It’s no secret that for much of 2021, employees quit at record rates. On average, 3.9 million employees left their jobs each month through November 2021. For November itself, that number rose to 4.5 million. And it’s not just blue-collar workers who are quitting. The category with the second-highest turnover rate is management consulting; enterprise software follows close behind. With demand high, companies must go the extra mile to keep their talent.
Why does turnover matter? Here are a few of the main reasons to take action against it now:
- High turnover drives down morale. Current employees miss the camaraderie they had with their coworkers. They may wonder if they should leave, too.
- The cost of replacing employees can be quite expensive.
- Teams don’t function as effectively when people are coming and going.
- It hinders your ability to prepare people for advancement.
A full 52% of employees who quit say their manager could have stopped them. Learn how to take action to reduce turnover starting right now. You can’t afford to lose your talented employees—and you don’t need to!
Understanding Your Turnover Rate
We all hear the phrase “turnover rates” continually these days. But what does it really mean? In other words, how does a company calculate its turnover rate? In particular, HR professionals need to know how to do this. Informed by this data, they can determine what actions they need to take. Further, they can make a clear case for action to company leadership.
What Is a High Turnover Rate?
Average turnover rates vary by industry. In 2018, the retail and wholesale industry had the highest turnover at 60.5%. Meanwhile, the insurance industry had a rate of 15.5%. Across industries, companies averaged a 22% turnover rate. (We’re examining pre-pandemic numbers to provide a more stable view of what an average rate looks like.)
In general, a 10% rate or lower constitutes a low turnover rate. Consider average rates in your industry to assess what constitutes a high rate for you.
How Do You Calculate Turnover Rate?
You can estimate your turnover rate with a simple equation. Here’s how the Society for Human Resource Management (SHRM) explains how to calculate it:
Turnover Rate = # of Separations / Avg. # of Employees x 100
First, determine the average number of resignations per month. Next, divide it by your average number of employees. Then, multiply the number you get by 100. Add a percentage sign, and you have your turnover rate.
SHRM offers a turnover calculation spreadsheet to make this task easier. It will help you find those average numbers to gain a more accurate estimate.
How Much Does Your Turnover Rate Cost You?
Replacing an employee costs half to two times their yearly salary. This can really add up. Say a company has 100 employees who earn $50,000. A fairly average turnover rate of 26.3% can cost it $660,000 to $2 million a year.
Even if employees don’t leave, disengagement proves costly. Gallup reports that lost productivity equates to 18% of disengaged employees’ salary. Say your company has an average salary of $50,000. That means each disengaged employee costs $9,000 per year.
At the same time, a minor amount of turnover is okay—and even beneficial. It exposes your team to new ideas and approaches. A team with zero turnover could stagnate. Plus, an employee or two may genuinely want to change industries or start their own business. So, don’t panic over one resignation, but do let it move you to action.
Take Action to Reduce Your Employee Turnover Rate
Good performance management is the cornerstone of employee retention. Implement these strategies for supporting your employees’ growth, and turnover will fall. Coach managers throughout your company on how to adopt these practices as well. They’re best positioned to address concerns early on and create an outstanding employee experience.
Improve Your Culture
A poor workplace culture plays the biggest role in attrition, says MIT Sloan Management Review. “The leading elements contributing to toxic cultures include failure to promote diversity, equity, and inclusion; workers feeling disrespected; and unethical behaviour.”
Even if your culture isn’t exactly toxic, it may have much room to improve. Evaluate how you’ve handled any issues with employee behaviour. Does it align with your policies, or do those policies need an update? Do managers have good relationships with direct reports? Does their leadership style need to improve?
Consider whether any managers have an authoritarian style that makes people feel uncomfortable, for instance.
Further, don’t just think about diversity when making a promotion. Instead, consider whether you nurture the talent of all employees equally. Who has received new opportunities in the past month? Has Kelly received regular mentoring that benefits her growth? Did John get to attend that virtual conference last year?
Disperse these opportunities in egalitarian ways across the team. Make sure everyone has the chance to build the credentials, abilities, and relationships that will allow them to advance.
Finally, make strong communication part of your culture. Model cultural norms of addressing issues promptly and professionally. Build a rapport with each member of your team. They’ll take your lead and help to solidify that culture.
Ramp Up Your Onboarding
Just 12% of companies believe they onboard effectively. Making onboarding a priority will boost job satisfaction from day one. Onboarding should ideally continue through the first 90 days. It should help employees not only learn their role but get to know their team. Here are several vital steps to take in the onboarding period:
- Pair them up with different coworkers for virtual chats each week.
- Assign a peer mentor to provide guidance through the first 90 days.
- Build in new challenges week by week. Don’t expect them to get up to speed all at once.
Create a Development-Focused Workplace
Focus more on strengths than weaknesses. Employees can improve much faster when they focus on strengths. Meanwhile, when focusing on weaknesses, they may see more minor changes. Managers should help them track their progress on a weekly basis.
Performance management software can illuminate milestones reached through steady effort. Help employees set and work toward goals and OKRs with the help of such tools. By focusing on development, you’ll greatly enhance engagement.
Reassess Policies and Benefits
Reevaluate your benefits package, salaries, and other job perks. Also reconsider company policies. Do employees want more flexibility in terms of vacation time, for instance? Or do certain employees want to live abroad or in another state? Find out by administering employee pulse surveys. They’ll show whether employees have needs and expectations that aren’t being met.
Here are a few sample questions for a survey:
- What type of flexible working arrangement fits your life best?
- Do our family leave policies meet your needs? If not, what could improve?
- What type of perks would you be interested in?
Take the example of Peloton. They realized their employees had an average age of 29, and many were having children. So, their head of benefits proposed launching a 529 plan to help them save for college.
Define the Path Forward
Employees need to understand their prospects with your organization. Otherwise, they’ll look for a future elsewhere. During performance reviews, make their career goals part of the conversation. Discuss the next steps they can take with your company to get there. And check in with them about their progress regularly.
For example, say they aspire to become a department head one day. Help them first build the skills to supervise a small team. Explain how you’ll support them on this path, too. Then, advocate for them by informing others of their big and small successes.
At the same time, organizational leadership should build a succession plan. You probably can’t promise particular positions to certain employees, but you can prepare. Crafting a succession plan will help each manager prepare employees for ambitious yet realistic opportunities.
Also, remember that many employees aren’t just worried about not getting promoted. They also worry about their company restructuring and laying them off. Job insecurity plays a big role in turnover. Unless you’re planning any big changes, reassure solid employees that their jobs are safe.
Offer Lateral Moves
According to Sloan Management Review, this is the single biggest thing you can do to boost retention. Many employees are craving a change, and you can offer it in-house. They feel bored in their current roles and want new challenges. Talk with them about whether they want a new role in another function. Likewise, the ability to relocate and work in a different branch could boost satisfaction.
Consider offering job rotations, too. “The human brain thrives on variety, and job rotation is a smart way to shake up your workers’ daily routine,” says Robert Half. Employees will build new skills along the way. Plus, they’ll better understand how the organization functions.
Recognize Their Hard Work
Those who have stayed with your company have weathered incredibly tough times. Share your genuine thanks for their loyalty. And whenever the opportunity presents, express your gratitude for their efforts. When thanking them, illustrate how their work furthered the organisation’s mission.
Find ways to give employees “shoutouts” in group settings as well. They’ll feel more appreciated when they know other colleagues recognize their work. And do something special on occasion to show your thanks. For instance, plan a celebratory lunch with three employees who went the extra mile this month.
Along with other job goals, encourage employees to set wellbeing goals. Managers can provide examples of these goals and prompt them to reflect on their progress. For example, “Have uninterrupted family time every weeknight” could be a good goal. Consider providing access to life coaches, financial coaches, nutrition coaches, and other experts on wellbeing.
Realising that you have a high turnover rate can feel daunting. Or, if you recently had a great employee quit, you may wonder who is next. But taking action through the strategies shared here will change the game. You’ll show employees that you’ve committed to their development. As a result, morale will rise, and employees will gain more satisfaction from their work!
Want to see firsthand how performance management software will benefit you? Schedule a demo today!