Updated: Sep 22, 2021
In business, it’s inevitable that people come and people go. But employee turnover is more costly than you may realize. Although the cost for each business varies, U.S. businesses lose an average of $1 trillion every year.
The cost of an employee choosing to leave may cost anywhere from 16 to 213 percent of the employee's annual salary on average, with high-turnover, low-paying jobs like retail enjoying lower costs. Positions that require experience and advanced education, like executives and CEOs, fall on the higher end of the spectrum. For example, if a CEO makes $100,000 every year, it might cost more than $200,000 to replace her.
And not only is it costly, it’s also becoming increasingly common. Research suggests that the average turnover rate has increased by 88% since 2010, underlining the importance of getting a handle on this preventable problem. According to data from Gallup, among employees who voluntarily leave their jobs, 52% say that there was something their employer could have done to keep them on staff. While there will always be some fluctuations and a percentage of employees moving on for a variety of reasons, there are actions you can take today to start getting a handle on your organization’s turnover rate.
Improve Your Hiring Practices
Poor hiring is the driving force behind an estimated 80% of employee turnover. Imagine the impact that simply hiring the right people for the right position could make. Take your time during the hiring process to make sure you're making the right choice. Start by creating a detailed candidate persona and defining the role clearly. Make sure all your hiring managers are trained to best source and evaluate potential fits. And don’t underestimate the power of behavior-based screening to help you find the right fit.
Offer Job Enrichment and Promotions
Who wants to stay in a dead end job? Not too many people. Even if you hire the best, brightest and most talented, if they’re bored and feel like there’s no potential for upward mobility, you risk losing them. Making sure employees have an opportunity to tackle a variety of tasks to break up any perceived monotony. For example, you might provide chances to work on team projects. Offering employee development opportunities like training classes and tuition reimbursement is also a smart move to keep employees motivated and provide an ever-more-skilled in-house talent base from which you can choose when a new position opens up.
Offer Fair, Robust Compensation and Benefits
Compensation is a major factor in attracting and retaining talent. If you’re not offering compensation that’s on par (or preferably better) than the standard, along with benefits that meet employees’ needs, can you blame employees for jumping ship? Consider adopting additional measures in keeping with some of the latest trends, such as offering flexibility for remote work, focusing on employee physical and mental health, and offering some allowances to support caregivers with children and elderly parents at home.
Show that You Care
Gallup research reveals that 52% of employee turnover is entirely preventable. More than half of employees who decide to leave their organization haven't had a single conversation with a manager or other member of leadership about their future with the company or their job satisfaction in the three months before they left. How do you think that made those employees feel? If none of the leadership show a vested interest in their employees or talk about their future, the conclusion will be simple — there isn’t one.
Employee engagement has a direct impact on turnover. Data from Gallop shows that engaged business units experience anything from 24% to 59% less turnover. A few simple ways to boost engagement include simply asking employees for feedback, which can reduce turnover rates by nearly 15%. Creating a culture that focuses on engagement is the key. Give your employees respect, avoid ridiculing or shaming anyone, listen deeply so they feel heard, value their ideas and make sure you let them know that they're valued. Consistently offer feedback on employee performance and be sure to recognize employee contributions and effort to make sure everyone knows that what they do matters.
Encourage Giving Back
Giving back pays off in more ways than one. A study from Benevity shows that turnover is lowered by 57% when employees are active in company giving programs and volunteering programs. Research also suggests that employees who work at organizations that encourage volunteering and other pro-social programs have a higher morale and better brand perception. As an extra bonus, by encouraging your staff to engage in prosocial behavior, everyone's more likely to be healthier and happier — two strong indicators that they’ll stick around.
Prioritize a Work/Life Balance
By all accounts, COVID-19 changed the way employees view the work/life balance, and it’s arguably a bigger priority than it has ever been before. Whether you're remaining mostly remote or bringing everyone back to the office, employees crave the flexibility they need to maintain a positive work/life balance. A study from Boston College Center for Work and Family revealed that 80% of employees and 76% of managers attribute flexibility to positive effects on employee retention.
Involve Employees in Critical Decisions
Whenever possible, include employees in the major decisions that impact their jobs. Let them feel like they're part of shaping the direction of the organization. Include them in discussions about the business's mission, values, vision and goals. The more involved they feel in the framework of the company, the more ownership they feel over their positions and the more likely they are to want to remain part of it all.
Commit to Diversity and Inclusion
Achievers 2021 "Engagement and Retention Report" revealed that 52% of employees pointed to diversity and inclusion as a factor in their engagement, which improves productivity, performance and retention. Creating a workplace where everyone is welcomed, valued, included and accepted is essential not just to retaining the employees you have, but also to attracting new talent to the mix. Data from Glassdoor showed that 67% of job seekers consider this one of the most important factors when they evaluate potential opportunities.