By Umer Raza Bhutta
Employee Turnover and strategies to reduce it
Companies usually try not losing its staff. That is what at least the intention of all the companies. But when good intentions are not translated into actions the company experiences an employee turnover. The employee turnover is than understood to happen because of a number of reasons. The companies at the same time continue to devise such plans albeit, with little or no actions whereby turnover could be reduced.
Employee turnover refers to the proportion of employees who leave an organization over a set period (often on a year-on-year basis), and it is expressed as a percentage of total workforce numbers. The term turnover encompasses all leavers, both voluntary and involuntary, including those who resign, retire or are made redundant, in which case it may be described as an ‘overall’ or ‘crude’ employee turnover. It is also possible to calculate more specific breakdowns of turnover data, such as redundancy-related turnover or resignation levels, with the latter particularly useful for employers in assessing the effectiveness of people management in their organizations.
In organizations we usually calculate the turn over ratios but seldom calculate the flip side i.e. Retention ratios. Retention relates to the extent to which an employer retains its employees and may be measured as the proportion of employees with a specified length of service (typically one year or more) expressed as a percentage of overall workforce numbers. The formula for calculation for retention rates of an organization is
Number of staff with service of one year or more x 100
Total number of staff in post one year ago
By calculating the retention ratios the HR can add up significance to its efforts to retain employees and use this as a bench mark as against the turnover ratio.
Latest turnover trends: According to a CIPD (Chartered Institute of Personnel and Development) survey voluntary turnover rates have decreased recently as a result of challenging economic conditions, on the other hand redundancy-related turnover has become more common. However, skills shortages persist for certain occupations even during troubled economic times, so it is important to be aware of trends in turnover rates for different groups rather than simply focusing on turnover figures. Turnover levels can vary widely between occupations and industries. The highest levels are typically found in retailing, hotels, catering, call centers and among other lower paid private sector services groups. Turnover also varies from region to region. The highest turnover rates tend to be found where unemployment is lowest and where it is relatively easy for people to secure desirable alternative employment. Hence, if there are opportunities available for employees turn over ratios are higher, but if there are limited or no availability of jobs staff might as well tend to tolerate the conditions within the same company. Another reason for staff to remain in one company for longer period without any major breakthrough in that company is their lack of focus towards their own development. It is said in the private sector that if you are not been promoted or given new challenge in three years of your job at one company you must look for other opportunities. However, if you do not move on, and remain in one company for a longer period at same position, it can be perceived that you are just as good as you are doing in that company. At the same time your chances of going to some other company and getting a higher position with some other company of higher repute gets slimmer. In our society the turnover ratios also gets a mixed and strange trends. I have seen people staying at one job, at one designation and with same responsibilities for longer period because of the fact that they have to support their families. This fear also helps organizations to retain some employees for a longer period. Such employees may not be bad performers but they lack a sense of personal development and belief. At the same time at lower grades there are such trends where employees leave jobs quite frequently and this happens because of same family problems for which they want to retain (or have) a job at the first place.
When does employee turnover become an issue?
There is no set level at which point employee turnover starts to have a negative impact on an organisation’s performance. Much depends on the type of employee market in which the organization competes. Where skills are relatively scarce, where recruitment is costly or where it takes several weeks to fill a vacancy, turnover is likely to be problematic for the organization. The more valuable the employees in question – for instance where individuals have specialist skills or where they have developed strong relationships with customers – the more damaging the resignation, particularly when they move on to work for competitors.
By contrast, where it is relatively easy to find and train new employees quickly and at relatively low cost, it is possible to sustain high quality levels of service provision despite having a high turnover rate.
Some employee turnover positively benefits organizations, for example when a poor performer is replaced by a more productive employee or when a senior retirement allows the acquisition of welcome ‘fresh perspectives’. Moderate levels of staff turnover can also help to reduce staff costs in organizations where business levels are unpredictable month-on-month. When business is slack, it may be possible to hold off filling vacancies for some weeks.
Why do people leave organizations? Employees resign for many different reasons. Sometimes it is the attraction of a new job or the prospect of a period outside the workforce that ‘pulls’ them. On other occasions they are ‘pushed’ ,as a result of dissatisfaction in their present jobs, possibly because of a lack of training, development and career opportunities, to seek alternative employment. The move might also be prompted by a combination of both ‘pull’ and ‘push’ factors.
A poor relationship with a line manger, leading to disengagement, can often be a ‘push’ factor behind an individual’s decision to leave the organization. Three most common reasons because of which employees leave organizations are: to increase job satisfaction, to attain better pay and benefits, to learn new things.
In high-turnover industries in particular, a great deal of employee turnover consists of people resigning or being dismissed in the first few months of employment. Poor recruitment and selection decisions, both on the part of the employee and employer, along with poorly designed or non-existent induction programmes are usually to be blamed for many turnover cases. Expectations are also often raised too high during the recruitment process, leading people to compete for and subsequently to accept jobs for which they are in reality not suited. HR also seeks to gain credit by filling a place quickly through whatever resource is available without giving much thought towards the long term suitability of the candidate for the organization.
Validity of Exit Interviews in investigating why people leave
Obtaining accurate information on reasons for leaving can be difficult. It is important to appreciate that the reasons people give for their resignations are frequently untrue or only partially true. Individuals are likely to be reluctant to voice criticism of their managers, colleagues or the organization generally, preferring to give some less contentious reason for their departure. Where ‘exit interviews’ are used to enquire about the reasons for leaving, the interviewer should not be a manager who has responsibility for the individual or who will be involved in future reference writing. Confidentiality should be assured and the purpose of the interview explained.
Using an external provider to conduct exit interviews will help employers capture more accurate data about why people are leaving, as individuals are more willing to be truthful when there is reassurance of anonymity.
Improving employee retention
It is worth considering the following elements, all of which have been shown to play a positive role in improving retention:
- Job previews – give prospective employees a ‘realistic job preview’ at the recruitment stage. Take care not to raise expectations only to dash them later. Realistic means realistic, showing them both sides of the coin at the beginning. A complete job description with reporting lines should be explained to the candidates, so that he/she could make an informed decision. Sometimes, candidates focus towards their up word reporting lines and seek opportunities whereby they could move up the ladder quickly. If this is not the case in your organization or for that particular position, the candidate must be informed. By giving a good candidate a false picture of a good career ladder, we may convince him to take a position, but imagine the damage towards image of the organization later, when he/she leaves and joins some other organization while bad mouthing about your organization.
- Make line managers accountable – for staff turnover in their teams. Reward managers with a good record for keeping people by including the subject in appraisals. Train line managers prior to their appointment and offer re-training opportunities to existing managers who have a high level of turnover in their teams. Surveys repeatedly reveal that employees do not leave organizations, they leave bosses. In satisfaction surveys within organizations, you may ask the employees the “want” and “have to” types of questions in relation to their work with boss. If a department shows positive trend for the question “ I Have to work for my supervisor” as against the question “I want to work for my supervisor”, that department and its supervisor needs training, coaching and that supervisor may be reprimanded.
- Career development and progression – maximise opportunities for employees to develop skills and move on in their careers. Where promotions are not feasible, look for sideways moves that vary experience and make the work more interesting.
- Consult employees – ensure wherever possible that employees have a ‘voice’ through consultative bodies, regular appraisals, attitude surveys and grievance systems. Where there is no opportunity to voice dissatisfaction, resigning may be the only option. The HR department needs to be with the people. It is good that we talk about strategic HR, but strategies do not come in closed door offices, these come with and through the people. When HR is available to the people any time, they will have opportunity to share and consult about themselves with HR. Many resignations may get stalled in the employee computer only after having a detailed and sharing discussion with either HR or the department head.
- Be flexible – wherever possible accommodate individual preferences on working hours and times. Where people are forced to work hours that do not suit their domestic responsibilities they will invariably consider looking for another job that can offer such hours.
- Avoid the development of a culture of ‘presenteeism’ – where people feel obliged to work longer hours than are necessary simply to impress management. This shows the organization do not value the output of the employees but values their presence only. It also discourages smart workers and they may very easily find a way to leave the organization. Prepare and look at the data whereby you could locate the department that are putting longer hours are work. The departments with longer hours consistently over a period of time may need a review either in their manning or their process, or most importantly a review of the department head.
- Job security – provide as much job security as possible. Employees who are made to feel that their jobs are precarious may put a great deal of effort in to impress, but they are also likely to be looking for more secure employment at the same time.
- Treat people fairly – a perception of unfairness, whatever the management view of the issue, is a major cause of voluntary resignations. For example, perceived unfairness in the distribution of rewards is very likely to lead to resignations. Resignation time spurs into organizations just after the announcement of appraisals. This is because of some expectations and a perceived unfairness of the management. Organizations, of course, cannot and must not give all employees similar rating in performance appraisal, however a fair treatment is required by all. This fair treatment comes through the offices of the department heads and HR. They have to work together to make sure that all the staff knows what is expected of them and how are they rated. When, during the year and most importantly during the last three months of an appraisal year, we do not communicate with our staff we tend to build a wall between us and them. Employees that have performed equally well in the organization must be treated equally. Another way of minimizing the label of unfairness is to do some discussion groups amongst the staff about their work. In this way the staff that are at same level and competing with each other will have an opportunity to present themselves and then the department head (HR may be included as a referee) and all the department colleagues may see the fairness of awarding the appraisal ratings through an interactive discussion. These discussions may not focus on the appraisal ratings but on work only. This practice will also help to raise the bar of performance of the department and eventually of the organization.
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