Throughout history, employee turnover and talent retention have changed in different ways, though the causes and consequences are very similar.
In 1500, in the Sengoku period in Japan, samurais worked and offered loyalty to the Daimyo, a feudal lord that managed private lands, in exchange for a piece of territory. Samurais ensure loyalty to the Daimyo under a contract signed with blood. They could only leave their job for three reasons, if the Daimyo died the samurai would commit seppuku or harakiri (ritual suicide) or they would pass to another feudal lord. Another reason was if the samurai was fired or if he had saved enough money to get out of the system. By doing this, the samurai stopped working under contract to become a ronin (wave man – wanderer), a person without a boss or contracts that lived from teaching martial arts.
We can see similar aspects to the causes and types of employee turnover both in modern society and in the early times.
Nowadays, there are four types of employee turnover: voluntary turnover, involuntary turnover, internal transfer and retirement. It is crucial to keep in mind that is essential to understand the causes of employee turnover to retain talent.
What Is Turnover Rate?
Turnover rate refers to the percentage of employees that leave the company and the recruiting of new ones to substitute them. Employee turnover can have different factors depending on the employees and the company’s situation. To understand the topic in more detail, it is necessary to explain the causes and types of staff turnover and strategies to reduce employee turnover.
Causes of Employee Turnover
According to a research done by Gallup, there are a couple of reasons why a person decides to leave the company:
The first reason is an unbalance between salary and group accountability. The employee who considers himself more qualified, effective and accountable than others, expects a more reasonable salary.
Another reason is employee recognition (or lack thereof ). John Dewey, American philosopher and psychologist born in 1859, used to say that “The deepest urge in human nature is the desire to be important¨. Sigmund Freud, the Austrian psychologist, had a similar thought, he emphasized that everything that man does in life is for ¨the desire to be great¨. Considering these psychological concepts, employees feel more motivated when they are recognized by their work and the achievement of their objectives. It is fundamental to make employees feel appreciated when they are efficient, by doing this they tend to stay and feel part of the company.
The lack of growth and learning opportunities are also one of the main reasons a person decides to leave a company. Gallup explains that employee turnover is 19% lower in companies where managers assign an individual to the right position and where they discuss employee progress and objectives.
The last reason is the presence of a friend in the group. There is an 18% lower turnover per year in teams where some of the members are friends. Overall, staff turnover rate is lower in companies where these conditions are respected and fulfilled.
Types of Employee Turnover
This happens when an employee decides to leave and the company needs to fill the position. Richard Branson, the founder of Virgin Group, says “Train people well enough so they can leave, treat them well enough so they don’t want to”. The more attention employees get, the more they tend to stay.
In this situation, the organization decides whether the employee stays or leaves. The company is prepared to let the person go, and it is not an unexpected situation. Reasons may vary, ranging from budget cuts, organization restructuring, poor performance or behavioral problems.
In this scenario, the company does not experience a loss of personnel. The employee is transferred to another area of the organization. At some point in their career, some employees decide to change areas/departments in order to be promoted to other r positions and to further develop their careers. US News states that some of the reasons for an internal transfer could be a labor challenge, the need to learn new skills, relocation strategy or an uneasy relationship with the manager or a coworker. Many times professional growth and promotion do not happen vertically but do horizontally.
We have to take into account that through technology is possible to determine if a person tends to change positions or leave the company.
According to Harvard Business Review, work anniversaries, birthdays and social meetings are crucial factors that make people compare where they are, and what they accomplished from the previous year. In these situations, the search for new positions goes up to 6% and 12%. There are not only professional but also personal factors that influence people to pursue new paths in their careers.
There are different types of retirements, sometimes the employee becomes unmotivated and has taken the decision in advance and there is nothing to do. In other cases, the company can prevent this from happening.
According to Harvard Business Review, 50% of employees that accept a counteroffer and stay, tend to leave the company within the following 12 months.
What Is Employee Turnover Rate?
We rely on the turnover rate to get the annual percentage of employees that leave the company for different factors. A reasonable reference to any company is to take into account the average annual rate of the industry.
Calculate Turnover Rate
We can calculate the turnover rate by taking into account new employees and people that leave the company in relation to the average number of employees through a certain period of time. Steps to calculate the turnover rate:
For instance, if throughout a year, in a company with 150 employees, 20 are new incorporations and 10 have left the employee turnover rate is 13% (20-10/150 *100).
It is important for a company to obtain HR metrics to gain insights and prevent employee turnover rate. Through StarMeUp, is possible to have a close track of employee behavior and performance. This technology is perfect to collect useful information to lower employee turnover rate and to strike a balance between talent management and organizational culture.