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Written by: Jaclyn Bock, CPHR
Employee turnover is one of the most calculated and measured human resources metrics that exists today. It is relevant across all industries and all departments and can be indicative of many issues, including ill-equipped managers, compensation competitiveness and bad recruitment processes, along with a myriad of other human resources challenges. Turnover also happens to be very expensive. According to the Spring 2017 Alberta HR Trends Report conducted by CPHR Alberta, the average total cost of processing an employee turnover in the second half of 2016 was $22,600. When you consider all elements that go into the cost of processing a turnover, including time of the HR team, severance, separation pay, working with recruiters and various regulatory requirements, the cost can add up quickly. However, not all turnover is bad. Every organization is going to see (and want!) organic turnover, especially with respect to low performers. Losing employees who are not meeting expectations or are not a great organizational fit to voluntary resignations is nothing to get upset over, because some level of turnover is going to be inevitable. Losing your organizational super stars is much more worrisome, and if you experience this, it could mean that there aren’t enough development opportunities existing for high potentials or that your compensation is not competitive across the industry you are operating in.
But what exactly is your organization’s healthy turnover rate? Unfortunately there is no universal, hard and fast “healthy turnover” rate, although a quick search on Google will suggest to you that it should be anywhere in the area of 15% - 30%. At first glance, it seems like quite a wide range and not entirely helpful. But ultimately, your organization will dictate its own turnover level that is normal for your culture, industry and specific to your organization. Watching your employee turnover trends over time by department and organization-wide can help you identify problem areas, implement solutions and take action when turnover in a specific area rises.
When you do notice that there is a turnover issue, what can you do to fix it? Again, there is not one “fix all” solution that is going to solve your problems with the snap of your fingers. A lot of the time, turnover is an indicator of issues that run more deeply into the culture of your organization or within the team that departing employees are working as a part of. A deeper investigation is often needed to dig up what is actually going on. Tools like exit interviews or even stay interviews can help you uncover some valuable answers.
A traditional solution to high turnover often involved throwing money at your employees through the form of increased salaries and retention bonuses. However, we have seen an evolution in human resources over the last few decades and this has challenged HR professionals to be more creative and engage lower cost solutions. According to the Alberta HR Trends Report, the most popular actions taken to reduce turnover are non-monetary. Those options include sharpening up organizational onboarding processes, making flexible work arrangements available to employees and providing more team building events. They are popular because they are simple, inexpensive and relatively easy initiatives to get your employees on board with. Additionally, these options subscribe to the theory that an employee is less likely to leave when they are set up for success beginning from their first moment of employment.
Monetary solutions still exist as possible options to reduce turnover, however are implemented less often in today’s business world. Higher wages, issuing stock options, signing bonuses and living allowances still happen today, but I often question the success rates of these solutions. A bit more money is always nice to have, and employees are never going to turn down a raise, but what is going to keep them from taking the money and then still leaving your organization? Tightening up your onboarding process, offering the option of working from home on a flexible schedule or dedicating more time to team building will likely do a better job of building employee loyalty, because these actions work towards increasing the overall investment into building and strengthening your organizational culture.
Turnover is an expensive human resources problem that can mean a lot of different things to different organizations, and it lacks a universal solution, making it a very tricky metric to tackle. Knowing your organizational culture and keeping track of turnover over time is a great way to gauge what a healthy level means to your organization and also how to best correct an unusual uptick. A good human resources professional has their finger on the pulse of what is going on both internally and externally to their organization, and uses a variety of tools to help them put together a realistic picture of what may be causing the issues. Solving turnover involves a number of creative initiatives that may or may not be a great fit for helping your organization return to normal levels of turnover. At the end of the day, being in touch with your organizational culture and employees and staying true to those elements will help you implement the best fit solutions in order to bring your turnover back in line.
Reference: Alberta HR Trends Report – Spring 2017, Human Resources Institute of Alberta
Written by Jaclyn Bock, CPHR and HR Generalist with Salopek & Associates Ltd.
SALOPEK & ASSOCIATES LTD.
Salopek & Associates Ltd. is a team of human resource and business consultants specializing in strategy, human resources and board governance. Serving clients across Canada, with Associates in Calgary, Fort McMurray, Ottawa and Toronto, we are available on an on-call basis to help you attract, retain and develop the right people and to put effective processes in place that will grow your business.