Is employee turnover bad for organisations?

Attracting and retaining talent is a never-ending quest for performance-driven employers. Even the best employer in the world has to deal with employee turnover, therefore, having a handle on it is important.

Whether it is a result of talent being sought by competitors, employees seeking career advancement elsewhere, or simply replacing bad hires and low performers who aren't pulling their weight - every business inevitably needs to deal with employee turnover.

Is employee turnover bad for organisations? It's important for organisations to have a healthy turnover. However, whether or not that 'number' is healthy depends more on who is leaving rather than the percentage of employees leaving.

The amount of internal instability that occurs when there is a large number of departures, and how that instability affects the company as a whole, largely depends on your organisation, your industry, and the core competencies needed for the incumbent position. Dealing with all these challenges proactively and positively can ease the transition for everyone and ensure 'departure fever' doesn't spread to other valuable members of your corporate community.

Warning signal

Leaders and managers who look solely at the employee turnover numbers may assume a low turnover rate is an indication of great management practices. But low turnover can be a warning signal too.

That's why the right HR practices are paramount to prevent the organisation from becoming a ward for poor or mediocre performers. Those outside of human resources may see any turnover as bad news.

From a HR standpoint, we know that there's bad, good and neutral turnover, and to categorise it all as a reflection of organisational management isn't necessarily a fair assessment.

When determining whether or not specific instances of turnover are bad or good, there are many factors to measure. These include employee performance, skills and contribution to the company, how difficult it will be to replace those, reasons for leaving, where they go after they leave you? Is it to your competitor and how critical their role is to the success of the business? It goes without saying that losing a top performer is never a good thing. It may be neutral depending on certain factors, such as his motivation for leaving coupled with how easy it is to replace them.

However, beyond the top performers it can get a little hairy. The question is how do you manage employee turnover so that it's beneficial to your organisation and ensure it doesn't negatively impact the performance of your top-end performers?

Impact

The organisation actually benefits when some categories of employees leave it. Such as, a poor or low performer who brings the average level of team performance down, an employee who doesn't fall in line with the organisation culture that disturbs the rhythm of the organisation, an employee who has 'grandfathered' into his position, ceased to provide value, an employee known to offend others and only make complaints.

These are a few examples of what good turnover looks like. Remember that turnover is a valuable way to measure your HR department's and your key leaders people management performance as long as you don't get caught up in the numbers and forget to look at the impact, whether positive or negative, that each 'loss' had on your organisation.

Costly

When it comes to employee retention, most organisations make use of counter-offers and exit interviews to try to keep their most valuable employees and to uncover the unknown facts. But I advocate, with my long years of people management experience, the use of 'stay interviews' as an effective retention tactic, and the variety of efforts that aim to increase employee satisfaction and engagement.

Regardless of whether it's healthy or not, employee turnover can be costly. Replacing top-level positions needs substantially more financing relative to lower levels, extensive training and adjustment, and a high element of risk - as new management can drastically alter the status quo.

But turnover at every level means recruiting, training, workload balancing and cultural shifts. It's critical for your organisation's financial and overall health to manage turnover effectively. My mantra for HR and functional leaders and managers is; ensure good turnover and minimise bad turnover. Proactively manage it to raise the overall performance of your team to improve the quality and speed of solutions to the ever growing business challenges.