Retention and Turnover in the Workplace

Retaining talent is a priority for every organization and industry across the globe.  However, employees who are satisfied with their job and the way the organization treats and rewards them for their performance and efforts are less likely to leave.

Typically, if your organization has a high turnover rate you can expect to find low staff morale and poor performance, which will cause damage to the organization’s brand and reputation, and inevitably affect the financial bottom line.

Generally, it is best practice to consider aligning your company’s recruitment strategy with your business plan by ensuring future employees are a good fit with the existing team and their skills will assist the organization with its goals.

Common Reasons Employees Leave

Employees have various reasons for leaving and while most managers believe the number one reason is money, many employees will tell you different.

When an employee provides notice of resignation, a standard process in human resources is to gather information from the employee by conducting an “Exit Interview”, however, employees who are departing are rarely forthcoming about their decision to leave. This is mainly due to the fact that they want to ensure they do not “burn their bridges” in the event they need a reference or may want to return to the company in the future.

In reviewing many different resources of why employees leave organizations, following are the top four:

• A poor relationship between the employee and their direct manager
• A lack of opportunity for growth and development
• A lack of challenging and meaningful work
• A lack of recognition

Measuring Retention

Turnover, on the flip side is a necessity because it is important to attract and recruit talent that brings fresh ideas and different perspectives to the organization. Turnover offers the opportunity to bring in talent that can challenge the status quo, which stimulates the environment and keeps the workforce engaged. Additionally, too much turnover can also be detrimental to the organization, which can result in:

• Lower employee morale and engagement
• Loss of company knowledge
• Problems with quality or productivity
• Uneven workloads

Best practice is keeping turnover below 15%, but above 3% to remain dynamic. To determine your organizations optimal target rate, you need to periodically assess turnover rates. 

The Turnover calculation is a crucial HR metric used to monitor fluctuations in workforce management strategy. The formula is:

Turnover = # of Exited Employees / Average # of Employees × 100

Calculating Number of Exited Employees

The number of exited employees refers to both voluntary and involuntary terminations. It does not include employees who are on leave, furloughed or temporarily laid off. ​ Temporary workers or those who are not on payroll should not be included.

Calculating Average Number of Employees

Calculating the average number of employees requires the total headcount, which includes all

employees on payroll, direct-hire temporary workers and those on temporary layoff, furlough or

leaves of absence. ​Again, temporary workers or contractors should not be included.  

Why Determine Your Annual Turnover Rate?

With these two numbers, you can calculate your overall annual turnover rate. This formula can be used to track the turnover rate for the year to date (YTD) with the following formula:

YTD Turnover Rate = Month 1’s Turnover Rate + Month 2’s Turnover Rate

This provides a baseline of turnover and companies have a clearer perception of how their processes and program adjustments impact their decisions to make changes and how it affects your workforce.  

Talent acquisition and management need to work together as everyone in the organization plays a role in retention. Managers are responsible for coaching and assessing employees and co-workers play a part in the culture of the company, so ensuring your candidate is not only able to perform the role successfully, but also is a good culture fit within the organization is detrimental to the success of retention. Turnover is very expensive to any organization as well a huge impact on productivity and morale.

Ways to Increase Retention

Everyone in the organization must understand their role in employee retention.

Managers should know that retention is a priority and responsibly ensure they are having regular conversations with regard to performance, so the employee has a clear understanding and has enough time to improve. Another technique used are “Stay Interviews” as part of the 30/60/90-day evaluation for new hires. “Stay Interviews’ are the opposite of “Exit Interviews”, which are conducted when an employee provides their resignation, at that time the employee has already made the decision to the leave the organization making it too late.  However, “Stay Interviews” are conducted during the probationary period, so there is time to identify weaknesses or performance issues that allow the employee to overcome and be successful in their role.  Create a mentor or buddy system, which helps employees develop relationships with their co-workers and provides a peer to help them understand the company’s mission and goals. Make your organization one that employees want to stay with or return to in the event they do leave.