What Is Employee Turnover?
Human Resources
The Definition of Employee Turnover
One of the Webster's Dictionary definitions of the word turnover is as follows: "the number of persons hired within a period to replace those leaving or dropped from a workforce; also: the ratio of this number to the number in the average force maintained"
This helps us appreciate what is meant by the term employee turnover. So if we are operating a business why should we be concerned with our rate of employee turnover?
There are at least three reasons:
- Cost of employee hiring
- Cost of employee training
- Employee morale
Let us consider each of these reasons one at a time.
Cost of Hiring
This effect of employee turnover could vary depending on the type of business. In some small businesses the process may be relatively inexpensive and a lot can be accomplished by means of free online ads.
For other companies it may be a lot more costly to come up with a hiring campaign. It can involve the use of a recruiting agency. It could also involve having to perform background checks on prospective employees.
The person doing the hiring can factor into the employee turnover cost as well. Do you have a manager who you pay to look after the hiring? Does the company have a Human Resource department that oversees hiring? There can be extra costs if these higher hour employees have to work extra hours to care for the hiring process.
Cost of Employee Training
This is one of the more obvious cost involved with employee turnover. Every time a company loses an employee not only do they have to hire a new one, but they have to train them as well.
Depending on the job this could take a number of months. The costs of training could depend upon the job wages as well. Obviously it would cost more to replace and train a managerial position.
Along with the direct cost of training there is also indirect but just as potentially costly factors as well. These relate to job performance and potential loss of customer.
While an employee is being trained they are more likely to make mistakes and they may lack efficiency. These factors can have a direct impact on customer satisfaction. An unhappy customer is bad for business.
Employee Turnover Cost
Employee Morale
An important part of operating a successful business is building a strong team mentality. One of the most negative effects of employee turnover is the impact that it could have on team building.
If your company is a revolving door, it will be hard for your employees to gel and to truly function as a team. Also when new employees are being trained it is your more experienced employees who have to take on a greater work load. If this is a prolonged development this could lead to frustration.
If long time employees become disgruntled it could have a direct bearing on their job performance. Their job performance can also have a direct impact on the service provided to your customers. You are also at risk of losing someone who was once a reliable employee. This can contribute to the ongoing cycle of employee turnover.
Employee Frustration
Employee Turnover Poll
If you worked at company that had a high employee turnover rate would you be concerned?
Understanding Employee Turnover is Important
Appreciating what is employee turnover and how it affects your business is truly essential. Having an understanding of employee turnover and its issues is the first step to being able to address them.
Read More About This Subject
- Cost of Retaining Employees vs. Hiring New
A high employee turnover rate can be truly costly to any business. We will consider the cost of hiring employees compared to retaining current employees. - How to Retain Current Employees
How does a business end the costly cycle of a high employee turnover rate? We will consider 3 effective employer retention strategies.
