THE NATURE OF EMPLOYEE TURNOVER
Why is turnover important? Employee turnover refers to the movement of workers in and out of employment with respect to a given company. It is usually a good indication of the level of morale within an organization, as employees who are satisfied with their jobs usually will not leave the company (although some dissatisfied employees will stay for reasons unrelated to working conditions within the company). Relationship to absenteeism. Absenteeism is another statistic that is also indicative of morale. The chronically absent employee is usually a candidate for later turnover. Bottom line impact. Employers should be concerned about the level of turnover because it represents a company cost that may have been avoidable. When employees leave a business, the cost of their hire, training and profit from their productive work efforts are lost. For example, to underscore the bottom line impact of turnover, an estimated annual per-person cost of turnover was: $10,000 or less --55% of companies $10,001 -$20,000 --16% of companies $20,001 -$30,000 --8% of companies $30,001 -$40,000 --11% of companies more than $40,000 --10%% of companies Source: William M. Mercer (1998) To determine the bottom line impact, multiply the number of separation per year times the estimated cost of turnover. Is all turnover bad? Some measure of turnover is to be expected in any company. In fact, the lack of turnover may mean that the employment force is becoming stagnant. But an excessively high turnover rate is indicative of poor management and will lead to excessive costs for the organization. It is up to management to find the reasons for excessive turnover and implement policies to correct the trend. Types of turnover. Employee turnover comes in several forms: • The most problematical form is the voluntary separation when an employee decides that it is not in his or her best interest to remain with a company. • Layoffs deal with suspensions from the payroll initiated by the employer without prejudice to the employee, due in most part to a downturn in business activity. • Discharges are a permanent termination of employment for disciplinary reasons. • Other separations include retirement, death, permanent disability and failure to meet adequate physical standards, matters which are largely beyond the control of the employer. • Transfers within an organization or short-term disciplinary suspensions are not usually considered in turnover figures. However, if these actions appear to be negatively impacting a unit, they should be subject to a similar level of analysis as turnover.