Understanding Employee Turnover: Reducing and Managing Departures 

Understanding Employee Turnover: Reducing and Managing Departures 

At some point in your business journey, you’ll experience employee turnover. Sometimes, the reason for their exit may be beyond your control. In other situations, there are proactive measures you can take to encourage longer tenure among your staff. 

In this article, we’ll walk you through what you need to know about employee turnover, healthy levels of turnover, and how you can effectively manage it. 

Employee Turnover Rate: The Natural, Healthy and Excessive 

Employee turnover refers to the rate at which employees leave a company and are replaced by new hires. 

Although it’s often perceived as a concerning issue, not all turnover is bad. Some are totally normal and even healthy for a company. However, when turnover is too high, it becomes an issue that can affect overall productivity and profitability. 

Natural Turnover 

Often called voluntary turnover, it occurs when employees leave the organization for reasons such as retirement, relocation, change of career path, or to pursue a job that better aligns with their values. This type of turnover is a normal part of workforce dynamics and is usually expected during employment. 

Healthy Turnover 

Also known as functional turnover, it occurs when employees with low performance or poor cultural fit leave the organization. This turnover can benefit the company, as it allows for replacing underperforming employees with more suitable candidates. It can also save the organization from making tough decisions and often improves productivity. 

While there is no standard for a healthy turnover, Gallup suggests a 10 percent turnover rate is reasonable.¹ In another study by ADP, they found that, on average, companies experience a monthly turnover rate of 3.2 percent, which adds up to about 38.4 percent per year.² However, keep in mind that every industry and company is different. What’s considered a healthy rate depends on your company.  

Excessive Turnover 

This happens when many employees, more than your business and industry average, leave the organization after just a short time. This turnover can be dysfunctional when high-performing employees leave voluntarily or when the employer lays off individuals.  

A high employee turnover rate can have various negative implications and is often an indicator of underlying issues such as poor management practices, low levels of job satisfaction among employees, inadequate compensation packages, limited career advancement opportunities, or an unhealthy work environment. 

Implication of Excessive Turnover 

Here are some ways excess employee turnover rates directly affect a company’s bottom line, workplace culture, and long-term success: 

1. Financial Consequences 

High staff turnover is expensive. It costs a lot to find, hire, and train new employees. According to Gallup, it can cost anywhere from half to twice an employee’s annual salary to replace them.³ When employees leave often, these costs quickly pile up, hurting profits and diverting resources away from other vital aspects of the business. 

2. Reduced Productivity 

Frequent turnover disrupts the workflow and creates a sense of instability within the organization. Companies would have to spend more time training new hires instead of focusing their efforts on core responsibilities. This decreased productivity can lead to missed opportunities, project delays, and reduced customer satisfaction, ultimately affecting the company’s competitive edge. 

3. Impact on Employee Morale 

High turnover can negatively impact the morale of the remaining staff. When employees see their peers leaving frequently, it can increase stress and uncertainty about job security. This, in turn, can lead to decreased job satisfaction and engagement, as employees may start looking for other opportunities, perpetuating the cycle of unwanted turnover. 

4. Loss of Institutional Knowledge 

Experienced employees possess valuable institutional knowledge about the company, its processes, and its culture. When these employees leave, their knowledge goes with them, creating a void that can be challenging to fill. New hires may take time to adapt and may not fully understand the intricacies of the organization, potentially leading to mistakes and inefficiencies. 

5. Impact on Company Reputation 

Word spreads quickly in professional networks, and potential job candidates may be hesitant to apply to an organization known for frequent turnover. This can make it difficult for the company to attract top talent, exacerbating the turnover problem. 

6. Recruitment Challenges 

Continuously recruiting for the same positions can be exhausting and time-consuming for HR. High turnover may lead to difficulties in finding suitable replacements, specifically for specialized roles. 

 Reducing Turnover Rates: 8 Strategies and Best Practices to Encourage Employee Retention 

Maintaining a healthy workforce is vital to increasing retention or decreasing turnover. To maintain a stable and engaged workforce, it’s essential to: 

1. Hire the Right Fit 

Reducing employee turnover starts with the hiring process. According to Zippia’s Employee Turnover Statistics, a US recruiting firm spoke to 1,500 workers, and around 500 quit their jobs within the first three months. Nearly half of those early departures left because the job didn’t match what they expected based on the interviews.⁴ 

To reduce turnover, hire employees who have the right qualifications and share the organization’s values and culture. Achieving this requires investing in comprehensive screening and interviewing processes, including behavioral interviews, skills assessments, and personality tests. These tools help identify candidates with the necessary skills who fit well within the company. 

Furthermore, clearly defining job roles and responsibilities during the hiring process ensures that everyone is on the same page from the beginning, reducing the chances of employees leaving due to unmet expectations. 

2. Ensure Effective Onboarding 

A well-structured onboarding program is essential for improving employee experience and making new hires feel welcomed and adjusted to the company culture. Workplaces with good onboard practices can retain up to 91 percent of their first-year employees, according to Zippia.⁴ 

To achieve an effective onboarding program, provide comprehensive training, introduce new employees to their colleagues and supervisors, and set clear expectations. Offering ongoing support during the initial weeks or months can help employees feel more comfortable and engaged in their roles, ultimately improving retention

3. Provide Competitive Compensation and Benefits 

Attracting and retaining top talent relies heavily on offering competitive compensation and benefits packages. Often, employees leave organizations in pursuit of better pay. 

To ensure your organization remains competitive, it’s essential to research industry standards for salaries and benefits. Implement regular salary reviews and consider performance-based bonuses or incentives. Additionally, benefits like healthcare, retirement plans, and flexible work arrangements can significantly enhance employee satisfaction. Employees who feel compensated and valued are far less likely to seek opportunities elsewhere. 

4. Provide Professional Development Opportunities 

People leave their jobs sometimes because they perceive a lack of growth or advancement opportunities. To minimize turnover rates, consider offering training and mentoring to help employees acquire new skills and advance in their careers within the company. 

Promote a culture of continuous learning and provide a clear path for career progression. This helps employees envision a future within the organization and increases their commitment to their roles. 

5. Encourage Employee Feedback and Recognition 

Employees flourish when they receive consistent feedback on their performance and experience recognition for their contributions. To achieve this, consider establishing a robust performance management system that incorporates regular one-on-one meetings between employees and their managers. 

During these meetings, provide constructive feedback and establish clear improvement goals. Furthermore, recognize and reward exceptional work through both formal and informal channels. Acknowledging employees’ efforts can elevate morale and strengthen their bond with the organization. 

6. Ensure Healthy Work-Life Balance 

Employee burnout is a significant factor contributing to turnover. Encourage a healthy work-life balance by:  

  • Promoting the importance of breaks and time off 
  • Ensuring that workload is fair and manageable 
  • Offering flexible hours 
  • Monitoring employee stress levels 

By prioritizing employee well-being, you create a positive work environment where employees are less likely to seek alternative employment to escape burnout. 

7. Foster Open Communication and Employee Involvement 

Encourage employees to share their ideas, concerns, and feedback. Conduct regular employee surveys to gauge satisfaction levels and address issues promptly. You foster a sense of ownership and loyalty by involving employees in shaping the company’s direction and addressing its concerns. Employees who feel a deeper connection with the company are more likely to remain committed to the organization. 

8. Build an Inclusive Workplace 

Inclusivity is providing equal opportunities and creating an environment that promotes, respects, and values its employees, allowing them to be their authentic selves. An inclusive workplace reduces employee turnover and enhances employee engagement, innovation, and overall organizational performance, regardless of color, age, gender, disability, or ethnicity. 

When employees feel included and valued, they are more likely to stay with the company long-term, contribute their best work, and create a more dynamic work environment, ultimately helping the organization propel forward to success.  

FIND THE NEXT IDEAL HIRE WITH THE HELP OF GALT FOUNDATION 

Galt Foundation stands out as a leading provider of staffing solutions for organizations looking to transform their workforce through disability hiring. 

We have been doing this for more than 20 years now, and our goal is to ensure that you find ideal candidates no matter how differently abled they are. To start a conversation and learn more about how we can help, contact us today. 

References 

1. Smith, Benson and Rutigliano, Tony. “The Truth About Turnover.” Gallup News, 4 Feb. 2002, news.gallup.com/truth-about-turnover. 

2. Yildirmaz, Ahu et al. “2019 State of the Workforce Report: Pay, Promotions and Retention.” ADP Research Institute, 2019, www.adp.com/adp-research-institute. 

3. Mcfeely, Shane and Wigert, Ben. “This Fixable Problem Costs U.S. Businesses $1 Trillion.” Gallup Business Journal, 13 Mar. 2019, www.gallup.com/fixable-problem-costs-businesses-trillion. 

4. Ariella, Sky. “27 US Employee Turnover Statistics [2023]: Average Employee Turnover Rate, Industry Comparisons, And Trends.” Zippia, 7 Feb. 2023, www.zippia.com/employee-turnover-statistics. 

More Stories

Contact Us

Let’s start a conversation! Are you a person with disabilities searching for a job or an organization with temporary or long-term employment needs? We look forward to helping you realize your potential.

Contact Us

Let’s start a conversation! Are you a person with disabilities searching for a job or an organization with temporary or long-term employment needs? We look forward to helping you realize your potential.