What is turnover and why do you need to decrease your company’s turnover – WAU
The turnover is not only an indicator of the Human Resources area, but a valuable information for the managers of a company to guarantee the innovative potential of its businesses. Understand the main types and learn the best practices so that it does not become a problem!
An explosion of indicators has taken over companies in recent years, and what were hidden problems and rooted in business, suddenly, they could be quantified and tackled in the open, as is the case with turnover.
Perhaps due to the features of the industrial revolution, the replacement of one employee by another was a situation treated as routine and of little relevance.
For many, it was a situation to be dealt with in the personnel department, and only for the purpose of contractual regularization.
Today, turnover rates take the sleep of business managers and shareholders. They define whether a company retains, attracts, develops talent and, as a result, works on its differentials in a more innovative and efficient way.
That is, turnover needs to be on your company’s radar, but not just as an index, but as an object of strategic study so that it can obtain an increasingly optimized management.
With all this in mind, we developed this content on turnover to address all its aspects, from definition to its practical use of management. Read on to learn how to retain your teams longer!
What is turnover?
The turnover is the proportionality between the dismissal of employees and new hires in a given period.
For management purposes, normally, the fiscal year is used to measure labor turnover, another way also accepted to define turnover.
However, as is well known, there are several reasons for an employee to be dismissed from the human resources of a business, from the manager’s initiative until the employee’s retirement.
So how do you measure which ones really impact the business and which strategies can help stop unplanned and expected outputs?
What types of turnover can be observed in companies?
In the first instance, it is easy to conclude that any turnover is bad for the company, after all, it adds a bad statistic to its human resources management performance. But not quite.
To understand this better, some situations that involve dismissing employees can help.
In this modality, part of the employee the request to leave the company’s staff. It is important to investigate the reasons and the sequence of facts that culminated in that request.
An employee who resigns to accompany his wife on an international project, for example, is a voluntary turnover with a clear reason, and does not offer much scope for trying to retain her.
Another situation is when a professional talent is harassed by the competition and accepts the proposed offer. In this case, it is necessary to consider whether it is worthwhile or not to attempt counterpart negotiations to reverse the case.
O involuntary termination occurs at the initiative of the company and, for the purpose of understanding the reasons, it is necessary to consult the direct manager.
Among some situations, we can mention the low sales performance, closure of the activities of a specific business headquarters, as well as the noncompliance or misconduct of the professional in face of the company’s values.
a functional turnover is one that brings benefits to the business, as in the case of an employee who has resigned but who also performs poorly in his position.
In this case, even if the replacement has an immediate cost and takes a while until the new employee has mastered the functions, in the long run, the exchange will be beneficial.
On the other hand, dysfunctional turnover is that much sense in the results and organizational climate. This is the case with leaders in strategic sectors or specialists who are difficult to find in the market.
It is also possible to classify turnover and its impacts as preventable or not. For this, once again, it is essential to know the origins of the problem through satisfaction surveys and during the feedbacks themselves, so that work on preventive and emergency strategies to deal with each of the situations mentioned.
If a company specialized in a particular process or product knows the difficulty of replacing its professionals, following the turnover monitoring and studying the reasons that lead to termination, it can build better career plans and benefits for your team, for example.
According to the 2019 Panorama of Digital Agencies in London, 44.4% of them are focused on a specific niche. Therefore, retaining your talents is a way to guarantee the quality and performance of the business.
How to calculate the turnover?
To calculate the turnover, firstly, it is necessary to have the numbers of hires and terminations for the same period in question. Then, just apply the formula in two steps:
Number of admissions + number of dismissals / 2 = X
The result of this calculation then completes the formula:
X / total number of company employees
This measurement is generalized, and follows the company’s general turnover. But, for more specific analyzes, it is possible to apply another formula:
Total number of terminated employees / total number of employees
In this case, of course, it is necessary to consider a specific period of time, whether annual or monthly, for example.
In addition to this traditional calculation, which uses the period as a reference, it is also possible to apply the same principle to carry out more specific analyzes, such as the turnover of each sector of the company, of a specific group of professionals, etc.
One of these studies can address turnover volume by contract time, for example. What is the severance rate for employees hired for up to one or 10 years?
These more detailed investigations can assist managers in improving the organizational climate and other measures for the management of human resources.
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What are the impacts of this phenomenon on the organization?
As seen, not every disconnection should be seen as negative when analyzing the situation in which it occurred.
An employee with poor performance or difficulties in interpersonal relationships can have much more disastrous effects if kept in teams, right?
But, of course, there are negative impacts when the volume of terminations in a company is high, and it is not only due to financial aspects. Some of them are as follows.
Difficulty in retaining knowledge within the company
The longer an employee stays in business, the more contribute their knowledge to the processes, in addition to, of course, sharing it with colleagues.
This is more evident when analyzing the leaders and professional talents with greater market experience. They mix maturity with knowledge, being great mentors and influencers for young people.
They are also one of the most coveted types of professionals in the market, mainly because their experiences and knowledge can be used by the competition to undermine the weaknesses of the original company.
Weakening of business ethical values
Even though the company has a good program to receive and integrate new employees, the values and the way they should do business are learned, mainly, in the daily life of the organization, either by the example of other colleagues, or by their respective guidelines.
If most or all have recently been hired, the number capable of serving as an example may not be large enough to support those entering positions.
Increase in recruitment and selection expenses
This impact is perhaps the simplest to conclude. The dismissal of employees generates charges and even lawsuits. Often, what was invested to capture them is not even returned to the business in the form of results.
In addition, its replacement depends on triggering the entire admission process, using platforms to recruit candidates, researching specific social networks, infrastructure to promote interviews and, again, all the charges required to regularize the new hiring.
Decreased productivity and results
The way to conduct processes, machines and systems of newly hired employees takes longer, involving a higher level of attention until their total familiarity. This will probably have a cost in the sector’s productivity.
In areas such as customer service, the constant drop in team size can overwhelm more experienced employees, which can also cause other damages, such as occupational diseases and stress.
In this case, another indicator in the Human Resources area will be affected: absenteeism.
It monitors the number of days or hours that an employee fails to fulfill his workload provided for in the contract, either by means of a medical certificate or in an unjustified manner.
Imbalance in the organizational climate
Oftentimes the departure of a professional considered as a reference for the team can destabilize the other collaborators.
The same effect can also be seen with the insertion of a new piece in the team. Initial distrust can also cause an imbalance in the organizational climate.
So, how to prevent this from happening? How to manage turnover so that it is a tool to assess the quality of the team and not a reference to the lack of effective talent retention policies?
What are the 5 best practices to fight it in your company?
There are several practices and strategies to avoid turnover in the business and, therefore, it is necessary to identify the one most compatible with the company’s profile. Among the most used today and with great effects on retention, we have the following.
1. Continuous engagement programs and interviews
Engaging employees can mean earning their respective commitments to business challenges, right?
The idea of programs and interviews of continuous engagement is, precisely, to make this a two-way street, that is, the company, in the figure of the manager or leader, is committed to the employee in relation to their expectations of growth and development.
It is an excellent tool to discover the motivations, desires, values and what most moves the employee’s performance. From there, it is possible create custom actions to optimize your results and team productivity.
In addition, of course, a company that is committed to the satisfaction of its employees will certainly have a much lower turnover.
2. Identify patterns in each type of turnover
In the world dominated by digital transformation and managed by data analysis, human resource management would not be left out.
When analyzing the different types of disconnections experienced in the business, it is possible to identify patterns among employees and, based on this data, promote preventive campaigns and actions.
A termination interview, in fact, is very important to understand the motivations of leaving, which points of the company are positive and which need to be improved so that it is not neglected.
3. Regularly monitor employee satisfaction
Professionals leave the company long before they actually resign. That means to say that they emit demotivation signals, interest in bigger challenges, stress in the work environment and other elements that motivate termination.
Satisfaction surveys, performance appraisals and mentoring are actions of a career plan that can offer prospects for professional growth and development. In this case, the regularity of these strategies is decisive for their success and effect.
4. Offer personalized career and benefit plans
People have different motivations and interests. In this way, they are motivated by distinct benefits and challenges. It is very important, then, to treat each employee in a personalized way and to identify both their motivational triggers and their development potentials. Not every employee aspires to leadership positions, for example.
Therefore, it is necessary to understand the particularities of each one, discover and explore their talents, allowing them to put your ideas to the test, be innovative and feel part of the business results.
5. Pay attention to internal policies and organizational climate
Employees need to feel good within the organization and also with the activities inherent to their positions. Therefore, it is necessary to review internal policies, goal plans and other mechanisms that work to organize processes and define actions. First of all, they need to be ethical.
As we have seen, it is essential to monitor turnover and promote preventive actions so that it is reduced and does not impact business results. For this, paying attention to the market, what benefits are offered by the competition and focusing on its continuous improvement are decisive actions.
One of them, by the way, is to always be aware of the business culture. Want to know how it influences the team’s performance? So, read more about the difference between culture and organizational climate and how it is possible to work both in a unified way!