Some employee turnover is healthy in an organization. It makes room for fresh ideas and innovation in your organization, and gives your former employees the opportunity to learn and grow in a new environment. However, too much employee turnover is often a sign that something is wrong. When you work hard to recruit top-tier talent, it’s important to consider whether you can retain them so you don’t waste precious resources and risk hurting your employer brand. Tracking your employee turnover rate can help you spot potential problems in your organization and fix them, before it’s too late.
How to calculate your employee turnover rate
Determine the frequency upon which you will track your employee turnover rate. Annual tracking will give you a high-level overview, and quarterly tracking will help you spot trends before it’s too late. To calculate your employee turnover rate, take the total number of separations and divide by the average number of employees during your desired time period. Express this number as a percentage by multiplying by 100. For example, if there were 5 separations and an average of 200 employees in Q1, the employee turnover rate would be 2.5% [(5/200) x 100].
What a high employee turnover rate could mean
If you see an unusually high employee turnover rate for a given quarter or year, look into it. Seasonal employment or layoffs could be skewing your numbers. If that’s not the case, try to determine if your separations are evenly distributed throughout your organization, or if they’re isolated to a single department or manager. If there’s a high turnover rate company-wide, there may be an issue with your company culture or compensation strategy. If high turnover is isolated to a department, find out what’s happening differently in that department compared to your others. Also consider whether employees are leaving in their first year, or after long tenures. First year turnover could be a recruiting or onboarding problem, while turnover from long-term employees could be due to changes in the organization or poaching. If the latter is the case, low compensation or lack of promotion could be at play. At least annually, get granular to determine whether specific demographics are turning over at a higher than average rate — you could have a diversity problem.
What to do about a high employee turnover rate
Regardless of whether you have a high employee turnover rate, implement an exit survey to learn why employees are leaving your company. Start with open-ended questions, like “Why are you leaving?” and “What led you to accept your new position?” so you can hear an unbiased account of why the employee is moving on. Then, dig a little deeper by specifically asking about key reasons employees leave — there are often multiple factors at play. Questions may include: “Did you feel you were compensated fairly?” and “What could your manager have done to improve?” When you recognize trends in the responses, take action to improve upon them.
When employee turnover can cost you anywhere from 30% to 400% of your employee’s annual salary, it’s a worthwhile metric to track. A high employee turnover rate can be a sign that something is wrong within your organization, and it’s in your best interest to look into it. You work hard to recruit top-tier talent, and it’s important to work just as hard to retain them. The success of your organization, your employer brand, and your future recruiting efforts depend on it.