Contrary to popular opinion you need employee turnover.Turnover is a complex issue for sure, but there are two sides to the turnover conversation. There is positive turnover, which should be a component of every culture, and there is negative turnover, which some industries and companies simply don’t address because they believe it’s just a cost of doing business. I beg to differ, and here’s why. Turnover is a function of job fit, of which there are many components, such as: salary, personality, geography and company culture. Positive turnover is related to company culture, and negative turnover relates to the other three listed because those areas can be pre-determined and managed prior to hiring someone.
Let’s start with Positive Turnover
Every company should be defining their culture strongly enough that employees who aren’t the right fit either opt out themselves or management makes the decision to offboard them. Cultures with strong core values, key work ethics, and cultural norms must encourage positive turnover. This means that it’s ok for an employee who is recently hired or has been at the company for long enough to identify the culture to say “this isn’t for me.” That’s not a poor reflection on anyone, it simply makes it safe for employees aware and brave enough to opt out of a culture that’s not going to work for them.
It’s harder for management to accomplish positive turnover because it has legal and best-practice implications; however, a strong and quantifiable probationary period where management is actively reviewing and determining whether the employee fits the culture in addition to performance reviews can help foster positive turnover. When positive turnover is a component of your company, you know your values and mission statement is working and the opportunity to leave is not a negative reflection on the business but a positive reflection of its culture.
Negative turnover is expensive! It is estimated that turnover in a front-line position that turns over is estimated to cost about 75% of the employee’s salary. So, if your front-line position pays $30,000 annually, the turnover cost would be $22,500. This number is made up of several costs: training, reduced production time, increased overtime to cover for the loss, and other soft costs. If you turn over an average of 50 front-line employees annually, you’re looking at an annual cost of $1,125,000.00. The question then becomes: how do you impact negative turnover?
First, on-boarding new employees usually involves an orientation to the company policies and training on the actual job and procedures. It’s also an opportunity to build relationships that engage the new employee and embed them in the organization. We know that if you introduce and involve someone in six to eight relationships over his/her first six months in the organization, they’re more likely to become an engaged, productive employee.
This reminds me of the business truism that says “it’s harder to leave people than it is to leave a company”. Many of the on-boarding processes inside of companies leave out any relationship-building in their process of bringing in new employees, and no, assigning a mentor doesn’t count. Many HR professionals believe that relationship-building within the employee’s first six months is something that will just happen on its own, without any intervention, which is true for maybe 25% of the population. For the other 75% of new employees, however, the first six months is a time of wading through a plethora of new information and just trying to survive in a new environment. Excellent companies foster relationships and don’t wait for them to happen for their new employees, thus ensuring the first step of the retention solution, which is developing strong relationships.
The second solution is understanding what process(es) employees go through when they are hired. New employees look at several items before taking a new job. The first is salary and benefits: “Can I live my current lifestyle or better on what you are going to pay me?” Second is progression: “Can I progress in my responsibilities, pay and stature?” Third is training: “What training and development can I have access to here?” Fourth: “What is it like to work here?” And last: “What can I give back to the company?” The first three questions occur pre-hire, the last two happen post-hire. The more quickly you introduce the third and fourth into the new hire’s experience, the stronger you solidify the integration into the company and its culture and the tighter you close the turnover door.
Finally, the last suggestion is “fit” — the concept that you can hire someone whose core personality traits match the organization’s culture and the needs of the position. I’ve worked with personality assessment for the last 23 years and have helped companies recruit and hire employees in a way that reduces negative turnover. Identifying and determining the personality traits that are held in common by high-performing, engaged employees is of the utmost importance and a passion of mine. I’ve found that identifying high performers’ traits and matching recruiting efforts to those traits can dramatically impact and reduce turnover.
Here is how it works. You identify the top performers in the job,(those are people you would hire again and would like to duplicate). We then administer a profile to those employees to identify what are common traits that we could look for in new employees. Simultaneously we will seek out management’s opinion about what traits are critical in the job for success. This is always important to determine whether or not management’s expectations line up with what is really succeeding in the job?
By combining effective on-boarding techniques and employee buy-in processes with cognitive and behavioral science, you can create a sound method by which to reduce turnover. If you could save 75% of the turnover costs you’re facing, in our little example, that would be $843,750.00 — not a bad contribution to the company’s bottom-line and future!