Your organization's employee turnover rate can have a major impact on its trajectory, and if you're having trouble with it, you're not alone.
Despite its important place in a successful operation, turnover is still one area even the best companies struggle with. Luckily, the struggle isn't mandatory, even if it is common.
Let's take a few minutes to explore turnover -- what triggers it, and some easy ways to improve.
So what is a good employee turnover rate, what's an average employee turnover rate, what's a bad one? What's yours, and more importantly, at which point on that spectrum do you and your team stand?
It's not exactly cut and dry. There are different types of turnover, and different circumstances under which it occurs.
Understanding the fundamentals of turnover can be really helpful, even if it seems a bit elementary at first.
Voluntary Vs. Involuntary Turnover
This is probably the primary differentiator when it comes to turnover.
Voluntary turnover happens when an employee chooses to leave the organization of their own volition. This could be for any number of reasons, like relocation or retirement, for example.
Voluntary turnover could also be due to a more enticing job offer, an interpersonal conflict, or something as simple as a micro-manager constantly blocking progress.
Involuntary turnover happens when an employee who would otherwise continue to work for an organization is terminated.
This could be due to any number of reasons like poor performance, committing a terminable offense, or absenteeism, for example.
Healthy Vs. Unhealthy Turnover
Turnover is expensive. Perhaps much more expensive than you imagine. If you're not convinced, take our 'cost of turnover calculator' for a spin.
With that in mind, you might expect the optimal turnover rate for both voluntary and involuntary turnover to be zero, but that's not necessarily the case.
Not all turnover is unhealthy.
A great employee could reach retirement age after serving your organization for many years, opening up room for a talented successor to advance their career. That's a natural and healthy form of turnover.
Another employee could reach the peak of their contribution to your organization, and summarily move on to another position before frustration or stagnation set in.
There are many legitimate cases when turnover is the best outcome for both parties; however, it's important to keep in mind that as a general rule, a lower turnover rate is better than a higher one.
Turnover by Industry
Average turnover rates are industry-specific. The hospitality industry, for example, sees more turnover than most other industries. That's clearly not because the hospitality industry is a bad industry; it's simply an outlier because of the nature of the work.
For more information, the teams at Compensation Force and CompData Surveys shared some useful benchmarks for both voluntary and involuntary employee turnover rate by industry.
Improving Employee Turnover Rates
Unless your employee turnover rate is already at zero, there's a good chance it's higher than you'd like it to be. That's OK though -- we're here to fix that.
Here are seven steps most any leader or manager can take to improve their employee turnover rate:
Default to Transparency
This is crucial -- not just for employee retention purposes, but for a healthy organization in general.
There's a bond of trust between employees and those who employ them, and few things strengthen that bond better than transparency.
Defaulting to transparency doesn't mean you need to share confidential acquisition plans, or make everyone's salary public. It's a simple mental model to follow.
"Do I absolutely have to share this information with the team?"
"Do I absolutely have to keep this information from the team?"
It's really that simple. You don't have to give up on the concept of proprietary or classified information to embrace transparency -- you just need to question the motivations behind keeping information under lock and key.
It's useful in a practical sense as well. Free-flowing information can help employees contribute and collaborate more effectively.
If you can't come up with a solid reason to keep something a secret, you need to question the validity behind keeping it behind closed doors, when the alternative offers so many benefits.
Post Realistic Job Descriptions
Are you attracting great candidates, only to see them leave after three months? It might have something to do with the way you're describing the job you're promoting.
If someone goes into their new job thinking they're going to be doing one thing, but then find out the actual job is nothing like the posting, you can't blame them for the inevitable cut and run ahead.
Nobody likes a bait-and-switch.
Once again, transparency is a major benefit here.
Here's an example: If you're actually planning on having a new software engineer dig through and fix their predecessor's crufty code, be upfront about it. Let them know the deal in advance, and you'll get a nice self-selected group of applicants who might actually like fixing crufty legacy code (I'm sure they're out there somewhere).
Hire for and Promote Soft Skills
This doesn't mean hire someone who's "nice" even if they have no idea how to do the job. The skills to get the job done are what gamblers call "table stakes," or in other words, the minimum prerequisites to be a fully functional member of the team.
Hard skills are much easier to train than soft, and given two applicants with a similar skill set, you'll nearly always benefit more from hiring an employee with stronger soft skills.
Emotional intelligence is a crucial skill for any employee to develop, but this is especially true for those in management positions. If you're not convinced of that, take a moment to learn a bit more about the unique benefits of emotionally intelligent leadership, and why emotionally intelligent leaders often succeed where others fail.
Psychological safety is key to developing a working environment where creativity flows freely, and the best solutions to organizational challenges are discovered.
Although you can't simply mandate psychological safety into existence, you can still do a lot to help build it into your organizational culture.
Ramping is tough for everyone. It doesn't matter how good you are at your chosen profession, there's always a huge amount to learn when you start a new job.
The easier and more streamlined you can make that process, the better.
Why is that?
For most people, it's incredibly frustrating to be asked to solve a problem with little context and no tools -- and it's even more challenging without help.
Most employees want to know what success looks like in your organization, and if you don't show them, the best tool they have is guesswork.
Don't be surprised if employees choose not to stick around if they don't know what it takes to succeed.
And finally, the bonds employees form among one another are the kind of retention driver you can't buy at any price. The more opportunities to build those bonds you provide during the onboarding process, the more likely they are to form and strengthen.
A seamless onboarding process can make a huge difference in all of these areas. It doesn't have to be absolutely perfect, but the more deliberate and thoughtful you can be in designing it, the better.
Clear communication is paramount for the success of any team. Without it, things can fall apart really quickly. If you've ever sat through a sports blooper reel, you know what I mean.
Collaboration is an immense challenge without communication, and inter-departmental collaboration is next to impossible without it. Identifying and breaking down departmental silos can have a dramatic impact on communication and collaboration.
Communication can also be extremely helpful in developing organizational alignment. After all, it's impossible to align with something if you have no frame of reference. Communicating organizational goals and values clearly, and across all departments will help the entire team understand where their contributions fit in the larger picture.
Feedback is crucial -- both giving and receiving it. If an employee feels like they're talking to a brick wall every time they try to provide (or ask for) feedback, they're eventually going to give up.
It's important for employees to know how they're doing, too. In many cases, issues that might eventually lead to turnover can be dealt with easily early on.
It's essential to give credit where credit is due, and a job well done deserves praise and recognition.
It's not just a feel-good thing you should do -- research by some of the world's top analysts shows that it's an incredibly powerful element of the working relationship.
If an employee repeatedly goes the extra mile and isn't recognized for it, don't expect them to continue putting in that extra effort. If none of their work is recognized or visibly appreciated, there's a good chance you're going to be putting another job posting up before long.
It's vital for employees to know that their work means something, and has a purpose, and recognizing their contributions is an excellent opportunity to illuminate the purpose behind those contributions.
Pay is fungible, but recognition, appreciation, and purposeful work aren't.
If you're new to the concept of employee recognition, or would like to improve your current strategy, take a look at "The Guide to Modern Employee Recognition."
Make Room for Growth
Professional development and growth opportunities are important if you want to keep great employees on staff.
Why is that?
A drive to constantly grow and improve is part of what makes a great employee. If you stifle that motivation for growth, you'll eventually either end up with a stagnant employee, or a resignation letter.
Offer as many opportunities as you can for learning and skill building. You won't only satisfy a top-performing employee's hunger for growth, the organization will benefit from the additional skills they develop.
Advancement opportunities are equally important -- just like a plant will outgrow its pot or become root-bound, a high-level performer will eventually seek out a transplant to keep from getting stuck forever in an environment they've outgrown.
Although employee turnover is a common issue for many organizations, it's doesn't have to be for yours. Any one of these strategies has the potential to improve employee retention rates, and stay ahead of turnover.
If you're ready to take the next step toward building and sustaining a talent magnet, check out our latest guide: