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How do you know if staff turnover is a problem?

Published 4th April 2017 by Melissa Farrington
Staff member saying that they're quitting

The best organisations in the world lose people every single year and there’s nothing they can do about it.

And let’s face it, no turnover at all means no new blood with their fresh ideas being brought to bear on your organisation. So turnover is not inherently a bad thing. But it can be either acceptable or unacceptable.

A low-performer leaving may be acceptable, even desirable, whereas higher-than average turnover in a mission-critical business unit would be unacceptable because it could impact the organisation’s long-term prospects.

What is the average annual turnover rate?

According to data from CompData Surveys, average total turnover among US companies in 2013 was 15%, or 15 employees leaving each year for every 100 employed. It broke down across industries, from 17.2% in banking and finance to 7.2% in utilities.

CompData Surveys also broke down turnover into voluntary and total turnover. Of the 15% total turnover across all industries, just under 5% was involuntary, or not driven by the employee.

It’s useful to know whether turnover is voluntary or involuntary, but not all involuntary turnover is bad and not all voluntary turnover is good. It just helps paint a picture of your attrition makeup and allows you to better interrogate the data to see what action you need to take.

Once you have industry baselines, you should establish your own internal organisation-wide baseline, as well as baselines by department and demographic, so you can easily spot shifts when they occur.

Do you need to take action on attrition? 5 questions to help you find out

Is there a seasonal effect at play?

Lots of people get a job after the new year in January, which could explain a spike in your attrition. The seasonal effect may also have to do when new jobs are advertised - an increase in the supply could increase the demand for new positions. This is common after the summer months as well as in January.

Are there themes or trends you can pull together from your exit interviews?

What are people saying in their exit interviews? If they’re flagging personal reasons for leaving, such as moving into a new life stage, you may be tempted to think there’s nothing you can do about it - that it’s a personal reason outside of the company’s control. But could you have provided better flexible working arrangements? A more individualised work-life balance?

If you can find out why people have left, you can help mould the employee experience to better suit people's needs and therefore help prevent unwanted attrition. An understanding of correlation and causality is important here: if people leave due to the workload, you may have hired the wrong people for the environment, or you might be giving people too much work. Ultimately, if enough people leave because of one reason, it makes it more likely you need to take action.

Do your employees think your company is a safe bet?

Employees are like financial markets: they don’t like uncertainty. If there are stirrings of financial problems, this can make employees form negative opinions over the long-term career progression or learning opportunities in your organisation and encourage them to jump ship.

What’s the market like for job opportunities in your industry?

Employees are like financial markets in another way: when the pickings are good, they are likely to take more risks. If the industry is buoyant and competitors are upping their game in terms of paying above market rates or just generally ramping up the number of roles they advertise, this can encourage people to move to another organisation.

Does the attrition picture change as you break it down to smaller units?

You can look at attrition at the organisation-wide level, at the departmental level, at the functional level, at the job title level or at the team level. Where you see patterns, you can dig deeper. Is attrition higher among programmers? Maybe you’re inadequately resourced at this level.

Does one team consistently lose top performers? Maybe there’s a line management problem there because the boss feels threatened. You need to break down the stats and make comparisons so you can start to see where patterns emerge.

Demographic breakdowns can also be helpful: is the rate of female attrition higher than male attrition? If so, maybe you have a hidden gender pay gap or glass ceiling you need to sort out. Are millennials much more likely to leave than baby boomers? Maybe you need to provide more transparent succession and career progression plans to staff. Or maybe millennials are just more likely to change careers more often.

This last point illustrates why effective interrogation of the data is so important; there’s no point making changes if they are solving a problem that doesn’t exist. By the same token, you don’t want to ignore a small problem before it becomes a big one.