Employee turnover is a commonly used Human Resources metric used to describe the number of employees who leave a business during a specified time period.
The causes of employee turnover can be numerous; it can relate to employee perceptions about how they are treated, it can relate to the role and promotional opportunities, or it can be driven by higher pay/salary being available outside the existing organization.
In this article, we’ll be investigating some of the key causes of employee turnover, together with the background behind the metric and why it’s so important. We’ll be covering:
- What is employee turnover
- How do you calculate Employee turnover
- Causes of Employee turnover
- Poor career progression
- Poor relationship with supervisor/manager
- Low levels of recognition
- Poor fit of an employee with the role
- Pay and/or Benefits
- Personal Problems
- Role mismatch with Job Description
- Poor levels of incentives
- Favoritism / Nepotism
- The Impact of employee turnover
- What can organizations do to reduce turnover?
Employee turnover is a Human Resources metric that analyses the rate at which employees leave an organization.
There are several reasons why an employee might leave an organization.
- Voluntarily – The employee chooses to leave the organization (i.e., they leave to pursue an improved role elsewhere)
- Involuntarily – The employer chooses to dismiss an employee (i.e., through poor performance or behavior).
Calculating employee turnover requires three pieces of information.
- The time period being assessed (often the calendar or financial year)
- The number of employees that have left the organizations
- The average number of employees during the period being analyzed
Once we have the information, we can calculate the metric as follows:
The number of employees leaving during period/Average number of employees during period.
So if we had ten employees leave during the period being analyzed and our average amount of employees during that period was 84, then our Employee turnover would be 11.9%
We can utilize further information (if it’s available) such as function, department, or other. This can add further nuances to the result and enable us to drill down further, uncovering trends. This can equip the business into taking mitigation action (i.e., reduce the turnover %) in areas that can be better managed or controlled.
For example, seeing a higher turnover in a single function would likely promote further investigation to determine the root cause(s).
As we described in our introduction, there are numerous reasons for employees to leave the organization; below; we’ll look at 15 of the most common.
1 – Poor career progression
Surveys (such as here at CIPD) have stated a significant quantity of the workforce has a career progression that doesn’t live up to expectations.
Having a role and related salary that does not live up to personal assumptions about what it should be (given age and experience) can be very disappointing. For many, one of the first steps will be to apportion blame on the organization and think that there will be better progression elsewhere. The net result being the employee leaves the business in search of it.
2 – Poor relationship with supervisor/manager
There is no doubt that a poor relationship with your direct manager can be demoralizing and cause many to dread coming into work.
Of course, while attempts may be undertaken to rectify the situation for many, actions taken do not bring about a resolution. That leaves two options
- Put up with the issue
- Leave both the organization and the issue behind.
3 – Overwork
Overwork and the related impact (stress, pressure, impact on family life) can have a significant effect on well being. Overwork may commence as a gradual creep of work overtime or where sudden demands on capacity and time are made.
Many employees see workload go up and down, but where you have prolonged periods of overwork, then the employee is bound to ask questions. For many, the answers come too late, and the decision has been made to leave.
4 – Conflict
Conflict is another incendiary activity that can affect people’s desire to remain with their current employer. Conflict can exist on many levels – perhaps it is with a particular individual, perhaps between teams.
Wherever it exists, if it is of a serious enough nature (and if it goes unresolved), it can be the thing that pushes employees over the edge and facilitate them leaving the company.
5 – Low levels of Recognition
In a study by Gallup, they found that only 1 in 3 employees in the US felt they received praise in the last seven days.
Those who believe they regularly don’t receive praise are twice as likely to leave an organization.
With numbers like these, it’s not surprising to find that organizations are trying hard to develop methods to enhance the perception of recognition within the workplace. Get it right, and people feel valued, trusted, and motivated. Get it wrong, and the employee may be the next one out the door.
6 – Trust
There are various ways an organization can build trust with its workforce, whether this is through empowerment or by being transparent with decision making. However, it’s achieved, building trust can drive employee engagement. Obviously, the converse of this is true; if an organization continually breaks its promises to its organization, then people can lose patience and leave.
7 – Micro-management
All employees will be faced with a level of scrutiny and control over tasks they perform, but when this gets excessive, and high degrees of control are placed on the employee on a more permanent basis, then this can lead to frustration and demoralized employees. Where such management techniques are employed for long periods of time (for some, this can be years), then some employees will simply become fed up and look for new pastures.
8 – Poor fit between employee and role
Often one of the simplest reasons for people leaving an organization is that they are simply not a good match for the role. This can be for a couple of reasons
- The job turns out to be something different from what they expected,
- The position morphs, over time, into something that’s not suitable.
9 – Ethics
As companies adapt, either with new practices or products, clashes can occur between an employees’ personal beliefs and the organization’s goals.
For example, a company may begin to trade with a country that has questionable politics or practices.
Unfortunately, where the clash is significant, some employees find themselves in a position where they can no longer work for the organization.
10 – Discipline
Termination by the organization is another common reason for employees leaving an organization. Termination on these grounds is usually because of a severe breach of company policies or a failure to achieve targets.
11 – Pay and/or Benefits
Perhaps thought of as the main reason why people leave an organization. If the pay and benefits are considered insufficient, and the individual believes they can obtain better (for the same or different position) elsewhere, then that can be grounds to leave an organization.
12 – Personal Problems
Unfortunately, from time to time, issues arise where there is a conflict between personal priorities and work-life, which may necessitate the employee leaving the organization.
This could be due to ill-health, the need to care for a family member, or other pressures.
13 – Role mismatch with Job Description
We all start a new role keen and ready to work, however when it becomes clear that the role is now what we thought it was, then in many cases, we quit while we’re ahead and look for something more suitable.
14 – Poor levels of incentives
In this case, these incentives are not strictly related to basic salary. Often paid out on completion of a successful performance review or maybe on completion of certain objectives, incentives can range from training to certificates thanking employees for efforts. All make the employee feel valued. If another organization can offer increased levels of incentives, then that can be enough reason to leave.
15 – Favoritism / Nepotism
If you’re putting in the effort and still not succeeding because your boss has an office favorite (or even worse, family member) that they prioritize over you, then it can be pretty soul-destroying. Where this persists for a long period, then it can radically demotivate an employee and be enough to make them look for a role with another organization.
The impact of a high employee turnover can be varied and affect companies both in the immediate and longer-term. Issues include:
- Loss of knowledge and skills
- The impact on staff morale
- Reduced capacity and capability
- The potential impact on the quality
- Stress levels on reaming staff who remain to pick up the work
- The lag between people leaving and recruitment
- Customer expectations/perceptions not being met
Given the importance of reducing turnover, what practical steps can be taken?
Organizations can develop strategies and plans that:
- Invest in employees
- Reward employees
- Improve the selection process
- Improve feedback
- Ensure a good work/life balance
- Remove opportunities for
- Adversarial relationships
As you can see, the causes of employee turnover are varied and complex, and the resultant impact can be severe.
The employee turnover metric is, therefore, a critical number for businesses to monitor.
Understanding the root causes behind why people leave an organization is crucial if an organization is to do anything about it and rectify the situation.
What is your experience? Have you left an organization for other reasons that we listed? We’d love some feedback; you can reach us on Twitter or via the comments section below.
This article is part of our Human Resources Guide.