You Need to Understand Your Company's Employee Turnover Rate — These 3 Questions Can Help

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May 28, 2024 at 11:14AM UTC

If you work for a company where it seems everyone is jumping ship, or where you’re hard-pressed to think of a colleague who’s been at the organization for longer than a year, chances are that your employer has a high employee turnover problem. As a worker, the implied instability this turnover brings doesn’t bode well for your own job stability and satisfaction. And if you’re the employer in this situation, a high employee turnover rate doesn’t bode well for your organization’s health as a whole. 

What is employee turnover?

Turnover is the act of having to replace a former employee with a new employee and typically falls within the domain of an organization’s human resources department to monitor. However, its true impact is hardly sequestered to any one specific department, as a high employee turnover rate has wide-ranging implications for companies, on multiple levels. Typically styled as a percentage, your employee turnover rate shows the number of employees who vacate roles at your company (i.e. roles that will have to be filled again) within a certain period of time. What a percentage can’t as easily capture, however, is the amount of time and financial resources that will go into replacing turned-over talent.

 To get a clearer understanding of the state of employee turnover at your organization, and how best to address it, we’ve rounded up some key facts to pay heed to below. 

Voluntary turnover 

Voluntary turnover occurs when employees willingly choose to vacate roles of their own accord. There are a variety of reasons this could happen; perhaps the worker doesn’t feel confident in their ability to grow within the organization. Maybe they’re dissatisfied with their work-life balance or compensation. Or, it could be that their life circumstances have changed and they no longer feel supported by their employer, which could be why 43% of working moms today ultimately leave their jobs

Involuntary turnover

In contrast, involuntary employee turnover often occurs when a worker is let go for reasons having to do with unsatisfactory job performance. Alternatively, it may have nothing to do with the workers themselves and instead be the result of a company- or division-wide reduction in workforce. Both voluntary and involuntary forms of turnover are costly to an organization, but the former can be even more so, especially when it is the best and brightest among a company’s staff choosing to attrite. 

Calculating your employee turnover rate

Since employee turnover rates refer to the rate of employee attrition within a specific window of time at your company, the way you’ll want to measure that window may differ. Most companies, however, calculate theirs on a quarterly or annual basis. For the example below, we’re showing how to arrive at your annual employee turnover rate, as looking at a slightly longer chunk of time can help you identify more precise patterns. 

You’ll need three numbers for this: the number of active employees at the beginning and end of the year, and the number of employees who left during that window. You can arrive at your average (Avg) by adding your beginning and ending workforce and dividing by two, as shown below. 

Source: Workable
Source: Workable

Analyzing your turnover rate

Employee turnover is a significant problem for many organizations today. One 2018 study by Randstad indicates that as many as 60% of U.S. workers today have newly quit or are considering quitting their job. Unfortunately, there’s no way to calculate the number of workers at your organization who are actively considering vacating their job. But with a closer look at your historical turnover percentages, you can gain a better grasp on patterns at play that may be encouraging employees to quit. Start with the following. 

Who are the employees who are leaving? 

To be clear, some turnover at your organization is normal and even healthy. For instance, if the workers who are leaving are low performers and their positions are being filled with more productive people, that kind of turnover is in your organization’s best interest. Conversely, if it’s consistently your most skilled employees who are leaving, while low performers choose to stick around, your organization could be experiencing a “brain drain” that a seemingly decent overall turnover rate wouldn’t capture. 

When are they leaving?

Can you detect any patterns as to at what career and/or life stage employees tend to leave your organization at? If a significant number of workers are choosing to leave at a mid-career stage, it could be the case that internal advancement opportunities within your organization are lacking, and a career laddering initiative could be of use. Are women attriting from your workforce not long after returning from maternity leave? This speaks to a need for new policies and initiatives that better support working parents and specifically mothers, from ensuring that your office has proper nursing facilities to allowing for flexible schedules and an adjusted ramping-on period. Understanding the average amount of time a worker stays at your company before choosing to leave, as well as making connections between that choice and workers’ life stages, is crucial to understanding and improving turnover. 

Why are they choosing to leave?

With an effective exit interview system in place, your organization should be able to collect data and look for patterns in the reasons workers offer for leaving. Some of the most common reasons employees today choose to leave a job include: 

  • They’re unengaged 

  • They work under a poor manager

  • They want better growth opportunities

  • They believe they’ll be paid more elsewhere

  • Their life circumstances have changed, and they don’t feel sufficiently supported

  • Their burned out

  • They don’t have work-life flexibility

Avoiding excessive employee turnover

Excessive employee turnover is bad for a company’s bottom line and worker morale. According to research from Employee Benefit News, when a worker voluntarily leaves a company, it costs that company as much as one-third of that worker’s annual salary to replace them. Not only that, but EBN found that 75% of the causes of employee turnover are preventable. 

If your company is invested in improving its employee turnover rate, addressing the following areas is essential. 

1. Improve your company’s onboarding process.

According to Inc, as much as 20% of turnover occurs within employees’ first 45 days at a company. One explanation for that has to do with poor onboarding procedures, in which expectations are poorly set, workers are made to feel unwelcome or are otherwise given a negative impression of the company. Your HR team should have a plan in place for setting up employees for success from day one.

2. Pay attention to the quality of your management team.

According to a Gallup study, half of all Americans have left a job in order to “get away from a manager” at some point in their career. Not only that, but Gallup’s study also showed that only 30% of U.S. workers feel truly engaged at work — and for those who aren’t engaged, the most common reason given had to do with their manager. Implementing training and coaching for your management team is a great first step toward ensuring you’re cultivating leaders that employees want to work for.

3. Create better, clearer growth opportunities.

If a worker feels like they’ve learned, grown and advanced as much as they’re able to at your organization, it’s only natural they’d want to leave. Professional development opportunities and programs are essential in making sure employees know they can continue growing at your organization. Having a career laddering system in place that your company is transparent about can help with this, too.

Collectively, we spend millions of dollars on recruiting and hiring talent. By not extending an equal amount of effort toward retaining that talent, companies are only costing themselves and their workers.

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