Causes of High Turnover Rate (and How to Remedy It)
A high turnover rate should be cause for concern for anyone working in human resources. Turnover costs your company significant amounts of money in recruiting, hiring, and onboarding costs, as well as productivity and organizational effectiveness while the new employee figures out how to fit within your company. And even after all that, there’s a chance that the new hire will leave, forcing you to repeat the process all over again.
That’s why it’s important to understand whether your company has a high turnover rate, what causes high turnover, and what you can do to fix it.
What Is a “High” Turnover Rate?
The rate that would qualify as high employee turnover varies with the industry. In their 2017 Human Capital Benchmarking Report, SHRM reported that the average voluntary turnover rate across all industries was 18%. However, when broken down by industry, as Compensation Force does in their 2016 Turnover Rates by Industry report, the data shows that voluntary employee turnover rates vary from as low as 5.9% for the utilities industry to as high as 20.7% for the hospitality industry.
Based on this information, there are a couple of possible approaches for determining whether your turnover rate is high. First, you can compare the turnover rate at your company with the overall turnover rate for your industry. If your turnover rate is higher than that average number, then your company has a “high” turnover rate.
While this approach can work, it fails to acknowledge a deeper problem: voluntary turnover is something you should always work to reduce. So while it can be useful to compare your turnover rate to industry averages (especially when making a case to executives for more resources to help reduce turnover), it’s more productive to focus on figuring out why turnover is occurring at your company. Once you understand that, you can work to reach a low turnover rate.
5 Causes of a High Turnover Rate
What causes a high turnover rate? There are a variety of causes for turnover, and you should conduct exit interviews to figure out the specific causes at your company. That being said, here are five common causes of voluntary turnover across organizations:
1. Insufficient Compensation and Benefits
While it’s not the most common reason that people quit, sometimes the simple fact is that what you’re paying an employee isn’t enough. If they receive an offer of a higher salary from another company (and they have no other compelling reason to stay with yours), then it’s understandable that they would leave.
Benefits play a significant role as well. Ensuring that employees have comprehensive healthcare, employer matching for 401(k) programs, and sufficient paid leave (including paid family leave for both men and women) is also key to reducing turnover.
2. Poor Work Environment
While discussions of working conditions tend to focus more on factories than offices, poor office conditions can also cause employees to leave, especially if a competitor is offering better working conditions. Consider the effects of out-of-date equipment, harsh buzzing lights, or chairs with poor ergonomics on employee satisfaction and productivity. Sometimes, relatively small investments in office infrastructure can mean the difference between content, productive employees, and high turnover rate.
3. Bad Management
As we’ve explored before, people leave managers, not companies. If your employees are the victims of micro-management, lack of feedback, and improper managerial recognition for their accomplishments, then they may leave what was otherwise an excellent job. Good managers are key to keeping people satisfied and engaged in their jobs.
4. Low Employee Engagement
Speaking of engaged employees, low employee engagement can also be a cause of high turnover. When an employee isn’t committed to their job, doesn’t feel like what they do makes a difference, and has no sense of the organization’s values and larger goals, it’s easy for another company with a clearer sense of vision to convince them to change jobs.
5. Lack of Advancement Opportunities
More than any of the above reasons, employee turnover results from a lack of opportunity for advancement. If your employees don’t feel like they have a future in which they can grow their skills, responsibility, and experience, then they’re not going to stick around for more than a few years.
In order to cultivate long-term career growth in employees, you need to show them they have a future at your company. You need to make them aware of internal opportunities, whether those involve moving higher up or just learning new skills.
This is where Twine Labs can help. We’ve created an internal company network that you can use to match internal talent with open positions. The result is a boost in employee retention of up to 30%, not to mention educed hiring costs and time. To learn more, contact us to set up a demo.