Whether you have voluntary or involuntary employee turnover, if it is too high it can be detrimental to your operations, not to mention very expensive.  It has often been said that your employees are a company’s most valuable asset, yet many businesses do not always treat them as such.  Maybe this is because managers and owners often think of them as an expense, instead as a source of revenues.  Yet the cost of high employee turnover can be a significant incremental expense for a business that should be avoided.  For one thing, high turnover increases a business’s unemployment taxes.  Also, it distracts managers and supervisors from their normal work duties when they need to continually review resumes, interview candidates and then train the new hires.

The first thing companies should do is measure turnover.  The monthly turnover rate is calculated as the number of terminations during the month divided by the average number of employees during the month.  First, this provides a company with a measurement of its employee turnover that it can use to take actions to correct.  However, it also provides a benchmark to measure turnover over time and identify when turnover has a material increase.  When that occurs, management can look into what may have caused the spike.  Was it related to one specific department?  Did it occur shortly after a major company event, such as new healthcare plan or bonuses?

Next, all turnover is not bad.  In fact, sometimes turnover can be a good thing.  Over time, all jobs change, and this is happening faster and more often recently as technology has infiltrated all aspects of companies.  Long time employees who have not adapted may no longer have the necessary skills to perform certain jobs.  Other employees who have always gotten annual increases may not be overpaid for the work they are performing.  Also, no matter how good a company’s hiring practices are, there will always be a few that get through the process, get hired and then do not perform well, are unmotivated or have bad behavior that can reduce the overall morale at the business.  In these situations, it may be necessary for the company to take actions to re-assign or involuntarily terminate some employees.  If not, these employees will likely never be motivated to leave a company and good employees may get frustrated and be the ones to leave on their own.

Businesses also need to realize that they can control turnover.  While they cannot eliminate all turnover, management can create a work place that encourages the best employees to stay while encouraging “good” turnover of other employees.  Here are the steps a business can take

1. First they need to make sure that employees are engaged.  Disengaged workers have essentially checked out and are going through the motions if their jobs and are unhappy. 
2. Company culture is very important.  This is the personality of the business and incorporates everything from company policies, communications, decision making, compensation, benefits, etc.  Firms with a culture that enhance performance consistently perform better than those that do not.
3. There needs to be a focus on competency.  Create detailed job descriptions. Provide adequate training to enable workers to perform their jobs to the best of their ability.   And establish annual performance objectives and hold employees accountable for meeting them.  If the objectives are not met despite providing the necessary training and resources, then do not be afraid to cut the cord.  There is an old saying, “Hire slowly and fire quickly.” 
4. Lastly, give employees what they want.  Yes, they will want to be paid fairly for their job as they need money to live.  However, other factors can be just as important, if not more so.  Providing positive and constructive feedback boosts their self esteem and confidence.  Providing affordable employee health care and a company contribution to a 401k retirement plan are also important. 

Does your company experience excessive employee turnover that is negatively impacting operations and profitability?  If so, Total Team Solutions may be able to help.  As a full service human resource outsourcing (HRO) firm, we provide human resource advisory services to our clients to update policies, create job descriptions, overhaul current hiring and compensation practices and implement a performance management process to engage employees and establish a more positive company culture.  We also provide payroll and benefit administration services for our clients.  For more information, contact John Morlock at jmorlock@ttspro.com or 800-836-9678, ext. 5.