Employee turnover has a major impact on your organization's trajectory, but if you're having trouble with it, you're not alone. Even the best companies struggle with turnover.
In this post, we’ll examine employee turnover: what it is, why it costs so much, and how to reduce it.
Voluntary vs. involuntary turnover
From a broad perspective, there are two categories of employee turnover: voluntary and involuntary.
Voluntary turnover occurs when an employee chooses to leave an organization of their own volition. Voluntary turnover can be due to relocation, retirement, family illness, a more enticing job offer, an interpersonal conflict, or a micromanager who's constantly blocking an employee's progress.
Involuntary turnover occurs when an employee who would otherwise continue to work for an organization is released. Involuntary turnover can be due to unsatisfactory performance, layoffs, poor culture fit, committing a terminable offense, or absenteeism, for example.
Healthy vs. unhealthy turnover
Keeping voluntary and involuntary turnover in mind, you might expect an organization's optimal turnover rate to be zero. However, some turnover can be healthy.
When a great employee reaches retirement age after serving your organization for many years, their turnover will make room for a talented successor to advance their career. Another employee might contribute significantly to your organization and move to another company before frustration or stagnation sets in. These are both natural and healthy forms of turnover.
There are many legitimate cases when employee turnover is the best outcome for both employees and employers. 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, experiences higher turnover than most industries. That's not because the hospitality industry is bad, it's simply an outlier in the realm of employee turnover due to the nature of the work. (To learn more, check out these useful benchmarks that the teams at Compensation Force and CompData Surveys put together for both voluntary and involuntary employee turnover rates by industry.)
Cost of turnover
Employee turnover can be costly, yet many companies fail to recognize it as a priority. What's worse, the departure of just one or two top-performers can trigger a subsequent spiral of turnover.
When it's left unchecked, the cost of employee turnover can add up quickly. Organizations foot the bill for direct exit costs whenever a separation occurs, whether it's voluntary or involuntary. Organizations also cover the less obvious costs around recruitment, productivity, training, knowledge, and morale.
For more information on the magnitude of those costs, check out our blog post "What You Need to Know About the Cost of Employee Turnover" and try out our Cost of Employee Turnover Calculator.
Once you understand the considerable impact employee turnover can have on your business, it's time to consider how you can decrease turnover when it hits unhealthy levels.
Ways to improve employee turnover
According to a survey of HR leaders performed by Kronos and Future Workplace, 87 percent of respondents said "improved retention" was a key priority. There’s a good chance you feel similarly.
Fortunately, we’ve compiled a list of 11 easy steps any leader or manager can take to improve their organization's employee turnover rate:
1. Analyze turnover
It's hard to change what you’re not measuring. It's important to collect the data carefully, understanding that all turnover isn't equal and that how you measure employee turnover makes a difference.
There are a multitude of reasons people leave a job, and it's important not to lump all employee turnover into the same category. Yotpo's Tomer Tagrin tackled this issue in his post, "How can you measure your company culture?", where he outlines a formula for measuring company turnover and culture.
Once you’ve measured turnover rate, you’ll also want to measure the cost of employee turnover.
Are you proactively soliciting feedback from employees before they leave?
Quitting your job is a big decision, and it's not one that most people take lightly. When employees do leave, how confident are you in your knowledge of why they left?
Remember that gathering qualitative data through engagement surveys and other means is also important. You can solicit feedback manually, but there are several effective tools available to help organizations gather that feedback in a low-overhead and anonymous format. TINYpulse, Officevibe, and CultureAmp are great examples of simple but powerful ways to better understand your team.
If you're squeamish about hearing hard truths regarding your company culture now, know that there’s a good chance you'll read about it on Glassdoor if you wait.
2. Ingrain transparency
Transparency 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.
Instead of saying, "Do I absolutely have to share this information with the team?" try, "Do I absolutely have to keep this information from the team?" If you can't come up with a solid reason to keep something a secret, you need to question the validity of keeping it behind closed doors, especially when the alternative offers so many benefits.
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. A recent TINYpulse survey found that management transparency is the number one factor when determining employee happiness, and happy employees stay around longer.
For more on the benefits of transparency, check out Unlocking the Benefits of Transparency.
3. Set accurate expectations
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 a new employee enters a role thinking they're going to be doing one thing only to find they're doing something else, you can't blame them for being unsatisfied.
On the flip side, promoting extreme and unrealistic expectations can discourage qualified candidates from applying. If you expect workweeks to be 60 to 80 hours, that shouldn't come as a surprise to your new hire. Honesty in advertising is important, but hiring also offers an great opportunity to reassess your company values and the quality of your company culture.
Here's an example: If you're actually planning on having a new software engineer dig through and maintain their predecessor's crufty old 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 maintaining old codebases (they're out there somewhere).
4. Look for 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 ones, and given two applicants with a similar skill set, you'll nearly always benefit more from hiring an employee with stronger soft skills.
For example, 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 another key soft skill to developing a working environment where creativity flows freely and the best solutions 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. And remember not to hire assholes.
5. Emphasize onboarding
Ramping up 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.
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.
Success in hiring and onboarding is more likely when educating new team members on core values and and incentivizing behavior through recognizing achievements, both big and small, that line up with those values.
Hiring and onboarding takes the whole team, and 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.
6. Communication clearly
Clear communication is paramount for the success of any team. Without it, things can fall apart quickly. If you've ever sat through a sports blooper reel, you know what I mean.
Collaboration is challenging when communication isn’t prioritized, even more so with interdepartmental collaboration. Identifying and breaking down departmental silos can have a dramatic impact on organization performance.
Communication is key in developing organizational alignment. Sharing goals and values clearly 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. Combat this by encouraging dialogue.
Communication is what you're discussing; dialogue is how you go about discussing it.
Think about it this way — if you're communicating regularly, but the dialogue within that communication is toxic, it's not going to benefit anyone. You're drawing nearer to a turnover event with every word. On the other hand, if you're never covering crucial issues, you’re not getting the whole picture.
It takes effort to cultivate an environment that supports frequent, effective, and productive communication, but that investment pays big dividends.
However, it's not just about knowing the tactical details of what's going on. Good communication is your opportunity to gain the additional insight you need to stay ahead of turnover.
How do you build an environment with healthy communication? Chad Halvorson covers this issue in his article on employee retention:
"Often time people feel they can’t really express themselves for fear of embarrassment or reprisal—even with open door policies in place. Instead, managers and employers need to actively create an open rapport with employees."
The key to sparking these crucial conversations is to bake them into everyday life in your organization. Carve out time for open communication at a regular cadence, and prioritize it so that you're not constantly rescheduling over it.
One on one meetings are a great format for productive communication between managers and the people they lead. If you're interested in implementing them or improving the ones you already have, check out our guide to getting the most out of one on one meetings.
7. Encourage growth
Professional development and growth opportunities are necessary to keep great talent on staff.
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 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 whole 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. According to Gallup, 87% of Millennials say that professional or career growth and development opportunities are important in a job, compared to 69% of non-Millennials.
Nobody wants to stay in a dead-end job. Learning opportunities are a great way to help your team grow and thrive. As an added benefit, the results of that learning will benefit the organization.
Don't think of employee professional development as subsidizing training costs for their next employer. Instead, think of it as an investment in human capital. You have the power to directly influence your returns on this investment. Peter Baeklund has a great quote on the topic:
A CFO asks a CEO: What happens if we invest in developing our people and then they leave us?
The CEO responds: What happens if we don’t and they stay?
When there’s no room for a top performer to move forward, they're liable to find another path. It's not fair to expect them not to. Advancement opportunities can make or break retention. If an employee is genuinely ready to take the next step in their career path, find ways you can help them advance internally.
8. Foster camaraderie
The people you work with and the relationships you build among them can be an incredibly strong employee retention factor.
According to the TINYpulse 2015 Employee Engagement & Organizational Culture Report, colleagues were cited as the top reason respondents love their job. When asking respondents what it was that made them want to give their all, the answer wasn't money, or prestige. It was peers.
"Seventy percent of people state work friendships as the most crucial element to a happy working life."
How do you provide an environment that supports the founding and strengthening of those friendships? Start with culture.
No matter how much effort you expend or how well-designed the work environment, culture should be the foundation in fostering camaraderie. Begin by developing a culture of mutual respect and appreciation, because it's nearly impossible to build great working relationships within a toxic organizational culture.
In addition, make sure there are physical areas and a cultural atmosphere that support collaboration.
The emotional environment you develop is incredibly important. Each member of the team should feel a sense of psychological safety — that their ideas will be heard, considered thoughtfully, and never ridiculed. Employees should feel comfortable in their environment, not like they're "breaking the rules" by interacting with coworkers.
9. Help employees find purpose
Purposeful work is a major factor in retention — especially in today's highly competitive talent landscape.
When asked about their primary concern during their first job, 57% of younger Americans said that they wanted something to be part of something that was enjoyable or made a difference in society. Researchers have also found that workers would be willing to accept a 32% pay cut if it meant their work was more meaningful.
Here's the key factor many people miss: there are no "purpose professions." Sure, there are some careers whose purpose is clearer and more present, but it's possible to find purpose in any career. Sometimes all it takes is someone else highlighting the importance in what you do.
Whether you're the executive director of a non-profit organization or a sushi master like Jiro Ono, your work is purposeful, and it's meaningful to others. Being able to help employees to see the purpose in their work is a massive competitive advantage.
In a recent interview with us, Imperative's Arthur Woods went into more detail on the importance of purposeful work.
Start by showing employees exactly how their work impacts their team, and why their contributions matter. Next, share how their effects reverberate across the organization and achieve organizational goals. Finally, take a step back and illustrate how their efforts positively impact the world around them.
10. Prioritize wellness
Employees who are healthy in mind and body have the necessary bandwidth to produce more and better work. It's really that simple.
Think about it from a psychological perspective – Maslow's Hierarchy of Needs is a great way to illustrate the importance of both physical and mental wellbeing, not just as human beings, but specifically in a work context.
As leaders, it's our job to help employees achieve self-actualization — that highest level in the hierarchy where a person fully realizes their potential and operates in a manner that fulfills it.
When an employee's basic physiological needs aren't being fulfilled, it's not possible for them to reach higher levels of performance because their attention will always be, at least to some degree, focused on fulfilling their most basic needs.
If an employee is sick at work but should be in the doctor's office, they're not going to be operating at their full potential. It's also putting the fulfillment of physiological needs (and as a result, higher-level needs) for other employees at risk.
Wellness goes beyond a basic health care plan or sick leave.
Mental health is a huge factor impacting employee wellness and organizational performance, one that’s too often ignored by employers. Only one in five workers say their company offers work-life balance. According to the World Health Organization, stress cost US enterprises over 300 billion dollars. If you're not convinced of the cost yet, our friends at Officevibe shared some more staggering statistics on corporate wellness.
Although you may work in what is considered a 'stressful' industry, and stress is never entirely avoidable, there are always tools to provide relief from that stress and soften the impact it has. The SnackNation team shared a great list of simple strategies you can use to limit the amount of stress you experience at work — many of which can also be helpful in designing a framework to help your colleagues do the same.
How can you support wellbeing within your team? Start by banishing overwork — whether it's happening through managerial pressure or individual pressure to succeed. Avoiding overwork is one of the core competencies of a good manager, and it can have a huge effect on several areas of employee wellness.
If they're thinking "I can't take a sick day because it'll cut into my vacation," or "I have to come in because if I don't, nothing will get done and everything will fall apart," it's time to re-think your approach to employee wellness.
Help employees manage stress through thoughtful project management, and give them the tools they need when stress is unavoidable. Jon Kabat-Zinn gave a great talk at the Google campus on the benefits of mindfulness and stress reduction at work.
11. Recognize contributions
A job well done deserves praise, and it's not just a feel-good thing to do — research by some of the world's top analysts shows that recognition is an incredibly powerful element of the working relationship. It also drives more success for the individual and for the organization.
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 has meaning and impact, and recognizing their contributions is an excellent opportunity to illuminate the purpose behind that work.
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."
Showing appreciation for an employee's unique contributions is a great way to keep them engaged and inspired to continue.
Frequency is a major factor in the effectiveness of employee recognition. If recognition is given once or even a few times each year, most contributions are likely not recognized.
Specificity is another important aspect. It's not enough to tell someone "good job." More specific recognition is more impactful, both to the receiver and the organization as a whole.
It’s even more impactful when that recognition lines up with company values, reinforcing organizational goals. This helps employees understand what types of contributions to their team are successful.
To encourage recognition, consider Bonusly, an industry-leading recognition and rewards platform built to enrich company culture and improve employee engagement.
Take meaningful action
Employee turnover is a common issue for many organizations, but it doesn't have to be for yours. Any one of these strategies has the potential to improve employee retention rates and help you stay ahead of turnover.
It's one thing to say you're dedicated to building a strong company culture or say that employees are your greatest asset, but are you genuinely following through on that rhetoric? You don't have to succeed with every initiative, but just like grade school math, you do need to show your work. Take visible steps toward building a great place to work.
Regularly reinforcing the value you place on your team's contributions and their happiness is one of the best ways to improve their experience at work. Implementing peer-to-peer recognition is a great way to crowdsource that positive feedback, and it's easy to do. Bonusly is fun personal recognition and rewards program, where everyone in your organization can publicly recognize everyone else by giving small bonuses that add up to meaningful rewards, and you can try it for free.
If you're ready to take the next step toward building and sustaining a talent magnet, check out our latest guide: