Employee turnover a costly business

by Rohana Jayalal

The secret behind a profit-making business is its highly skilled and capable employees. In the same manner, the secret behind loss-making business is its low skilled and incapable employees.

Therefore, the need to retain experienced and qualified people has been a challenge for business organisations over time. Employee turnover is costly for a business, as it has already spent money on developing the employees.

However, no company can force its employees to stay at the organisation. On the other hand, forced retention can result in either absenteeism or presenteeism which can be considered killers of organisational performance.

The only alternative HR professionals have is to introduce some retention policies which will motivate people to stay with the company, because employee retention is of importance in the business world.

People working together in an organisation to earn their bread and butter and make profits are called employees. Employee retention is a function of the HR department tasked with reducing the number of employees leaving the company by improving key processes and conditions.

The ultimate aim is happier, loyal employees who wish to remain with the company. It is a process in which the employees are encouraged to remain with the organisation for the maximum period of time or until completion of the project. Before retention policies are made, senior managers ought to know that the company suffers from turnover problems. Let's find out why employees leave an organisation.

Why employees leave

Employees tend to leave, as they are no longer satisfied with the company. An employee's decision to leave the organisation comes up with the idea of low job satisfaction. Job satisfaction is the level of contentment that employees feel about their work that can affect performance.

It is obvious that employees leave the company, due to the discontent that they feel about their job.

There are various reasons that cause low job satisfaction, ultimately resulting in higher labour turnover. Employees should be motivated to remain with the company and positively contribute towards profitability.

Even though motivating factors can vary from person to person, some common factors can be identified. Once employees feel that this is not the job that they really expected, they might decide to leave. When growth opportunities cannot be expected, people look for other organisations that provide employees with growth.

Employee training is important. When people cannot keep hopes about promotions, they are discouraged. People work for money, unless they are paid in proportion to their knowledge and skills, they cannot be prevented from going to another company.

When promotions are made on the basis of sexism and favouritism, hardworking people are disillusioned and leave the organisation. Moreover, lack of trust between employees and the management, lack of appreciation, stress from over work can result in turnover of employees.

If skilled employees leave the organisation it means the business loses its spirit. The cost caused by the turnover is immeasurable.

Cost of turnover

Almost every company allocates a significant amount of its profits and time to arm its employees with modern knowledge and skills that pave the way for winning the market competition.

When these employees leave the company, they take knowledge and skills acquired at the company to other companies. The situation goes from bad to worse, as most of the employees leaving the business will join competitors in the same industry.

Once employees who are considered an asset to the organisation are recruited by competing companies in the same industry, the previous company that bore the financial burden to develop employees is unable to deliver better results in the market.

This will result in low customer satisfaction. In other words, low employee satisfaction in the organisation can lead to low customer satisfaction. Ultimately the company will incur losses.

Employees working for a longer period of time are more familiar with the company's policies, guidelines and thus they adjust better into the organisational culture. If new people are recruited, extra money and time has to be spent on making them familiar with the culture.

Old employees are more loyal to the organisation than new recruits. When employee loyalty is shattered, the company can never keep customers loyal to the brand. Disloyal employees will never build customer loyalty. Hiring competent people is not an easy task.

However, the company has to hire people at the rate at which people leave the company. It can be seen how costly employee turnover is.

Retaining the best

Retaining highly skilled and competent employees is a hot topic in today's HR discussions. A company should not retain all the employees in the organisation. If so, it will be very costly. The company must not hesitate to fire poorly performing employees. However, the emphasis should be on retention strategies in the best interest of employees.

Employee recognition is one of the most important factors which go a long way in retaining employees. Everyone likes to be appreciated. Holding money-gobbling functions to admire employees is not necessary. Leaders should appreciate their subordinates at every possible time. When employees are not overloaded with work, they can be creative and add a competitive advantage to the company. The responsibilities must be delegated, according to the person's specialisation, qualifications, experience and interests. Duties should not be assigned without providing a proper training.

Freedom of expression is of utmost importance at the workplace to retain employees. Employees should express what they feel about the company and complain even against the CEO. If an employee resigns, reasons must be widely discussed.

Many employees, especially female employees leave the workplace, after marriage. The main reason may be work-life imbalance. Hence, work-life balance strategies coupled with monetary satisfaction should be introduced. Creating an employee-friendly culture is a must, as many workers leave, especially, at the grassroots level, due to the bad behaviour of co-workers.

Employee turnover can cause a domino effect, tarnishing the goodwill of the company. It has been proved that sometimes, people are pushed out of the organisation, due to low job satisfaction.

Nevertheless, in some cases, people are pulled by better chance in the industry. Having avoided all these negative factors, an organisation should retain those important for the organisation.

The writer holds a BA in Economics from the University of Colombo.