According to a recent study by the Society for Human Resource Management (SHRM), turnover varies by industry with the food & service industry along with the arts and entertainment industries and retail having the highest turnover with an average of 28% between them. Those having the lowest turnover are high-tech, government, associations and utilities. The average among these industries is only 9%. When calculating losses due to turnover, organizations must consider why they have turnover. For example, according to SHRM’s study, hospitality, arts/entertainment and retail may have seasonal or cyclical turnover. Some industries pay lower than others and the first offer of even a small increase in pay will lure employees away. If yours is an industry where the skill gap is growing, turnover can be a critical factor in organizational growth.
Another cause of high turnover is employee morale. Feelings of being undervalued can often trigger low morale. The CEO will find it more difficult to interact with each employee on an individual basis as the company grows and more employees come on board. Therefore, it becomes essential for a CEO to stay vigilant about how managers align employee performance around company goals. This one act alone will help clear the field of those who are not on board with organizational goals and ensure a better fit for jobs leading to higher morale and better retention.
It is easy for employees to disengage when they do not feel valued. Other opportunities become attractive on a whim. Other people are asked to leave. Losing employees either way can cause disruption in services or product delivery. The high cost of losing key employees is not a secret. SHRM offers a quick formula of about 60% of the individual’s salary. In addition, adding in the cost of total replacement that includes training and lost productivity, the cost continues to climb.
While many factors affecting employee turnover are outside our control, reducing costs of turnover must be intentional. Further, this effort requires identifying those factors over which leaders do have control. Here are some ideas:
- Build a succession plan. Be sure to continue recruiting from the outside so the succession pipeline doesn’t dry up.
- Ensure that your recruiting and hiring process meets needs, goals and customer service
- Have a competitive pay plan including a good pension plan
- Practice fair play on opportunities, discrimination and diversity
- Create individual and team bonuses
- Provide good health benefits
- Be sure processes can continue regardless of losses in expertise
- Ensure there is adequate depth of skill
- Capture intellectual capital
- Encourage collaboration
- Be committed to continuous learning practices
It is critical that organizations think about what would happen in case of losses. This is a critical conversation for management because it will force the team to be proactive. There can be financial losses when a key team member leaves. Take the time to think about, plan for and be proactive on the expertise of each employee. Then contemplate how the company would operate in the event of the loss of that expertise.
Tags: CEO, Business Growth