The health of any business depends on a number of key factors. Staff quality is one of them, and this can be dependent on the amount of expertise racked up from employee experience over long service.
Consequently, it makes sense for organizations to take steps to retain staff wherever they can. Happily, there’s an HR practice that can help deliver this. It’s called employee turnover analysis, and we’re going to look at how it can help. We’ll start by looking at employee turnover itself, and how high levels of it can harm a business.
What is employee turnover?
Employee turnover is the rate at which staff leave a business and are replaced by new staff, over a given period of time. This includes both voluntary and involuntary staff turnover.
High turnover levels can have huge negative effects on an organization’s success, so it makes sense in most cases to pursue low levels where possible. We calculate the employee turnover rate figure as follows. When a employee leaves it is important to do exit interview questions and answers. Valuable information can be learned from these interviews.
Why is employee turnover important?
We’ve already mentioned one of the main problems associated with high turnover: a loss of expertise. This is hugely important, because expertise by its very nature takes time to accumulate so it is a precious commodity.
On top of this, high levels of employee turnover are expensive. They lead to a number of different negative impacts:
- Recruitment expense – it’s not cheap to go through the recruitment and selection process
- Onboarding and training – a significant expense. Going through the onboarding checklist can be very time-consuming for the new recruit and any overseeing staff.
- Morale impact – remaining staff may start to feel a little beleaguered, as the exit tide grows.
- Reduced business performance overall – a business has to devote more time, bandwidth and finance to recruitment matters. Therefore, other areas of activity can suffer from a lack of resources, and the performance deteriorates.
- Separation factors – outgoing employees need to get paid any vacation pay owing as well as possibly severance pay. Exit interviews will need to be conducted, taking up staff time.
What is employee turnover analysis?
Employee turnover analysis is an HR analytics process that collects and studies data to understand the reasons behind employee turnover. It’s tremendously useful for breaking down employee turnover into easily understood chunks of data. This can then enable a business to establish responses that can help to minimize employee turnover going forward.
Employee turnover calculations can deliver the following information:
- The number of employees that leave (and thereby the rate of employee turnover)
- How many are voluntary and how many involuntary
- The exact reasons behind departure
- The financial cost that this leaving represents
- The risk of further turnover
Employee turnover analysis is usually conducted by the Human Resources department. Findings then feedback to senior management. The process uses orchestration, meaning it utilizes inputs from a number of different systems and processes, such as financial reports, staffing data, and surveys.
How can employee turnover analysis help a business?
1. Direct talent retention
Employee turnover analysis assists an organization in improving talent retention. This is the name of the game, so important is it to business health. A key takeaway is the cost of recruiting – between $4000 and $20000 per position, not including salary and benefits.
Once you have the results of an employee turnover analysis, you should be in a better position to understand why people are leaving. It could be any of the following factors:
- Poor performance: an employee feels they’re just not cutting it so jump (or perhaps get pushed)
- Seeking career growth: an employee might identify a more fruitful professional path elsewhere
- Disciplinary action: if facing sanctions, an employee can elect to leave (or be compelled to)
- Seeking better salary: if money’s better elsewhere, this can be a big influence on a decision to leave
- Management matters: staff can decide to leave because they have issues with the management style, including contract management, negotiation opportunities, or leadership challenges
- Low morale: as we’ve seen, this can be a consequence of high turnover, but it might be down to other factors, such as poor conditions in general.
If you have information relating to why people are leaving, this enables you to develop targeted retention strategies.
A basic example is as follows. Say an employee turnover analysis in a sales outfit reveals dissatisfaction with pay rates as the key reason most people are leaving. It may be sensible to raise pay, either uniformly or in response to targets being reached.
Another example is where data engineers bemoan a lack of career development opportunities. You could look into instituting the opportunity to gain the best certification for data engineer accreditation, helping your engineers to improve their prospects.
2. Indirect talent retention
Employee turnover analysis can help an organization retain staff through indirect means. Examples include saving on recruitment costs and retaining expertise and continuity. Utilizing advanced HR technologies, such as master scheduler software, can streamline workforce management processes, ensuring optimal staffing levels and minimizing disruptions due to turnover.
These can make it possible for the organization to perform better, which can in itself assist with retention rates. Low turnover leads to lower turnover: staff are more likely to stay in an organization that’s visibly keeping its staff. Morale and continuity = higher retention rates.
