Reduce employee turnover by offering development opportunities

A young woman leaves a company with a high employee turnover rate, taking her personal belongings with her.

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Employee turnover: Definition and types
Causes
Possible solutions
Tips and best practices
The bottom line

Nadine Pedro

Copywriter

With training as a marketing communications specialist and over ten years of experience, Nadine brings in-depth expertise in strategic B2B marketing. At chemmedia AG, she markets digital solutions for e-learning and digital human resources development, getting to the heart of complex topics such as digitalization, learning experience, and continuing education.

Storytelling for specialist topics
Multichannel campaign planning
Marketing strategy for digital learning solutions

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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.

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.

Voluntary turnover

Employees leave the company of their own accord. This is often due to dissatisfaction with the job, to pursue a career change, finding better career opportunities elsewhere, or for personal reasons such as relocation or family planning.

Involuntary turnover

This is when the company lets its employees go. Reasons may include poor performance, issues with conduct, economic challenges, or organizational changes such as a restructuring or merger.

Internal turnover

Employees change departments or positions within the company. This can be positive as it encourages internal mobility and gives employees the opportunity to develop new skills and understand different aspects of the business.

Functional turnover

This form of employee turnover occurs when the departures have no negative impact on the company. These are often employees whose departure is seen as necessary or even beneficial for the company, as they may not have made an effective contribution to the performance of the team or the organization as a whole.

Dysfunctional turnover

In contrast to functional turnover, these are departures that are detrimental to the company. Highly qualified and valuable employees leave the company, resulting in a loss of knowledge, experience, and productivity.

External turnover

This type of turnover refers to employees who leave the company completely and move to another organization. Frequent reasons include better salary offers, more attractive promotion opportunities, and a better working environment at the new company.

Age-related turnover

This form of turnover occurs when employees retire. This is a natural form of employee turnover, but can also pose challenges, especially when experienced specialists leave the company.

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.

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.