Turnover rate: How to avoid disaster

During a workforce shortage, retaining personnel is crucial to ensuring the viability of your business. Whether it’s the loss of skills or knowledge, the negative perception by customers or the time needed to train a replacement, losing an employee can be more expensive than you think. According to Edda Pizzati, a business consultant and human resources specialist at Inno-centre, the cost of losing an employee is equivalent to that employee’s annual salary. Here, Pizzati helps us recognize the warning signs that an employee is about to leave and how this issue should be addressed.

How is the turnover rate calculated?

The simplest formula involves determining the percentage of employees who have left on an annual basis. For example, if 30 employees out of 100 left the company, then the turnover rate would have been 30%.

But Pizzati takes it further. She explains that to improve this percentage, you need to look deeper. “We can look more specifically at voluntary versus involuntary departures, new employees, divide up the numbers by department, by management or by position type,” she explains. The result may then lead to more appropriate responses.

Are yearly evaluations still relevant?

According to Pizzati, yearly employee evaluations aren’t enough because they rarely represent opportune moments for real dialogue. “In fact, evaluations are a tool, not a form of career management. Managers need to understand how to get the most out of them in order to then take effective action. Otherwise, if nothing is actually done, the employee will lose faith.”

Pizzati says that a turnover rate of 15% is considered to be high. Yet some sectors have rates that are even higher, which she attributes to mistaken beliefs in the power of business culture.

Causes of an elevated turnover rate

While we often hear about the importance of flexible work schedules and remuneration, Pizzati considers these factors as only “surface causes.” She notes that in SMEs, the real causes generally stem from immediate supervisors or the person heading the business. “The deeper reason is usually related to management.”

For Pizzati, good management leads to good results. But what do employees look for in a manager? “The good news is that the answer is simple: Be courteous, respect your employees and encourage them to be autonomous, which means recognizing their skills and ability to make good decisions,” she summarizes.

The effect on growth

Above and beyond the numbers and any human factors, stability of personnel remains a powerful tool for growth. “Low retention rates for employees have a negative effect on actual opportunities to do business. Another result, which is invisible yet highly important, is losing the support of a qualified person,” emphasizes Pizzati. This is a factor which is even more significant when you consider that the employees left behind are often overlooked. “We often see periods of work overload followed by a loss of motivation. This is even more problematic in contexts where the time it takes to recruit is becoming longer and longer.”

Retention is good, engagement is better

For Pizzati, retention happens automatically when there is genuine communication with all employees. “People need to understand why they’re going to work every morning. Also, everything is not necessarily okay just because your retention rate is high. According to experts, 65% of employees have little personal investment in their work. So even though they may not leave, the company should have every interest in reducing this percentage. That’s why we need to focus on retention, but above all on employee engagement.” So what should you do to motivate the troops? “You need to stabilize your current situation, then detect and eliminate any sources of dissatisfaction. Only then can you hope to create a motivating environment.”

As for exit interviews, the HR specialist doubts they have any relevance. By definition, they are an exercise performed when an employee is leaving the company and about to move on to other things. The true reasons behind the employee’s decision, according to Pizzati, are therefore usually hidden. “Instead of asking employees why they’re leaving, you would be better off regularly asking them why they stay!” she concludes.