Employees leaving your business may have a significant impact on the company's productivity, morale, and profitability. You want to retain top talent as long as possible to prevent labour turnover. Employee retention strategies are critical to reduce employee turnover.
If you've noticed an increase in employee turnover, it's time to reconsider your HR approach and determine why employees leave. In this article, we'll look at the factors that contribute to employee turnover and ways to reduce them.
What is Employee Turnover?
Employee turnover is one of the prime concerns of businesses of all size. But what is employee turnover, and what are the effects of employee turnover?
Employee turnover, or employee turnover rate, calculates the total number of employees who leave an organisation during a given period. Usually, a staff turnover rate consists of the number of employees who leave in one year. The employee turnover rate applies to an entire organisation. However, it can also apply to groups within an organisation like departments or teams. The turnover rate in smaller groups yields significant insight into the culture and other vital business metrics.
If a company is experiening a high labour turnover they may experience a range of negative impacts. It's crucial for companies to track their labour turnover, uncover the reasons why employees leave and enact employee retention strategies.
Types of Employee Turnover
There are two types of employee turnover. These are voluntary and involuntary. Voluntary turnover refers to any situation where an employee actively chooses to leave. In contrast, involuntary turnover is any instance where an employer decides to terminate an employee.
What Causes Employee Turnover
Many factors cause employee turnover or increase employee turnover rates. Some turnover is expected and perfectly normal, such as employees leaving for personal reasons. Bad staff turnover happens due to negative triggers at an unexpected rate. The average employee turnover rate in Australia in 2019 was 8.5%, this was an increase on a turnover rate in 7.7 in 2017. The staff turnover rate also fluctuates between industries. The highest contributor is the Australian hospitality industry, with a 17.9% turnover rate. Whereas public administration only has a 5.3% turnover rate.
Some of the most common reasons for employee turnover are:
- Lack of opportunity for career development and growth
- Feeling burnt out and overworked
- Lack of feedback and recognition
- A negative view of management
- Toxic workplace culture
- Lack of work-life balance
- Natural career progression
- Internal promotion or transfer
- Significant family or life event
- Competitive offer
- Involuntary departure/Employee termination
1. Lack of Growth and Development
Opportunity for growth and professional development is a significant factor for retaining top employees. If an employee feels they are in a dead-end position, they are likely to look at different companies for the chance to develop their skills, status, and income.
2. Being Overworked
It might seem natural to ask your staff to take on extra responsibilities in periods of economic pressure. Employees often expect to work overtime at specific periods. However, asking employees to work longer hours too often may leave them feeling stressed, frustrated and overworked, leading to higher employee turnover.
3. Lack of Feedback and Recognition
Lack of open communication and transparent feedback channels may drive your employees away. Feedback from employees can help them manage their workload and refocus. Ignoring the opportunity for feedback or providing recognition of talent will cause your employees to become disheartened.
4. A negative view of management
A lack of trust and a negative view of management can drive up employee turnover rates. A study from TinyPulse found that 40% of employees who don't rate their managers' performance positively have sought out new companies over a timespan of three months. Micromanaging can make employees feel stifled and overmanaged. They may feel they have a lack of freedom to perform in their area of expertise.
5. Toxic Workplace Culture
Toxic workplace culture can lead to rampant conflict, disengaged and unmotivated employees. Staff who feel they do not fit into the culture or do not mesh well with their colleagues will quickly look for other businesses with a positive culture.
Why is High Employee Turnover Bad?
There are several reasons why high turnover is bad. These reasons can range from immediate and noticeable effects to long-term, subtle effects that build over time.
In the short term, outgoing employees create staffing gaps, and recruitment related costs drastically increase. In the long run, a high staff turnover rate inside your company may signal to current employees and job seekers that your organisation has a problematic company culture or might not be a great place to work. Although the causes of employee turnover may not be the result of internal issues, it can still negatively impact your business.
Here are some of the disadvantages of high employee turnover:
- Increased recruitment costs
- Loss of company and brand knowledge
- Decrease in productivity
- Low employee morale
Effects of Employee Turnover
High employee turnover has a direct impact on company revenue and profitability. Factors that contribute to this include productivity, cost of recruitment, training new employees, and lost sales.
Businesses with high staff turnover typically experience low employee morale and productivity rates. Existing staff may have increased workloads and responsibilities due to a lack of a trained workforce. The business experiences decreased sales due to a significant amount of time spent training new hires in company policy and process. These factors also contribute to low employee morale from overworked employees and new hires who struggle with new responsibility and procedures. Companies with high staff turnover can grapple with attracting and retaining top talent.
How to Reduce Employee Turnover
There are several tools and strategies to reduce employee turnover rates.
1. Create the Ideal Working Environment
Cultivating a work environment that motivates your employees is essential for engagement and retention. A DISC assessment provides insights into an employees ideal working environment, motivators, communication style and things they need from their respective manager or leader. Organisations can use the insights from a DISC assessment to craft the ideal working environment for the employee. The insights contribute to employee retention and reduce staff turnover rates. Understanding DISC methodology alone and knowing about the four primary DISC personality types helps employers understand an employee, such as how they interact and their stress levels. Completing a DISC assessment yields the best knowledge of your employees as it reveals their unique traits.
2. Recruit the Right Fit
Recruiting the right fit for the company is essential to retain employees. Ensure you clearly define the role and ensure the candidates' skills match the requirements and the company culture. Some of the primary factors that contribute to employee turnover are disengagement and lack of job satisfaction. Using a DISC assessment during the recruitment process will reveal how to keep your new hire motived, spot when they are under pressure, and in which areas they may need development and support.
3. Monitor Employee Feedback
Employee satisfaction or engagement surveys are an effective way to monitor employees' feedback to ensure you retain them. Feedback from an HR survey can demonstrate what drives employee engagement in your organisation. Identifying these critical areas of employee engagement supports businesses to place resources into key areas that produce the best outcomes and ensure the retention of top talent.
Use surveys to collate open-ended questions to delve deeper into internal and external factors to gauge how likely employees are to stay in the role or organisation. Turnover intention is one of the best predictors of actual turnover rates. Questions like 'How much longer do you plan to remain with the company' reveal how likely your employees will leave the organisation. While you cannot control external factors, you can influence internal factors to ensure employee retention. Surveys help uncover why employees might be distracted and disengaged at work and provide qualitative insight and detail into the reason behind engagement scores. Analyse open-ended questions to identify key themes and emerging issues within the workplace to respond appropriately. The key to employee retention in the workplace is to gain up-to-date feedback on job satisfaction levels, employee engagement, and employee commitment.
4. Employee Training and Development
Employees place significant value on growth opportunities. Several workplace studies explore the direct connection between the lack of development opportunity and high turnover intentions. Businesses who do not invest in their employees are much more likely to experience high rates of turnover. A DISC Assessment is excellent to use as a basis for discussion in a performance review. The insights open up discussion around things like how the employee feels they are using their strengths in the position. How can they improve the job scope to use more of their strengths and things that motivate them? The DISC assessment highlights things demotivating the employee and where the business can further support them. Using the DISC profile report transforms the review into a very unique and personal journey where both the manager and employee have clear expectations for the next six months or year. The insights from the DISC assessment are a win-win towards job satisfaction for the employee and the employer.
Transparent communication is essential to the success of any team or organisation. Without effective communication, things can rapidly fall apart. Teamwork is difficult when team members are not communication or not communicating clearly. A DISC assessment is a useful tool to develop effective communication and learn how to adjust your communication style to others. The assessment insights reveal how an employee needs to be communicated to from their managers and peers. Such as, do they prefer one-on-one communication or group discussion? Or, how much detail, background, facts, or results do they like? Feedback is also an essential part of communication in a business, both giving and receiving it. If an employee feels unheard every time they try to provide or ask for feedback, they're eventually going to give up. Encouraging clear and transparent dialogue, and knowing how to adjust your communication style to others, will help to combat this.
It takes effort to cultivate an environment that supports it's employees, develops a culture of feedback and has effective and productive communication channels. However, the result pays big dividends with a significant increase in employee engagement and job satisfaction. Identifying areas of improvement in your business and acting upon them will create job satisfaction and decrease employee turnover.