out the root of the problem and overcome it.
Who’s out from your company? Is it a top performer? Top-tier position? A low performer? Each displays signs of which problem occur in your company. If a major percentage of turnover is top performers and top-tier, then it is a telltale of a chief problem in the company. It could be the management, culture or salary issue that make them feel disengaged and decide to leave.
In fact, the release of top performers has a significant impact on the company because their output is four times greater with the equal amount of salaries than that of average performers. Their resignation disrupts the corporate relationships with consumers, even to the point of breaking up, and this is likely to impact the company negatively.
Losing the top-tier also has a substantial impact on the productivity and ROA of the company. The process of finding replacements for both groups of employees will not be easy and costly.
Meanwhile, high turnover in low performers can bring positive impact in many aspects, ranging from employee engagement, productivity to profit, as long as we can minimize the percentage and replace it with human resources whose quality is much better. High turnover rates in low performers indicate that companies need to make improvements in their recruitment process.
The high turnover in the new-hired group most likely indicates a problem in the selection process, onboarding and / or training process.
Create an ideal turnover
Researchers believe that employee engagement is the key to address high turnover rate issues. As said before, ideal turnover can be different for each industry and company. So, it would be wise for employee engagement strategies to focus on reducing turnover in top performers and top-tier as close to 0% as possible and turnover in low performers at least below 10%.
Companies also need to pay attention to the turnover rate of the average performer, which is generally the largest population within a company. Indeed, high turnover rates on average performers do not have as much impact as those on top tier and top performers, but it must be controlled.
The biggest risk of high turnover on average performers is the cost of recruitment and expense when the position is vacant. The cost of employee retention on average performers is much cheaper than the cost of recruitment and vacant position combined. That means, employee retention strategy also needs to be focused on average performers.