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Home / Blog / The Difference Between Good, Bad, and Strategic Employee Turnover

The Difference Between Good, Bad, and Strategic Employee Turnover

Using data-driven insights to determine when employee turnover becomes problematic.

Brorhie Muoboghare
Team HR Partner at IBM
Contributing Experts
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The modern workplace is undergoing rapid transformations. All this change presents new and intricate challenges in talent management and organizational structure. Amidst these complexities, organizations grapple with a pivotal workforce challenge – employee turnover.

Managing employee turnover is a strategic play between fostering employee retention and maintaining a healthy influx of talent.

In This Article


Employee Turnover’s Place in Strategic Workforce Management

Monitoring turnover as one of your key HR metrics is easy enough. It is especially easy when you have employee analytics software that tracks and reports employee hiring and departure rates. Effective turnover management transcends merely monitoring departure rates. It is also more complicated than reducing voluntary exits. Not all turnover is equally problematic.

Turnover is unavoidable and plays a part in maintaining a balanced and vibrant workforce.

In short, turnover is much more than a metric. First of all, we need to establish whether the employee turnover we experience is a force for disruption or an opportunity for evolution within your organizational framework.

A graphic explaining the formula for employee turnover.

Is Employee Turnover a Bad Thing?

While experts in workforce planning have written volumes on the subject, it's crucial to delve into the heart of the matter: What exactly is employee turnover, and is it inherently a negative force within an organization?

Employee turnover signifies the loss of talent within a workforce over time, encompassing various factors such as voluntary resignations, unexpected departures, and workforce reductions (layoffs). A central question that often surfaces amid discussions on employee turnover is whether it should be deemed detrimental to organizational health.

As a leader in talent management or the head of the people function within your organization, it becomes imperative to recognize the prevalence of turnover and scrutinize its implications.

Balancing the workforce is an ongoing imperative for leaders, which means we need a strategic approach to managing exits. Determining whether turnover is “good” or “bad” involves carefully analyzing whether each departure aligns with the broader organizational goals and company culture. Consequently, our job is to navigate employee turnover as an inevitable aspect of workforce dynamics and as a phenomenon that demands strategic attention to ensure a harmonious and effective organizational structure at every juncture.

The Difference Between Healthy and Problematic Employee Turnover

An annual turnover rate of 10% is deemed a healthy benchmark within organizations. This metric sets a standard for a reasonable level of workforce churn that allows for rejuvenation and adaptation.

Taking the analysis a step further, Gallup previously asserts that the consequences of turnover, particularly voluntary turnover, extend far beyond the immediate operational dynamics.

In a staggering revelation, Gallup suggests that U.S. businesses grapple with a colossal annual loss of a trillion dollars due to voluntary turnover. This is alarming. The financial impact of turnover costs can be crippling when it is not effectively managed. The cost of ongoing recruitment comes into play, on top of which each replacement creates a dip in productivity. There is also a ripple effect among employees who remain at the organization. High turnover rates negatively affect company morale and job satisfaction, which further diminishes productivity and may even lead to more turnover.

The stark difference between healthy and problematic turnover lies in the numerical metrics and, more significantly, in the sustained impact on your organization. In essence, the consequences of poorly managed turnover extend beyond the loss of talent—it permeates into the financial fabric of the workforce. When turnover spirals into problematic realms, the organization risks losing a substantial portion of its income.

Recognizing this critical distinction is paramount for organizational leaders. It emphasizes the necessity of focusing on minimizing turnover rates and implementing strategic measures to mitigate its adverse effects.

When is Employee Turnover a Good Thing?

Although we typically see employee turnover as a negative phenomenon in the workplace, it can be beneficial under specific circumstances. Along with all the cost and disruption of turnover, organizations gain the following positive influences.

  • Fresh Perspectives: When new employees bring fresh ideas, skills, and perspectives to the table, it can invigorate the organization. This influx of diverse viewpoints fosters innovation and prevents stagnation within teams.
  • Removing Poor Fits: In cases where an exiting employee did not perform well or was a poor cultural fit, you have to ask yourself whether they were the right employee for the role. Their departure is an opportunity to replace them with someone better suited for the role. This helps maintain team cohesion and productivity.
  • Growth Opportunities: Turnover can create vacancies that provide opportunities for internal advancement. When employees see opportunities for career growth within the organization, it can boost workplace morale and engagement. On the other hand, when employees experience that the only chance for advancement comes when a senior employee retires, they may consider leaving your organization as the only viable career path.
  • Realigning Teams with Organizational Goals: New expertise becomes more valuable as organizational priorities shift. Sometimes, turnover is necessary to realign the workforce with the organization's evolving goals and strategies. Hiring new employees with skills and expertise aligned with current objectives ensures that the organization remains competitive and adaptable.
  • Reducing Costs: While turnover comes with recruitment and training costs, retaining underperforming employees can be even more expensive in the long run. Strategic turnover can help control costs by ensuring that resources are allocated effectively to high-performing individuals.
An HR manager reviewing employee turnover data to establish benchmarks and identify trends.

The Markers of Bad Employee Turnover

How can you tell if your organization has concerning employee turnover levels?

Identifying concerning levels of employee turnover requires a comprehensive assessment of various factors within an organization. Here are four markers that can indicate potential concerns:

A Significantly Higher Turnover Rate Compared to Industry Norms

In workforce leadership, staying attuned to industry benchmarks is paramount when grappling with turnover challenges.

As a seasoned leader, plotting your organization's turnover rate compared to industry norms becomes a practice and a strategic imperative—a discernible departure from the industry average signals potential underlying issues. By monitoring how your organization compares to industry standards, you’ll know whether turnover fluctuations indicate macroeconomic trends and when factors within your company require your immediate attention.

Recognizing this variance is akin to deciphering a critical signal— an invitation to delve deeper, analyze root causes, and forge proactive strategies.

You’re Losing Your Top Talent

The departure of high-performing talent, a scenario no leader wishes to witness, is a glaring red flag within an organization.

This consistent exit of top performers contributing significantly to the organization's success extends beyond a routine turnover concern. Instead, you should view this trend as a critical indicator of potential dissatisfaction or systemic issues. As a vigilant leader, you must meticulously monitor these exits to understand the reasons behind them and recognize the caliber of talent you’ve lost.

Each departure of top-performing individuals becomes a poignant signal, urging leaders to delve into root causes and implement strategic measures to address the intricacies of turnover that threaten the organizational fabric.

New Hire Exits

An emerging trend where new employees depart shortly after joining your organization is a definite red flag. A sharp decline in average tenure may point to critical issues in the initial phases of the employee journey, especially if a recurring pattern of short tenures (less than twelve months) emerges from a history of loyalty. Typically, causes of new employee attrition lie with your organization’s onboarding processes, recruitment communication, or company culture,

For example, you might find a disparity between what was communicated during the hiring process and the organizational reality. In that case, you can review your recruitment marketing messages and job descriptions for misalignment with actual day-to-day operations.

Use your exit interviews and employee offboarding processes to identify areas of improvement and make addressing these issues a matter of priority.

Reliance on Contingent Workforce

Organizations often turn to temporary or contract employees to address immediate talent needs. However, when this practice evolves into a recurring pattern, it serves as a clear signal that your organization might be grappling with an unhealthy turnover rate.

A growing reliance on temporary or contractual staff can indicate challenges in retaining permanent employees, high absenteeism, or ineffective workforce management.

A concerned HR manager reviewing concerning data regarding employee turnover within their organization.

Strategies for Monitoring Employee Turnover Dynamics

Fluctuations in turnover rates will come and go based on macroeconomic trends, a phenomenon increasingly prevalent in today's dynamic work environment. Navigating these fluctuations in turnover rates necessitates a proactive approach to workforce management. Organizations are compelled to adopt strategic measures for effective monitoring and adaptation in the context of the contemporary business environment's ever-changing dynamics.

Leaders can develop a comprehensive workforce planning strategy by understanding the causes and patterns of employee turnover.

Consistent Reporting Systems for Improved Oversight

HR leaders frequently become aware of turnover challenges after they've already transpired.

Data drives every aspect of workforce dynamics. A systematic reporting system enables HR teams to track turnover and retention metrics proactively. This involves generating regular reports, be it on a monthly or quarterly basis, spotlighting crucial turnover figures, and identifying prevailing trends.

Harness and Technology for Informed Workforce Insights

HR technology offers invaluable tools for addressing challenges associated with turnover. The integration of analytics, propelled by technologies like big data and artificial intelligence (AI), has streamlined our ability to predict and understand workforce outcomes.

HR leaders can leverage these technological capabilities to gain foresight into potential turnover issues. Armed with actionable insights, they can proactively develop and implement strategies to mitigate the impact of turnover, transforming a reactive approach into a forward-thinking and strategic workforce management paradigm.

Use Strategic Segmentation for Data Analysis

While we can look at workforce data as a whole, segmenting data unveils nuances in turnover data that can lead to more informed decision-making.

In an era where data is abundant and effortlessly accessible, it also becomes overwhelming. It is crucial for HR leaders to master the art of segmentation for optimal outcomes. The first step is to pose a question and pinpoint the exact data to provide the answer.

Breaking down turnover data by factors such as department, role, tenure, and performance level is an expected skill for HR leaders. This strategic segmentation is instrumental in identifying specific areas of concern and tailoring targeted strategies to address them effectively.

For example, looking at employee turnover across a large organization may not raise any alarms. However, when we drill down into the data and find that a large proportion of voluntary turnover comes from a single department, there is an apparent reason for concern.

Benchmark Excellence for Informed Workforce Evaluation

Effective workforce management involves constructing baseline data from industry standards and establishing internal benchmarks.

A best practice entails meticulously comparing your turnover metrics against industry benchmarks and internal historical data. This comparative analysis unveils the performance trajectory within your organization and tells you how your turnover rates compare with broader industry trends.

This approach guides informed decision-making and strategic workforce planning. In essence, if your organization’s turnover rates and dynamics align with historical data and industry benchmarks, you have a healthy flow of talent in and out of your organization. Spikes in separation, a trend toward higher turnover in particular segments, and workforce stagnation that veer from these benchmarks are reasons for concern.

Nurture Manager Partnerships and Sustain Employee Engagement

A potent strategy for monitoring turnover dynamics is fostering consistent partnerships with managers.

When your human resources management team has open communication channels with team leaders, potential issues can be flagged early on. Regular check-ins regarding departmental health and team engagement can help with the timely development of retention strategies tailored to specific departments. This approach ensures a nuanced understanding of the workforce landscape and nurtures open communication channels with employees. Organizations can cultivate an inclusive environment where employees feel heard and valued by staying attuned to their concerns and sentiments.

Complementing this, regular employee surveys and feedback mechanisms serve as dynamic tools that provide valuable insights into the workplace environment. To minimize the administrative component, it is worth investing in employee engagement software that automates surveys, collects feedback data, and interprets it into actionable insights.

Implementing these monitoring strategies equips organizations with a nuanced comprehension of employee turnover. The insight gathered from monitoring turnover also leads to informed interventions that lead to fundamental improvements.

By staying ahead of the curve, leaders can usher in a workplace environment where talent is retained, engaged, and empowered, propelling the organization toward sustained success.

An HR manager planning employee engagement interventions to support employee turnover improvement.

Responding to Bad Employee Turnover

Addressing elevated (bad) turnover demands a comprehensive and strategic approach. Organizations that earnestly prioritize this challenge undergo a metamorphosis, not merely curbing turnover but cultivating an environment where top talent thrives.

As a business leader or HR executive, navigating this terrain requires deliberate steps and strategic interventions. Let's delve into a roadmap of best practices to counteract high turnover.

Optimize Total Rewards

One of the most potent retention strategies is regularly reviewing your compensation and employee benefits packages for market alignment.

The interplay between compensation and benefit strategies and turnover rates is undeniable yet often overlooked. Your total rewards strategy serves as a linchpin that can either lead to the loss of critical skills or serve as a magnet for attracting top talent. Hence, it becomes imperative to delve into the alignment of your total rewards packages with industry standards.

Any misalignment in these crucial areas can wield a significant influence on turnover. Compensation and benefits falling short of industry standards will incentivize your team members to seek alternative employment opportunities. Inevitably, your top performers will get the first opportunity to move on.

Strategic Workload Assessment

Assuming that employees will consistently adhere to their job requirements is a misconception.

Regular assessments of workload and job design are essential to guarantee reasonable job descriptions and alignment with employees' capabilities. Performance management meetings are ideal for addressing misaligned employee responsibilities or productivity shortfalls.

Overburdened or disengaged employees are prone to exploring alternative opportunities to save themselves from burnout. On the flip side of overwork, we also find that employees with too few responsibilities and challenges suffer from bore-out. They may find their work too repetitive or understimulating and move on in search of career development opportunities.

The goal is to achieve job designs that not only meet organizational needs but also resonate with the capabilities and engagement levels of the workforce.

Invest in Ongoing Professional Development Initiatives

The trajectory of the future workforce hinges on a culture of continuous growth. It is now essential to fortify your workforce against uncertainties by fostering avenues for ongoing development.

Offer opportunities for skill enhancement and career progression, as employees are inclined to remain committed when presented with a clear pathway for growth within the organization.

Uncover the Core Causes of High Employee Turnover

The age-old wisdom that "prevention is better than cure" holds especially true in turnover management. A negative experience that drove a small number of employees to resign will likely cause more turnover unless you address it.

We often assume that job satisfaction relates only to workload and remuneration. In truth, any aspect of the employee experience can drive turnover. A lack of development opportunities, inadequate recognition, and misaligned company values can threaten employee satisfaction just as much as an overbearing workweek.

Employees who like their work schedules and annual salary may still seek a new job if they don’t experience job satisfaction.

HR leaders are responsible for mitigating the immediate impact of turnover and discerning and addressing the root causes that drive it. Understanding these underlying challenges requires a proactive approach involving thorough exit interviews, insightful surveys, and candid discussions with departing employees.

This granular understanding becomes the cornerstone for targeted interventions, positioning HR leaders to react to turnover and proactively prevent its recurrence.

Elevate the Onboarding Experience

The potential for mitigating turnover is substantial when the right talent, inherently drawn to your organization, is seamlessly integrated through a well-crafted onboarding experience.

Optimizing your onboarding process is pivotal to ensuring that new employees feel supported and become seamlessly integrated into the organization's fabric. A positive onboarding experience transcends the initial days, setting the tone for long-term commitment and fostering a sense of belonging that resonates throughout an employee's tenure.

Cultivate a Nurturing Work Environment

Understanding the intricacies that lead a professional to depart from a positive work environment can be elusive. One undeniable truth is that cultivating a positive and inclusive work culture diminishes the likelihood of high turnover.

In environments where employees feel valued, respected, and supported by their colleagues and leadership, the inclination to stay and contribute to organizational success becomes ingrained. A positive work culture is a powerful retention magnet, fostering a sense of belonging and loyalty among the workforce.

Consider implementations that would enhance the employee experience your organization offers. Implementing flexible work arrangements, such as remote work options or flexible hours, demonstrates a commitment to accommodating the diverse needs of employees. This flexibility enhances the overall work experience and contributes to a work culture that prioritizes individual well-being and work-life balance, further solidifying the bonds between employees and the organization.

Work on Positive Leadership and Management

Departures within an organization can often be attributed to the quality of leadership. If you observe heightened turnover rates within a specific department, region, or project, delving into the leadership dynamics of that sphere is imperative. Such patterns signify potential management issues, poor team dynamics, or a deficiency in providing growth opportunities.

Recognizing these patterns prompts a call to action—a need to investigate, address concerns, and implement strategic interventions that resonate with the workforce's expectations and aspirations.

Systematically assess leadership and management effectiveness, recognizing that high turnover can be traced back to suboptimal relationships with supervisors or a lack of support. Proactively invest in leadership development initiatives to ensure leaders have the skills and awareness necessary to foster a positive and supportive workplace culture.

Foster Transparency

Without transparent communication channels, there is a significant risk of multiple interpretations of well-intentioned actions. Misconstrued communication can sow divisions and, in turn, elevate the likelihood of employee exits. To counteract this, establish open, transparent communication processes.

Fostering transparent communication involves sharing information about organizational changes, challenges, and plans. It also means actively engaging in dialogue that addresses employees' concerns. Proactively addressing uncertainty through transparent communication is a powerful tool for building trust and cohesion within the workforce.

Establish Achievable Expectations

Clarity in job expectations is fundamental. Employees are most engaged when they understand their work and their performance expectations. Your workers must understand precisely what “good” work looks like to achieve it. Ensuring that employees clearly understand their roles and responsibilities sets the stage for a harmonious work environment.

Clear expectations contribute to a sense of purpose and direction, reducing the likelihood of employees feeling overwhelmed or uncertain about their roles—factors that often drive individuals to seek alternative employment.

Proactive Programs for Employee Engagement and Retention

Individuals may depart for diverse reasons. Intentionally cultivating initiatives to retain talent becomes a strategic shield against turnover risks.

Crafting targeted retention programs requires a nuanced understanding of the issues identified through comprehensive analysis. By tailoring these initiatives to address identified challenges, organizations can not only stem the tide of turnover but also cultivate an environment where employees feel valued, supported, and inclined to contribute over the long term.

Cultivating an engaged workforce stands as a powerful deterrent against elevated turnover rates. A strategic approach to employee engagement involves regularly measuring and monitoring engagement levels. A decline in engagement can be an early warning sign of potential turnover issues. Based on your findings, you can prevent a loss of talent by implementing strategic employee engagement action plans.

Addressing concerns and proactively enhancing the workplace experience based on employee input demonstrates a commitment to their well-being and contributes to a positive work culture.

Crafting a Transformative Work Environment

Ideally, your organizational aspiration is to forge an environment where employees are not just retained but are also motivated, deeply engaged, and ardently committed to the organization's success. Integrating proactive strategies discussed in this article lays the foundation for this transformative experience.

Regular reassessment and adjustment of strategies, guided by continuous feedback and meticulous data analysis, will be a pivotal part of the future workplace. Organizations can cultivate a workplace culture that transcends conventional norms by adopting a dynamic and responsive approach, fostering an unparalleled employee experience.

A positive and enriching employee experience, in turn, establishes a foundation of belonging, purpose, and job satisfaction, directly influencing an employee's choice to either remain with the organization or seek opportunities elsewhere. Conversely, turnover rates tend to escalate when insufficient support, unclear expectations, or a lack of opportunities for professional development tarnish the employee experience.

Dissatisfaction and disengagement become catalysts, propelling employees to explore alternative paths where their contributions are recognized and their well-being takes precedence. Organizations grappling with high turnover must acknowledge the pivotal role of employee experience. By aligning practices with the principles of a positive employee experience, organizations can mitigate turnover rates, retain invaluable talent, and cultivate a workforce that not only remains committed but actively contributes to the overarching success of the organization.

Conclusion

As we traverse the terrain of employee turnover, it becomes unmistakably clear that turnover, though inevitable, transcends being a mere numerical metric; it profoundly reflects an organization's overall health. Armed with this insight, business leaders and HR executives find themselves at a crucial juncture. At this point, proactive strategies can metamorphose turnover from a potential threat into a catalyst for positive transformation.

Brorhie Muoboghare
Team HR Partner at IBM
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Brorhie, is a seasoned expert in people, business, and culture. He brings a wealth of skills, expertise, and experience, to his work, driving organizational success and fostering a resilient and engaged workforce. With a proven track record, Brorhie strategically aligns HR initiatives with overall business strategy and objectives, showcasing adept leadership that inspires and motivates teams.

Brorhie excels in conveying complex information to various stakeholders effectively. His global HR experience, coupled with a growth mindset, empowers him to navigate cultural nuances across diverse countries and regions worldwide. Brorhie's extensive background in talent management is evidenced by his success in attracting, developing, and retaining top-tier talent while concurrently building a formidable employer brand.

Moreover, Brorhie is well-versed in change management, ensuring seamless transitions, managing compliance, leveraging HR technology, and championing diversity, equity, and inclusion in the workplace. His holistic skill set and vast experience position him as a valuable asset capable of driving success in any organizational setting.

Brorhie holds a Master of Science (M.Sc) in Psychology, Industrial and Organizational Psychology from the University of Lagos and boasts a career in talent and PeopleOps spanning over 20 years. His professional history includes an eight-year tenure with IBM where he has climbed the ranks in recruitment and human resources.

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