What Should You Do If Your Turnover Rate Is Low?
True story: some companies have low employee turnover rates. When I hear from them, I ask them what they’re doing about it. Crickets and blank stares are what I usually get — because why would anyone want to “do something” when they already have a good thing going?
That, BTW, is a great question. So here’s the answer: the average employee turnover rate across all industries in the U.S. is around 18% (it’s even higher in Utah — more than 21%, which is the 5th highest in the nation). If you’re relying on good luck and intuition alone to keep employees in place, eventually that turnover rate is going to catch up with you and bite you where the sun don’t shine. You’ve got to keep working at it.
How much is employee turnover costing your company?
Turnover is one of the costs of doing business, but it’s an expensive one. It includes more than just the price of hiring and a training session. You’re paying in terms of productivity and output and a hit to your workplace culture, too. You can see the full scope of the costs of employee turnover here.
Need an example? Let’s start with HR. It’s a cost center that doesn’t directly support product sales or development, but it does directly affect your entire business. That one HR role will impact operations, recruiting, hiring, benefits, culture, management training and more.
What happens when a key HR person leaves your team? (The really great ones are always in high demand.) Recruiting for your tech team may slow to a snail’s pace. You don’t have the former expert to lead the decision on your new benefits plan, so a handful of marketing and customer service team members leave for better benefits. Productivity in accounting drops since their unfilled position is putting a strain on everyone else’s workload. You’re spending time answering employee questions and digging up benefits info. And the person who is filling in on payroll doesn’t actually know the system, so you’re helping there, too. Reports, timesheets, workers’ comp, employee questions — there are bottlenecks everywhere. All because one person left.
My point: every company’s turnover rate needs attention, because turnover affects more than just the open position. My advice: have a plan to address turnover BEFORE it becomes a problem.
What does the data say?
The process of retaining employees starts, oddly enough, with data. How many people are leaving? When? From which department? There are a couple reasons you want to know this:
- It’s good to have a baseline before you embark on a retention plan so you know the number to beat.
- Turnover data, if it’s specific enough, can point you to some of the areas in your organization that need work.
You want detailed data (some HR software/apps provide this — make sure yours does so your HR team isn’t manually tracking everything) so you can see the turnover rates from department to department, year over year, through busy and slow seasons. Also, review your turnover rate to that of your industry. This will prevent you from pulling out your hair when your restaurant’s rate is at 18%, even though the rest of your industry is well above 20%.
How do you translate the data?
Once you have the numbers, start looking for the story. Did your rate increase because a competitor moved to town and staffed up in Q4? Did a rate decrease following a change in insurance plans or a new PTO policy? Is your entire industry experiencing the same rate changes that you are?
Also look at individual departments and pay close attention to dates associated with internal events. A department with a rising rate could indicate a need for manager training, particularly if the rate increase coincided with the promotion of a new manager. Or maybe you’re not offering a compensation package that’s right for a specific team.
Finally, ask employees why they’re leaving to take a new job elsewhere. If you don’t think departing employees are being candid enough, bring in an outside party to do exit interviews. Consider offering “stay” interviews long before employees hint at leaving, which will help you know why employees stick around.
Because you won’t be able to prevent all bad turnover (eventually employees retire), know what you’ll do to mitigate the impact when key members of your team leave. Do you bring in a contractor? Outsource to a company that specializes in the task? Roll up your sleeves and do the work yourself? In a competitive employment market, positions can remain open for a long time, so it pays to have a plan.