Reduce employee turnover by offering development opportunities
A stable and committed workforce is crucial to your economic success. High employee turnover, on the other hand, is costly and jeopardizes your company’s productivity. Nevertheless, the trend towards high employee turnover cannot always be stopped. While the rate fell from 33.1% to 29.8% in 2020 due to the pandemic, it returned to 33% in 2022.
In this article, you’ll learn how you can reduce employee turnover at your company, and find some tried-and-tested tips and best practices to help you maintain a low turnover rate.
What is employee turnover?
Employee turnover refers to staffing changes within a company or organization. These changes can result from voluntary redundancies, dismissals, retirements, or internal transfers. Employee turnover is often recorded and analyzed as a KPI as it can provide important information about the stability of—and satisfaction among—the workforce, and the working conditions at the company. High turnover rates can indicate issues such as poor working conditions, inadequate remuneration, or a lack of development opportunities, while low rates are often an indicator of a positive working environment and high employee satisfaction. This KPI provides information on the levels of stability and satisfaction within the workforce and is an important indicator of a company’s health.
Types of employee turnover
There are different types of employee turnover (also referred to as fluctuation), each of which has different causes and effects. Each of these types of employee turnover has different implications for a company. It is important to understand the specific reasons behind employee turnover so that targeted measures can be taken to reduce and manage it.
Calculating employee turnover
The best way to measure the stability of your workforce—so you can then take appropriate measures to improve employee retention—is to calculate the turnover rate. The turnover rate is the percentage of employees who have left your company within a certain period of time, usually one year. It is often expressed as a percentage of the total workforce and is an important KPI in human resources management. How to calculate your employee turnover rate:
Turnover rate = (number of departures in the period/average number of employees in the period) × 100
It is important to clearly define the time period and what you consider a departure. For example, you could calculate the number of departures per year, quarter or month.
Example:
Suppose your company lost 10 employees last year and the average number of employees was 200. The turnover rate is then calculated as follows:
Turnover rate= (10/200) × 100 = 5 %
Reasons for increased employee turnover
Increased employee turnover can have several causes. Understanding these causes is the first step in developing effective employee retention strategies. Here are the most common reasons for increased employee turnover:
Lack of promotion opportunities
Employees are always looking for opportunities to develop and advance in their careers. If your company does not provide clear career paths or offers limited opportunities for advancement, employees may seek better opportunities elsewhere.
Poor working conditions
Working conditions play a decisive role in employee satisfaction. Inadequate equipment, unreasonable working hours, high workloads, and an unpleasant working environment can lead to frustration and ultimately to departures
Insufficient remuneration
Competitive remuneration is an important factor for employee retention. If salaries and benefits are not in line with the industry average or employee expectations, this can lead to increased employee turnover.
Lack of recognition and appreciation
Employees want to be recognized and valued for their achievements. A lack of praise, recognition, and reward can significantly affect motivation and loyalty. Regular recognition and rewards for achievements are therefore crucial.
Poor corporate culture
Corporate culture has a major influence on employee satisfaction. A negative or toxic working atmosphere, a lack of transparency, poor communication, and conflict can increase employee turnover. A positive corporate culture that encourages openness, cooperation, and respect helps retain employees.
Work-life balance issues
A healthy work-life balance is a decisive factor for many employees. Excessive working hours, having to be available constantly, and insufficient flexibility can lead to stress and burnout, which increases employee turnover. Offering flexibility and support in balancing their work and home lives is therefore highly important.
Poor leadership
Managers have a considerable influence on employee satisfaction. Poor leadership, a lack of support and feedback, and unclear communication can lead to employees feeling uncomfortable and leaving the company. Good managers motivate, support, and encourage their teams.
Lack of training and development opportunities
Employees want to develop their existing skills and acquire new ones. If your company doesn’t offer training and personal development opportunities, this can lead to frustration and a desire to move to an employer that does.
Dissatisfaction with the role
If an employee’s daily tasks and responsibilities do not match their skills, interests, and career ambitions, this can lead to dissatisfaction. Tasks that are perceived as monotonous, overwhelming, or underchallenging can increase employee turnover.
Lack of support and resources
Employees need the right tools, resources, and support to do their jobs effectively. A lack of necessary equipment, inadequate training, and a lack of support from colleagues and superiors can affect job satisfaction and lead to departures.
Corporate stability and future prospects
If employees feel that the company does not have a stable future or is in financial difficulties, this can lead to uncertainty and a desire to find a more secure job. Transparent communication about the company’s goals and performance can help here.
Demographics and life phases
People’s life phases and demographics can also influence employee turnover. For example, younger employees may change employers more frequently to maximize their career opportunities, while older employees may consider a change due to retirement or personal commitments.
Corporate values and personal convictions
If a company’s values and beliefs do not match those of its employees, this can lead to dissatisfaction, and ultimately to higher employee turnover. A company that clearly communicates and embodies its values is more likely to attract employees who can identify with them and want to stay longer.
The consequences of high employee turnover
High employee turnover can have serious consequences for your company:
- Costs: Recruiting and training new employees is expensive and time-consuming.
- Loss of knowledge: Valuable expertise is lost when employees leave.
- Loss of motivation: Remaining employees can feel demotivated and insecure.
- Loss of productivity: If there is a shortage of skilled workers, the productivity of your entire company suffers
- Customer relationships: Constant changes can affect customer confidence.
Can employee turnover be positive?
Employee turnover can also have positive aspects. It enables you to bring fresh knowledge and new perspectives into your company. It can also provide an opportunity to review and improve inefficient processes. It is important to keep employee turnover at a healthy level. Depending on your industry, a healthy employee turnover rate normally lies between 8 and 12 percent.
Overall, it depends on which type of turnover predominates. While functional turnover is positive and perhaps even desirable, high dysfunctional employee turnover is a cause for concern.
Possible solutions to counter employee turnover
Preboarding as a tool to combat early resignations
There’s a lot you can do to retain new employees, even before they arrive for their first day at work. Make sure that new employees feel welcome and receive all the information they need.
Onboarding
An effective onboarding program helps new employees find their feet quickly and feel part of the team. They receive the support they need to get started and feel loyal to your company more quickly.
Clear learning and career paths
Offer clear development opportunities. Employees who know that they can develop and advance will remain motivated and loyal for longer. During training, make sure your employees are assigned individual learning paths that are tailored to their needs. These give them a clear path to follow, and the learning material links all of the training measures they will go through into a logical sequence where each step builds on the one before.
Fostering strengths, closing skill gaps
Identify your employees’ strengths and make targeted use of them. Offer training courses to close skill gaps and make the most of your employees’ potential.
Mentoring
Mentoring programs help new employees and managers settle into their roles, and encourage the exchange of knowledge. Experienced employees pass on their expertise and, in doing so, create a strong network within the company.
Train soft skills
In addition to technical skills, soft skills such as communication, teamwork, and problem-solving are crucial to ensuring you have functional teams and a collegial, cooperative environment.
Encouraging and challenging managers
Around 40 percent of German employees see potential for improvement in their direct superiors’ management skills. Employees often give "poor managers" as a reason for leaving a company. Prevent this by preparing your managers for their role effectively.
Tips and best practices to combat high employee turnover
High employee turnover can be a challenge for any company. In addition to the solutions offered above, you can strengthen staff loyalty and reduce employee turnover by implementing appropriate measures. Show your employees that you take their development and well-being seriously and you’ll enjoy the lasting benefits of a loyal and committed workforce. Here are some tried-and-tested tips and best practices:
Conduct regular employee appraisals
Regular employee appraisals are crucial both to determining the level of satisfaction among your employees, and to nipping any potential problems in the bud. Use these discussions as an opportunity to share feedback, evaluate performance, and set goals together.
Get 360° feedback
360° feedback is a valuable tool that helps you gain a comprehensive overview of your employees’ performance and conduct. This feedback can come from colleagues, superiors, and maybe even customers. It enables staff to identify their strengths and weaknesses and work on them in a targeted manner.
Determine training needs on an ongoing basis
Your employees’ needs and requirements are constantly changing. You have to regularly assess their training needs to ensure they have the skills and knowledge they need to successfully complete their tasks.
Offer development opportunities in the form of training courses
Offer your employees a wide range of training opportunities to help them develop their existing skills and acquire new ones. This could take the form of internal or external training courses, workshops, or online courses. Development opportunities show your employees that you are investing in their future.
Establish a positive learning culture
Foster a culture of continuous learning and growth. Encourage your employees to try new things, see mistakes as learning opportunities, and continuously develop their skills. A positive learning culture boosts motivation and satisfaction.
Foster innovation and innovative thinking
Innovation is the key to a company’s long-term success. Highlight the need for creative thinking and encourage your employees to contribute innovative ideas. Create an environment in which new approaches and creative solutions are welcomed and supported.
The bottom line on employee turnover
Employee turnover is a complex issue with many facets. By taking targeted measures, you can reduce employee turnover and create an attractive working environment at the same time. Invest in your employees’ development and satisfaction and you’ll enjoy the long-term benefits of a stable and motivated workforce. Implementing the right strategies will help you retain talent and see your company enjoy lasting success.
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