There is no “one size fits all” answer to the question: What is a high employee turnover rate? In other words, I cannot provide you with a number.
It all depends . . .
It all depends on a lot of significant factors. Factors such as industry, culture, size, (yes, size does matter), management and leadership styles, workforce age, expectations, employee engagement, compensation and benefits all play a role in whether your employee turnover is high or not.
First, Let’s Understand What IS A High Employee Turnover Rate
A high employee turnover rate refers to situations where many employees are leaving an organisation within a specific period of time – usually a short window of time. It may indicate that there are problems in the organisation such as limited opportunities for learning and progression, ineffective management, poor leadership and general dissatisfaction with the way things are done. It is important to understand the genesis of a high employee turnover rate and keep the work environment healthy and stable.
It is important to hold back from jumping to conclusions about an employee turnover rate, especially if it is high. There could be very valid reasons why a high rate is accepted.
On the contrary, a low employee turnover rate could indicate that there is a lot of complacency and inefficiency within the organisation.
Understanding is key. So, let’s dive in further.
How Is Employee Turnover Calculated?
Our starting point is knowing how to calculate employee turnover.
So, for example, if we are using a standard year, from January to December:
1. Add the number of employees who left for each month to get the total for the year.
2. Add the total number of employees for each month and divide the total by twelve (12).
3. Divide (1.) by (2.) and multiply the figure by 100.
You can deep dive even further and calculate the rate of employee turnover by each department. You can then determine if and where issues may reside and put plans in place to address them.
Keep in mind that some turnover is healthy. Try to separate voluntary turnover (employees leaving by choice) from involuntary turnover (employees who have been terminated or laid off).
Why Is Employee Turnover Important?
It is important to track employee turnover rates regularly to assess your organizational health and pinpoint areas that may require improvement or changes altogether.
Although turnover rates can vary by industry, job type and organization size, it remains an important metric for any Human Resources or Organizational Development dashboard.
And do not be fooled.
A low employee turnover rate could be just as damaging (or worse) as a high employee turnover rate.
When your employee turnover rate is low, it means that you may not be getting sufficient new “blood“, energy, air and thinking within the company. Ideas may be the same and there may be little challenges and stretch to grow the company.
Remember, what brought you to this point may not take you into the future, especially during these times of continuous, fast-paced change.
How To Identify A High Employee Turnover Rate
The threshold for a high turnover rate varies across industries but generally, exceeds the average turnover rate in the specific industry.
Within the following five (5) industries, for example, (not exhaustive) it is viewed as customary to have high employee turnover rates:
- Retail and Hospitality: Industries that include hotels, restaurants, and customer-facing retail businesses often have high turnover due to the nature of the work and the potential for part-time or seasonal employment.
- Healthcare: Some areas within healthcare, such as nursing and direct patient care, may experience higher turnover due to long hours, demanding workloads, and burnout.
- IT and Tech: The IT and Tech industry can have higher turnover rates due to competitive job markets, constant innovation, and the lure of new opportunities.
- Construction: Construction industry turnover can be influenced by factors like project-based work, seasonal fluctuations, and the availability of other higher-paying job opportunities.
- Transportation and Logistics: High turnover can be found in the transportation and logistics sector due to long hours, time away from home, and demanding schedules.
Other industries such as media and financial services also struggle with the effects of high employee turnover.
Benchmarking against industry averages and historical data can help you decide if your turnover rate is high enough to warrant immediate interventions.
Ordinarily, a high turnover rate indicates that underlying issues such as low employee engagement and dissatisfaction exist. It will not hurt to do deeper observations and research to be sure.
Start by simply asking questions and listening attentively. The feedback may surprise you.
ADDITIONAL READING >>>> Active Listening – 8 Easy Ways To Improve Your Listening Skills
Some Causes Of High Employee Turnover
In order to develop effective retention strategies for your company, it is critical that you understand the specific causes of your high employee turnover.
There are some standard common factors that may be contributing, such as:
1. Inadequate Compensation and Benefits.
2. Limited Opportunities for Learning and Growth.
3. Weak Management.
4. Lack of Consideration for Work/Life Balance.
5. Little or no Recognition for Quality and Quantity of Work.
Do you see a common thread here?
In his Hierarchy of Needs, Abraham Maslow provides us with a template for understanding how personal and organisational motivation may become congruent.
It is when there is a high level of incongruency or misalignment that employee turnover begins to rise and eventually reaches a critical state.
What Are Some Consequences Of High Employee Turnover?
If high employee turnover is hurting your organisation and negatively impacting its growth and objectives, you may recognise some – or all – of these consequences.
1. Increased recruitment & selection costs.
2. An inability to hold on to institutional knowledge and memory.
3. Low productivity.
4. Decreasing employee morale.
5. A challenge to attract needed talent.
6. High training and development costs.
7. Low customer satisfaction.
8. Poor employee engagement.
9. An unhealthy relationship between staff and management.
10. A rise in market competition and a weakening corporate reputation.
If you can answer “yes” to at least 3 of these, it may be time to start paying closer attention to your employee turnover.
If your “yes” applies to 5 or more then you definitely have some work to do!
Two Strategies That May Help To Reduce High Employee Turnover
There is not much rocket science here. Once you have recognised that incongruency exists between the employee turnover you want and what you currently have, it is time to take action.
This is where most organisations fail.
They do little or nothing to address the situations they identify and this leads to greater incongruence.
A word of caution: If you do not intend to take action, it may be best that you leave things as they are. Otherwise, you are risking making things much worse.
When you start to inquire, ask questions and roll out surveys, you begin to plant and feed expectations. The biggest expectation is that you will be doing something about the situations you identify.
So, what is the number one strategy for reducing a high employee turnover if it is not benefitting your organisation?
It is communication!
Simply going into the belly of the organisation and asking the right questions. Ask your employees why they are not happy and what is making them dissatisfied.
They will tell you but you have to be ready to hear the truth because some of it may be difficult to swallow.
Listen. REALLY listen!
Two effective communication tools that you may want to consider implementing are Employee Engagement Surveys and Exit Interviews.
And, once they tell you, remind yourself of what I shared earlier: TAKE ACTION!
Some Closing Thoughts . . .
In 2005, I joined a media company in the Caribbean that turned out to have a highly toxic culture.
Journalism is one of those professions, (like consulting and sales), that has a high employee turnover. However, I never expected how damaging this culture would be.
During my first twenty-nine months, the Group Human Resources Department (GHRD) had “recruited 338 new employees into the organisation (12 per month, over 28 months or 1 every other work day) and, managed 236 employees out of the organisation (over 8 per month, over 28 months“.
The organisation was a revolving door for employees.
However, because the Chief Executive Officer (CEO) was excellent at keeping the Shareholders and Board Members happy with a strong financial performance – there was also an Employee Share Ownership Plan (ESOP) – hardly anyone paid attention to how damaging the culture was.
It was during this phase of my career that I became passionate about employee turnover, organisational health and well-being and how organizational development could bring much-needed change to organisations that were incongruent.
This was the genesis of my research into my Strategy of Congruence ©.
It took me years to do the research in the organisation and create the right Human Resources (HR) dashboard to present to our Governance Committee. But, thankfully, when I submitted my Aide Memoire in July 2007, they listened.
Before the end of the year, the CEO exited the organisation on “early retirement” and the organisation began a journey towards healing.
Who Is Responsible For High Employee Turnover?
After many years of working within the space of HR, Organizational Development and Change Management, I cannot say to you that the responsibility for a high employee turnover rate lies with any one employee or employee group.
It is a shared responsibility.
Staff have a responsibility to speak up.
Managers have a responsibility to manage employees in a way that is healthy and beneficial for everyone.
Leaders have a responsibility to be attentive, listen, observe, ask the right questions and be fair in their judgement.
One thing is certain though. HR must lead the charge. The function is the Gatekeeper and owner of the organisation’s human resources and as such the primary responsibility rests here.
More Insightful Information >>> What Is The Future Of Organisational Development?
A Little About The Author
Cassandra started her career in the Finance Industry, moving from Actuarial Science to Information Technology, Sales and Marketing. She first “landed in HR” as a Corporate Trainer in the early 1990s. As she learned and taught others she realised that her own behaviours were being transformed. This resulted in her choosing the career path of Management Consulting, HR and OD. She eventually chose to specialise in Organisational Behaviour and went on to develop the Strategy of Congruence ©.
Today, she works with individuals and organisations around the world helping them to become more congruent with their goals and objectives.