Is Turnover A Problem?
The best cybersecurity professional who was leading a critical project leaves the organization to go to a competitor. That will be likely to be viewed as a problem. A troublesome employee who can easily be replaced leaves to go to a competitor. That might not be agonized over.
Turnover is an inevitable reality. People retire, move, change their preferences, acquire additional education and have aspirations. More attractive opportunities become available. Conditions worsening where they work and disagreements with managers can provide the impetus to look elsewhere. Finally, organizational needs change, causing misalignments between the current workforce and the type of workforce required. The last few years have been challenging for many employers. The pandemic altered conditons of work, pushed people to retire earlier than planned due to frustration and critical skill shortages were exacerbated by technology requiring new capabities.
Workforce management strategies attempt to limit turnover that creates problems. Resizing the workforce is a common need, particularly in the turbulent environment we are dealing with today. Yet increasing or decreasing headcount quickly is challenging. Reducing the costs of current employees is also daunting. They have wages/salaries and benefits that they rely on to sustain their living costs, and they presume these will not be reduced. That makes them fixed costs. When revenues become highly variable any fixed costs present a problem. So, a dilemma exists for many organizations today.
When consulting with organizations on their compensation systems I have frequently advised clients to adopt variable pay programs to make a portion of direct compensation costs less fixed. Ysf changing the direct pay mix to something that is partly variable presents some challenges in the short-term, due to employee preferences for a sure thing over something that is not guaranteed. But the flexibility it provides can enable an employer to minimize the repetitive “hire-fire-hire…” cycle.
Analyzing The Impact of Turnover
The model below illustrates how turnover levels can be evaluated and how the most impactful types can be identified. Once the critical losses are identified the organization can focus its attention and resources on dealing with them.
In this example the 29% total turnover rate is not what attention should be focused on. It is the 10% (2% internal and 8% external) deemed to be dysfunctional that will warrant actions to lower it. By identifying specific types of turnover as dysfunctional it means the organization would like to have less of it.
Even though this approach enables an organization to determine responses based on current conditions, what is dysfunctional may change. For example, losing a valued employee may not be the source of alarm if there are competent replacements available, and if they would bring more up to date skills and knowledge into the organization. Although this can be viewed as a hard-hearted way to conduct business the advantages may outweigh the costs. Loyalty is valued in some cultures, but most Western cultures believe business needs should drive behavior.
Low turnover does not necessarily mean all is well. Employees may remain with an organization even though they are dissatisfied with their roles and/or the conditions of their employment. Inertia is a powerful force and beginning a search for alternative opportunities requires effort. This can result in employees continuing to endure low satisfaction and engagement levels, which tend to lower performance levels.
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Employees who know where a water utility’s pipes are really buried and how they are hooked up can be valuable to a water utility, even if they are not burning up the track performance-wise. If their knowledge is tacit, rather than explicit, it can be lost when they leave. Organizations should protect their pool of intellectual capital by identifying who has valuable tacit knowledge and adopting knowledge management systems that enable that knowledge to be rendered explicit.
Having those approaching retirement spend some of their time either writing down what they know or conveying it through the use of a “master-apprentice” relationship with their replacements may be a wise investment. Organizations need to know who knows what it needs to know and ensure untimely exits do not result in the loss of that knowledge.
Consultancies are marketing systems that are designed to help an organization anticipate who is prone to leaving. Assuming the systems work they enable the organization to weigh the consequences of losing at risk people compared to what it would take to discourage their exit. Every organization should be investing in workforce planning and if future needs are identified it helps decision makers decide who they must retain to sustain the viability of their workforce. Waiting until one’s house is on fire is not a good time to review fire insurance coverage or to work on fire prevention.
Conclusion
The last few years have been turbulent. The pandemic, technological revolution and the onset of high inflation rates have created the perfect storm that must be navigated by those responsible for staffing organizations. Some employees may have retired early or left active work out of frustration caused by being cooped up in their homes during the pandemic. Others now faced with being called back into central work locations may decide to look for opportunities that would enable them to stay remote and avoid dreaded commutes. For a time vacancies had increased to a level that exceeds the supply of people who are unemployed, which means any further losses became more harmful. Skill shortages result in increased pay levels and create opportunities to jump ship for more money.
Employers can benefit from adopting workforce planning systems that assume turbulence in the environment. Scenario-based planning can enable an organization to anticipate alternative futures and to develop strategies that will work reasonably well in whichever future manifests. Using a model that evaluates turnover based on its likely impact can help management decide how to plan for and respond to it when it occurs. Staffing levels, the use of outside resources and compensation systems should all be scrutinized to decide optimal approaches to a more uncertain future.
About the Author:?Robert Greene, PhD, is CEO at Reward $ystems, Inc., a Consulting Principal at Pontifex and a faculty member for DePaul University in their MSHR and MBA programs. Greene?speaks and teaches globally?on human resource management. His consulting practice is focused on helping organizations succeed through people. Greene has written 4 books and hundreds? of articles about human resource management throughout his career.