High employee turnover is a growing epidemic in the corporate world. Gone are the days when employees would find a single employer to stick with throughout their entire career. Today’s workers stay with a job for an average of just over 4 years. Compare that to the average just a few decades ago, when the average tenure at a job was 10 years.
Leaders at most organizations recognize how significant employee turnover is. High turnover is usually symptomatic of other issues. If a high percentage of employees are fleeing into the night, then there’s probably something else deeper going on that needs attention. Yet, most organizations gloss over turnover rates and fail to delve into exactly how much employee turnover is costing them, or what they can do to reduce it.
A recent case study that analyzed the cost of employee turnover in a sales organization found that keeping a single well-trained, well-performing employee for three years versus two, could save the company as much as $1.3 million! That figure factors in the time to hire a replacement, onboard and train them, and ramp them up to consistently match the sales target of their predecessor. Granted sales is an especially tough field. However, even if you go with a conservative estimate, replacing the average employee will cost an employer about 1.5 times their annual salary. So if an employee makes $50,000, you can expect to lose $75,000 finding, hiring and training their replacement. That’s still no small figure to write off, especially when you multiply it for a high number of employees leaving.
what’s the real impact of employee turnover?
Employee turnover is about more than just losing a great employee. Whenever someone leaves your organization, it triggers several costs involved in finding and training their replacement. Some of the costs associated with turnover include:
- lost productivity while the job is vacant
- promoting the open job
- screening, reviewing and interviewing applicants
- training and onboarding the new hire
- fixing mistakes made by inexperienced employees
- shift in the company culture
a strong employer brand to the rescue!
Websites like Glassdoor and Google My Business make it incredibly easy for workers to share their experiences or air grievances. When your employees are unsatisfied and they share their story with the public, it can have an adverse effect on your employer brand as a whole. Suddenly that a few upset employees are influencing the opinions of hundreds of other potential employees who are researching your company and deciding whether or not they want to work for you. It can quickly snowball.
To avoid this type of public relations nightmare, make it a priority to build a strong, decisive employer brand that takes into consideration what your employees want. Building your employer brand won’t happen overnight, and will require constant attention to be maintained. Some ways to strengthen your employer brand:
- Ask for feedback regularly. Send out surveys, emails, have an anonymous tip box… whatever it takes to better understand what your employees are looking for from their work lives in general, and you as an employer, specifically.
- Give everyone a forum to voice their opinions. Giving every employee, no matter their seniority or job title, a chance to speak up will go a long way to ensuring they don’t feel the need to turn to social media to be heard.
- Provide employees with a no-judgment zone where they can openly discuss personal work issues, without fear of retribution. If employees feel confident they can bring their issues to leaders or HR, you have a chance to resolve problems before they snowball.
- Make communication and transparency a priority. Keeping secrets and covering up bad news will only breed distrust and contempt, and lead to similarly fearful behaviour from employees. Be open and honest with employees, good news or bad, and communicate status updates regularly.
- Prioritize a culture where everyone is welcome and feels valued for their individual and team contributions. Make sure diversity and different opinions are welcome. An organization that allows open discussion is stronger than one that zeroes in on a single point of view.
- Make company goals and priorities clear. A team that’s aware of what they’re working toward will be more productive. If everyone’s on the same page, it’s easier to work together and achieve great things.
- Make problem-solving a priority. Too many companies don’t really fix the problems that are brought to their attention by employees. Issues are swept under the rug and patched up temporarily. Make a sincere effort to fix underlying policy issues and big picture things that are repeatedly causing problems.
what matters to employees?
1. meaningful raises
When you factor in inflation, most middle-class employees haven’t received a true raise in decades, and they’re well aware of this fact. People realize they aren’t getting ahead financially by accepting meagre yearly raises that barely keep up with inflation. Just as organizations are constantly looking out for their bottom line, employees are thinking about their expenses. If heading out onto the job market will net them a 20% raise and staying with their employer means settling for just 2%, then guess what? There’s a good chance they’re leaving for that shiny new opportunity unless you’re offering something else of significant value.
When creating your organizational compensation structure ensure that there are processes in place to ensure that salaries for all jobs keep up with current market rates. Also, ensure that employees receive regular raises based on merit. Padding the paycheques of indispensable employees who go above and beyond for your organization goes a long way to ensure they feel appreciated for their hard work and stick around to continue being a star performer. Avoid compensation structures where everyone, no matter their seniority or level of effort, gets the exact same raise. This kind of ‘everyone wins’ mentality, while well-intentioned, can quickly lead to resentment among top-performing employees who feel they’re carrying lower performers on their backs.
2. benefits that are actually beneficial
Offer benefits that employees actually want and will use. Touting a subscription to a ‘jelly of the month’ club as a ‘perk’ will probably be met with blank stares by many employees. However, staples like health and dental, retirement plans and health and wellness tools will rarely be met with disdain. Benefits in these areas almost always go over well:
- health and dental insurance and benefits
- retirement plans such as pensions, RRSPs and TFSAs, particularly with employer matching
- stock purchases, in particular, if they include employer matching
- additional vacation, sick or personal days, above what’s legally mandated
- flexible work solutions, such as reduced hours or the ability to work from home
- bonuses or other financial rewards on a scheduled basis (typically quarterly or annually)
- wellness or fitness perks (i.e. free gym membership)
3. training and advancement opportunities
Career development is important to employees, particularly talented ones with lots of options before them. Driven employees aren’t happy sticking with the status quo for long; they want to know what’s next in their careers. These ambitious, forward-thinking employees are exactly the type of people you want working for you.
Make it easy for employees to see how their work translates into results, and how success within your organization leads to advancement. Make advancement from within a priority and offer training and development programs to show you prioritize employees’ upward career trajectory. If your organization doesn’t offer a clear pathway to advancement, you can be sure that once employees find themselves at an impasse, they’ll start looking outward to find new opportunities to fulfill their career goals.
According to a recent survey of employers, 87% recognize that internal promotions are essential to improving employee retention. Despite this, only 33% of the surveyed companies actually prioritized internal hires. Closing this gap can significantly increase employee retention and save organizations millions.
Making even a small effort to lower employee turnover can have a dramatic effect on your company. Sure, employee turnover is just one statistic, but it’s an important one that ties in with many other metrics at your organization. It can reduce costs related to productivity and training, and even change your company’s culture and morale. With a thoughtful approach, it’s possible to keep employees engaged. Keep a close eye on your employer brand and ask for input from your employees regularly. Offer meaningful benefits, compensation and career paths that highlight why sticking with your organization is the right long-term decision.