Ways to Reduce Employee Turnover

Voluntary labour turnover

Securing and retaining skilled employees plays a significant role in all organizations because employees’ knowledge and skills are central to companies’ competitiveness on the market.

Moreover, losing employees may lead to revenue decrease, productivity loss, low employee morale and increased likelihood of errors leading to deteriorating product or service quality.

Hence why it is essential for all employers to understand reasons behind voluntary labour turnover and methods to effectively manage it.

Factors contributing to turnover

Atkinson et al (2014) argue that there are three main factors that cause voluntary employee turnover: pull, outside and push factors. Pull factors are associated with the attraction of the organization’s competitors. Outside factors relate to situations in which someone leaves for reasons that are unrelated to their work. Push factors relate to employee dissatisfaction with the organisation or job and they are the only factors that the company can have control over, therefore they will be described in more details. Under organizational rubric would fall aspects such as pay and promotion policies and job security.

Certainly, a good salary offer increases the odds of retaining employees in the company, however, according to the research conducted by Fitz-Enz 80% of employees leave their jobs for reasons unrelated to pay. Instead, they often leave it because of the lack of opportunities for growth and advancement. Opportunities for progression or promotion to more challenging positions increases employee’s satisfaction, engagement, and status within the company. Where the presence of such opportunities may be viewed as incentives to the employee their absence can often lead to absenteeism and termination. Maylett (2015) stated that according to a survey by Glassdoor and Harris Interactive, 1/3 of employees leave a job because of lack of career growth than for any other reason.

Other organisational factors that lead to unwanted labour turnover may relate to organisational instability that is questioning employees’ job security, poor work-life balance and factors directly linked to their dissatisfaction with the job.

The poor relationship with line management is one of the crucial factors that can contribute to job dissatisfaction. Armstrong (2004) identified that conflict with managers and the feeling that they are treating employees unfairly is a frequent cause of employees’ turnover. In addition, Fitz-Enz (2009) stated that too little coaching and feedback, as well as lack of trust and confidence in managers, are two of the main reasons for employees not progressing and wanting to leave their job. Thus, companies need to ensure that they have trained, high-quality line managers who are not only fair towards employees but also who gain employees’ sympathy, trust and know how to coach and encourage them to improve their skills and performance.

A healthy interaction between employees is equally vital. An individual's good relationship with other employees can provide support and reinforcement necessary for adjustment and attachment to the organization (Porter et al, 1973). According to Mejia (2018), employees are seven times more likely to be engaged in their job when they have developed a friendship in their workplace. Conversely, failure to foster employees’ good relationships may result in alienation from the workplace and voluntary layoff.

According to Kinsey (2018) poor communication can lead to unmet expectations, the stress in the workplace and low morale of employees, therefore a higher rate of labour turnover. Hence why, even or especially at the interview stage, the company should effectively communicate with its potential employee, clarifying realistic job expectations. In terms of internal communication, employers should actively inform their staff about the company’s matters and involve them in the decision making processes. Organizations that have developed good communication and employee engagement strategies have a lower rate of employee turnover than those that didn't (Kruse, 2012).

The factors described above are not the only factors that contribute to high rates of employee turnover but also that contribute to job dissatisfaction by which turnover is largely driven. Nevertheless, being unhappy or dissatisfied with the job is not the only reason for voluntary layoffs. There are as well other aspects which contribute to it, such as too big job expectations, lack of recognition and autonomy and some personal factors that companies cannot have an impact on.

What implications does turnover have for organizations?

The implications that employee turnover can have on the organization include both direct and indirect costs. Direct costs are associated with processing the departing employee’s separation and the new employee’s hiring and training. Whereas indirect costs include the value of the lost productivity, reduced service etc. (CPS,2016).

Labour turnover cannot be eliminated completely because of unavoidable causes like retirement, death, etc. Nonetheless, a voluntary high rate of turnover is always unhealthy for the organization due to some of the following reasons:

Revenue decrease

When an employee leaves the organization, the management must consider advertising costs, interview and selection expenses as well as the cost of training and on-boarding. Financial costs associated with it often exceed 100% of the annual salary for the position being filled (Allen et al, 2010). It is further supported by SHRM research which found that “employee replacement can cost a company between six and nine months of the departed employee’s salary” (Hetsevich, 2017).

Productivity loss

According to the ATD (2016) report, employers use an average of 33.5 training hours per employee. When the organization train its new employees or is involving in it its workforce there is a loss in the overall productivity of the company. The time that could be spent on growing and improving the business is instead spent on training the new employees.

The employee often leaves with hard to replace institutional knowledge and may leave behind a set of tasks that may be left undone until the company finds a replacement. When important tasks are not completed, or remaining employees are burdened by extra work in addition to their existing jobs, productivity is more than likely to fall. Even when a new employee is hired, studies suggest that on average it may take him/her one to two years to reach the productivity of a person who left the organization (Bersin, 2013).

Increased likelihood of errors leading to deteriorating product or service quality

New employees lack the institutional knowledge to solve problems quickly and successfully, this can lead to deteriorating product and if these employees are in a customer service role, their errors may lead to decrease in customer satisfaction. In both scenarios, mistakes can negatively impact the company’s reputation and bottom line. Workload and lack of sufficient knowledge and experience about employees’ new job responsibilities can lead to decreased quality of product and service. In addition, Kokemuller (2011) noted that companies with high turnover may struggle to complete all necessary or important daily functions and make mistakes because of the lack of an adequate number of employees.

How can organizations manage turnover effectively?

Turnover can be very expensive to an organization, which is why it is important to develop retention plans to manage it, these may include:

Providing a realistic job preview (RJP)

All companies should ensure that they are giving their potential employees RJPs. Employees who receive an accurate picture of their job during the selection process have a better survival rate than those who did not (Duncan, 2007).

Providing career progression opportunities

An organization should provide internal promotion and growth opportunities if it cannot promote an employee due to limited positions in an organization, employers can come up with other alternatives. For example, shadowing or career conversations that can be as basic as focusing on what an employee hasn’t had a chance to be exposed to. It could be an opportunity to be more public-facing and represent a company at a trade show or teaching an employee more about the fundamentals of how the business operates (Maggarey, 2017). The Centre for Creative Leadership also argues that 77% of companies report a mentoring programme to be an effective retention strategy. A mentor can point out employees’ hidden opportunities (Rolfe, 2014).

Improving the quality of line management

Improving the quality of line management through carefully choosing the right candidates for the management positions and adequate training is regarded as one of the most effective means of reducing staff turnover in organisations (Suff,2011). Effective managers should encourage their subordinates to progress and should know the importance of employee recognition and review meetings. Thus the company needs to select the right people who recognise it. There also should be a more structured approach to the management of staff, that would be applied by all managers – not few. Conduction of more frequent, formal review meetings should be also considered.

Creating a good work environment

Organizations should keep employees informed of the business’ matters and promote two-way communication between the management and employees. Involving employees in decision making regarding day to day tasks and showing respect to their input can affect the rate of labour turnover.

In addition, employers should foster employee interaction with one another. Workplace friendship is positively related to employees’ job satisfaction, creativity, performance, team cohesion, and organizational commitment (Chiaburu & Harrison, 2008).

Thus, companies should create friendships and encourage teamwork by organizing team building activities, team social outings, outdoors adventures etc.

Conclusion

The reasons for employee turnover can vary, there is not much that employers can do with regards to retaining their employees if they are leaving due to personal reasons, however, they can minimize labour turnover caused by organizational and work factors.

Smart companies work hard to measure employee satisfaction and act to minimize turnover, as it is more profitable to keep their current employees motivated and productive than it is to find, hire, and train new ones. Studies have shown that the use of realistic job previews, provision of employee growth opportunities, good work relationships with managers and colleagues and employee engagement strategies are all important aspects of the favourable work environment which have a positive impact on employee retention. Thus, companies should focus on them.