Out with the old, in with the new?
From one perspective, staff turnover could be viewed as a positive for an organisation. New blood, bringing fresh ideas, insights and business opportunities.
Though true in part, the reality of course is largely different. Firstly, organisations are quite complex systems and hard to change or move. It’s more likely that new employees will either adapt to their new environment, dare I say culture, or move on quickly enough. Worse still, stay and are disengaged, unhappy and underproductive.
Secondly, there are usually a lot of skills lost when an employee leaves, not just what’s on the CV, but the subtle nuances with interactions amongst staff, the deeper understanding of “how we do things around here”. All that takes time – and time is money, or customer service satisfaction.
Why? Well an organisation with high turnover makes it more difficult to find quality staff:
Difficulties in recruiting quality staff = greater levels of absenteeism = poorer customer service and staff moral.
When we refer to turnover we mean the number derived from number of staff leaving / total number of staff in a given year.
In a study done on South African employee turnover in the pharmaceutical sector, the rate averaged almost 22% per annum between 2007 and 2010. These figures are not specific to sector or country, highlighted by numerous studies including on in the UK whereby 10.4% turnover was seen across industry which cost its economy in the region of £49Bn (Peacock, 2010).
In short, low turnover is seen as an asset.
Hom & Kinicki (2001), identified 3 main factors involved in turnover:
o External environment (the economy)
o Personal element (inter-role conflict / personality clash)
o Job satisfaction (employee engagement)
It’s no surprise then that Goodman et al (2009) identifies employee engagement as one of the top 3 trends facing organisations today.
“Khan’s (1990) definition describes employee engagement as: “the harnessing of organisation members selves to their work roles; in engagement, people employ and express themselves physically, cognitively and emotionally”.
Sounds like Utopia – how much does it cost?
Interestingly, most drivers that lead to greater employee engagement are non-financial. A key factor impacting on employee engagement is the role of senior and middle management. Leaders have to engage with individual employee’s sense of purpose and meaning – coming back to the old ‘values / culture’ duality again.
But does it really make a difference?
Corporate Leadership Council in the UK (2004) studied 50,000 employees at 59 global organisations. Those employees most committed unsurprisingly performed 20% better and 87% less likely to leave.
Obvious I hear you cry. Absolutely, we couldn’t agree more! So where are you on a scale of ‘Blissfully ignorant’ to ‘Knowledge is Power’?
Hom, P.W., Kinicki, A.J. (2000). “Toward a greater understanding of how dissatisfaction drives employee turnover”. Academy of Management Journal, 44:5, 975-987.
Smith, J. & Macko, N. (2014). “Exploring The Relationship Between Employee Engagement And Employee Turnover”. Annamalai International Journal of Business Studies & Research, 6:1, 55-69