Employee Turnover

High employee turnover hurts a company very hard. High turnover can cost your company thousands of rupees in recruitment and training expenses till employee final becomes equally productive as previous one, and also results in a workforce lacking in expertise.

Experts estimate it costs upwards of twice an employee’s salary to find and train a replacement.

The loss is also seen in lack of expertise. Low expectations on the part of both management and workers can contribute to what business administration professor Leonard Schlesinger terms a "cycle of failure."

What is Employee Turnover:

“Employee turnover refers to the number or percentage of workers who leave an organization and are replaced by new employees” , Or as Wikipedia would say “In human resources context, turnover is the act of replacing an employee with a new employee. Partings between organizations and employees may consist of termination, retirement, death, inter-agency transfers, and resignations. An organization’s turnover is measured as a percentage rate, which is referred to as its turnover rate. Turnover rate is the percentage of employees in a workforce that leave during a certain period of time. Organizations and industries as a whole measure their turnover rate during a fiscal or calendar year” 

Types of Turnover

The employee turnover can be simply divided into following two parts

1. Voluntary Employee Turnover- Voluntary turnover is always initiated by employees (Resignation), 

a. Reason: Most commonly it happens because of Better opportunity, Lack of growth/ Learning, workplace conflicts etc.

2. Involuntary Employee Turnover- Involuntary turnover is always initiated by employer.

a. Reasons: Most commonly it happens because of Performance Issues, workplace conflicts). 

Calculation of Employee Turnover

Following formula will help you identify the % of turnover in your organization, generally anything beyond 10% is considered as very harmful however it may vary by respective industry. 

Number of employees separated during the month/ Number of employees active during mid month X 100 = Turnover %

According to the book “Keeping the People Who Keep You in Business” by Leigh Branham, the cost of losing an employee can range from 25% to 200% of that employee’s salary. 

The cost of Turnover

The true cost of turnover is going to depend on a number of variables including ease or difficulty in filling the position and the nature of the job itself. Estimating the costs of turnover within an organization can be a worthwhile exercise, especially since “turnover costs” are unlikely to appear in an organization’s balance sheets. The formula stated above will help you identify the % of turnover and you may do the financial calculations as well for the respective case/cases however the actual cost is way more. Below table will give you an in depth preview of losses because of one employee leaving the organization:

Direct	Indirect
Recruitment Expenses	Loss of knowledge
Lost Productivity associated until hiring new resource	Public Relations Cost
Lost of productivity during the new employee learning the job	Cost of Trade Secrets associated with the profile
Lost of productivity associated with coworkers helping new employee
Cost of Training
Cost associated with employees lack of motivation during notice period
Administrative Expenses

Why it Happens

Below table gives you an detailed and point by point understanding of why employees leave the organization, you can perform your own survey to identify the reasons for employee turnover.

The Solution 

Today’s youth seeks the better opportunity all the time, now a days its almost a fashion that people work for about two years only. Employees are important in any running of a business; without them the business would be unsuccessful. However, more and more employers today are finding that employees remain for approximately 23 to 24 months.

1. Effective high-performance work systems (HPWS) is the name given to a set of systematic HR practices that create an environment where the employee has greater involvement and responsibility for the success of the organization. 

2. Value your Team it is a lot more important than caring for your customers, you see if your employees feel valued and connected to the company, they will value your clients and then results will be groundbreaking. Below diagram explains the three level approach for making your employees feel valued. 

3. Choose the Approach Carefully

• The Carrot Approach: The carrot approach takes a much more positive approach to employee motivation. For this approach the goals have to be SMART. This approach is used as a retention method, usually as part of a compensation plan. 

➢ If you increase sales by 10 percent, you will receive a bonus.

➢ If production increases by 15 percent, the entire team will receive an extra day off next month.

• The Stick Approach: As you can see, the stick approach takes a punitive look at retention, and we know this may motivate for a short period of time, but not in the long term. 

➢ If you don’t increase your sales by 10 percent, you will be fired.

➢ Everyone will have to take a pay cut if we don’t produce 15 percent more than we are currently producing.

Conclusion

Continual training and reinforcement develops a work force that is competent, consistent, competitive, effective and efficient. Beginning on the first day of work, providing the individual with the necessary skills to perform their job is important. Before the first day, it is important the interview and hiring process expose new hires to an explanation of the company, so individuals know whether the job is their best choice.

When companies hire the best people, new talent hired and veterans are enabled to reach company goals, maximizing the investment of each employee. Taking the time to listen to employees and making them feel involved will create loyalty, in turn reducing turnover allowing for growth.

In easiest term” Let them feel valued, important and connected with the organization”. 

Good Reads: 
1. http://www.sayitcommunications.com/talent-clone-blog/bid/206046/10-Ways-to-Reduce-Employee-Turnover-and-Improve-Retention
2. http://smallbusiness.chron.com/employee-turnover-definitions-calculations-11611.html
3.  https://en.wikipedia.org/wiki/Turnover_(employment)