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Ideal Turnover Rate

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Oct 6, 2018

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Turnover is not always dreadful. In its own way, turnover opens up a way for new and fresh people to come on board to share their idea, skill, and expertise. But just like any other things, it could turn into something ugly if it happens too much or too often.

But what is exactly the ideal turnover rate? Many executives are dealing with the math and constantly asking if the number is too high or is this normal?

Ideal Turnover Rate is Illusion

There is no such thing as ideal turnover rate. A company may have a 10% turnover rate while another company comes up with 20%. There is no way to tell which company that has it bad. The second company may lose 20% of its employee, but all of them are the bottom performer and it was easy to replace. On the other hand, the first company loses 10% of their top performer, which will greatly reduce the company productivity, not to mention that it will be hard to find the replacement.

There is no one-size fits all answer. Every company needs to decide its own ideal turnover rate. Work on the ideal turnover rate for top performer which should be close to zero and less than 20% for bottom performers, depend on the company’s effectivity level of recruitment.

The company need to understand more than just the turnover rate. They need to analyze it to understand why employees choose to stay or leave.

Once they understand the why, they can start to develop a strategy to recruit top talent and how to keep them on board. In long term, it will decrease the turnover rates, where the company will be able to grow more.

Keep the Employees from Leaving

The company needs to understand what makes the employee stay or leave. How to do that? Start by gathering data and information on a variety of factors such as skill gap, compensation, work environment, and so on. Most companies already have this data on hand, but they don’t really use it.

Every employee wants to feel engaged and satisfied. There are many ways to improve employee satisfaction both in the term financial and non-financial.

The employee wants to know that they have room to grow in the company. Lateral job move, increasing the salary, new training, new challenge, and the chance to step up the ladder is some example of the things that a company can do to keep the employee on board. It all depends on the insight that the executives could find from analyzing the company’s data.

Some companies may find that increasing the salary is good enough to keep the employees from running out of the door, but other companies may have to come up with more creative solutions.

The employee also wants to feel engaged. They want to feel that they are part of the company and their hard work is being appreciated. A simple conversation, an appreciation for a good work done, and giving more flexibility on how to finish to task is just another example of the things that will make the employee feel engaged and in the long term it will increase retention rate and decrease turnover rates.

More to Read : The Best Way to Improve Employee Satisfaction

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