Turnover, Leadership and Engagement - It's a Proverbial Three-Legged Stool
Does your organization have low voluntary turnover? Most people might think this is a good thing, but just like high voluntary turnover, low voluntary turnover or a combination of both can vary by area of the business or time of year. One thing is certain, these numbers tell a story about your company’s policies, processes, procedures, leadership and culture.
If you do not regularly track turnover, you should. Let’s start with the basics of how to calculate turnover.
Monthly Turnover Rate equals the Number of Separations during the Month divided by the Average Number of Employees during the Month. Multiply the result by 100 to determine your monthly turnover rate.
For example: In May you had 5 separations and your average number of employees is 250. The result .02 is multiplied by 100. Monthly turnover rate is 2.
Next let’s review some myths about turnover; this may explain why this is a good statistic to be measuring.
Myth #1 Turnover Isn’t That Important
Most people would say that no one is irreplaceable, so why worry and fret over it? It’s a waste.
Reality: Although it’s true, people are replaceable, in today’s market environment, every organization should want to keep their talented people, while continually challenging them and helping them grow within the company. On that note, employees and the work they do is significant. Each person is unique with different strengths, weaknesses, talents and skills. If a key employee left the earth tomorrow, you would likely replace the individual or spread the work out among a number of people. No matter what you decide, there will be an impact on your company, whether that be good, bad, or somewhere in between. Employee turnover is an issue that affects your bottom line.
Myth #2 Low Turnover Is Always Good
Low turnover is proof that a company must be doing something good for employees to want to stay.
Reality: Motivating people is complex and if your organization has low turnover there are some possible scenarios: people are overpaid, aren’t motivated to advance, are underpaid (and perhaps apathetic), believe the economy is unstable, stay because the company benefits are so good they cannot be obtained elsewhere or know very well that no other company would tolerate their bad behavior.
There could be many avenues covered here but let’s concentrate on bad behavior in the workplace for a moment. It takes all kinds of people to make the world go around and the workplace is filled with bad behavior. If managers do not step up to the plate and let others know their bad behavior is not acceptable, then they are perpetuating the problem. The perception throughout the workplace is that they condone it. This is not doing your organization any favors. In this instance, low turnover is not a good result.
Myth #3 Turnover is Always Bad
Turnover can be very disruptive to an organization and it has a dollars attached to it that include hiring costs such as advertisements, recruiters, sign-on bonuses as well as some indirect costs such as orientation, onboarding and lost productivity during the vacancy. Knowing these costs, turnover should be avoided if possible.
Reality: There are times when change is needed and many times this means separating from some individuals through retirement, separation agreements, or employees selecting themselves out. The point is, turnover can be an opportunity for employers to replace, develop and promote employees who are excited about the company. In these instances turnover is good and can rid the employer of overpaid or under performing employees or those with bad behavior.
Myth #4 You Can’t Control Turnover
Employees are “at will” and they are free to leave when they desire, without regard to what the employer needs. Organizations need to look at this as whatever happens, happens. In this regard it relieves leaders of the responsibility to manage it.
Reality: Employers cannot completely control turnover. They can however create a workplace culture that is conducive to maintaining the most talented employees and makes them want to stay yet encourages growth and turnover which can spawn future growth. This takes thoughtful planning and mindfulness on the part of the employer and its leaders.
What Really Is Engagement?
Employee engagement is the emotional commitment of the employee toward the organization and its goals. This means employees actually care about their work, the company and the people they work with. They don’t just work for the money or a promotion but work on behalf of the company and in pursuit of the goals set forth. They will be more apt to use discretionary effort. How would they display this effort? By working overtime to finish a project, without being asked; by cleaning up, even if the boss isn’t watching. Engaged employees lead to better business results. A Towers Perrin study showed that companies with engaged employees have 6% higher net profit margins.
Despite all the hype, information, and studies behind engagement in recent years, employers are still not doing a great job. In a March 2018 Forbes article studies were cited that state a few statistics which confirm most employees are not as engaged as their employers would like to think they are. “The Conference Board reports that 53 percent of Americans are currently unhappy at work. Global studies reveal that 79% of people who quit their jobs cite ‘lack of appreciation’ as their reason for leaving.”
A 2014 Employee Engagement Report from Aon Hewitt states:
- Companies with higher employee engagement see the biggest financial gains in their sales growth and shareholder return at +4% compared to the average company.
- Companies with lower employee engagement see the biggest financial loss is their shareholder return at -8% compared to the average company.
Disengaged workers are not good for business. These people are less than productive and cause others to make up for what they don’t accomplish. This is bad for everyone. On the other hand, people can be fully engaged and still underperform. Engagement is not a substitute for competency. Employers need people who can perform, not just show up.
Retain the Best and Let Go of the Rest
Companies who are thoughtful about their talent management strategies are the ones that have cultures who significantly outperform those who do not. A company’s personality touches everything about an organization including processes, communication, policies, how decisions are made, who is hired, who is promoted, who gets fired, how much employees are compensated, how conflict is handled, the quality of leadership, and the products and services they provide to each other and their customers. Organizations who spend energy on creating a healthy corporate culture is energy well spent.
To Sum Things Up
Turnover is really a reaction to all leadership decisions. Managing turnover must be intentional and top of mind. Employers need to create a culture that supports high performing individuals in a variety of ways - financially, intellectually and psychologically - while providing ways to efficiently and properly weed out those who are not engaged and not performing.