How You Can Stop Turnover Before it Starts

Employee turnover refers to the proportion of a company’s workforce that leaves and is replaced by new employees over the course of a year. In 2012, The Center For American Progress reported that companies lose around 14-21% of every departed employees’ annual salary in turnover costs. And the higher the management level or specialization, the higher turnover percentage lost. While turnover costs for executive-level jobs greatly differ from company-to-company, some studies have reported that depending on the executive’s impact on the company, turnover lost could account for more than 250% of their annual salary. 

The real cost of employee turnover 

Where do these turnover costs come from? The same study distinguished between direct and indirect costs. Below are the top four direct costs:  

  • Separation costs– exit interviews, severance pay, unemployment taxes, and so on
  • Productivity loss– covering a departed employee’s duties, overtime, temporary staff, and increased contract labor rates
  • Employee replacement costs– advertising, recruitment, overhead costs, screening, hiring bonuses, applicant travel, and relocation incentives
  • Training and Education– onboarding training, project training, certifications, or educational costs

It is important to highlight the second cost—productivity loss. Once an employee is hired, it takes a significant amount of time and resources until they are effectively functioning in their new role—known as productivity. An Allied Workforce Mobility Survey of 500 HR professionals concluded that the average employee needs eight months to reach their full productivity potential. There are many reasons for this seemingly long length of time necessary to reach productivity. For example, employees in professional servicing industries need time to learn about their clients—their organization, company portfolios, project goals, and so on. Regardless, eight months is a big investment of time for businesses to wait for a fully settled and functioning employee.  

How can you combat high turnover?  

Now that you’ve learned how detrimental employee departures can be, companies can start combating turnover by starting with a few key activities. 

Evaluate Turnover  

Calculate how many employees have departed from your organization in the last 12 months. Compare the result to turnover rates across 24 months, or 36 months. Is the number of departed employees increasing yearly? Does the total number of departed employees outweigh the total number of new hires? If you’ve answered yes to both questions, try setting a yearly quota as a starting point for maintaining or reducing departures. 

Conduct Exit Interviews  

If your turnover is rising year-to-year, it’s time to prioritize or re-evaluate your offboarding process. Exit interviews are important because they offer an inside look at your company’s culture, day-to-day processes, and morale. When an employee submits their resignation, they oftentimes are willing to be honest and forthcoming when delivering feedback. This data provides companies valuable information on employee perception and company trust, but most importantly the reason for their departure. The insights are then used to identify trends, preempt attrition, and inform HR and company leadership how to continue enhancing the effectiveness of their employee programs or workforce strategy. 

Develop A Robust Onboarding Program 

Which brings us to onboarding. Why should you care about onboarding? Because without it, companies lose up to 23% of their workforce each year. Depending on the size of your business, this turnover could turn into a multi-million-dollar loss. 

Here are a few pieces of advice for building a program that will set up your new employees for success and save you money in the long-run. 

  • Start onboarding before Day 1– Make the new hire feel welcomed and prepared by sending them a message and welcome materials the week before they start. This not only shows you’re on-top of things, but also can help get more administrative tasks out of the way before they even step foot through the door. 
  • Create introduction activities– By making onboarding a social experience you’ll engage new hires and allow them to build positive relationships with other employees. Include icebreakers and other more collaborative activities. 
  • Build in integration activities– Onboarding is more than just administrative tasks. It enables the indoctrination of new hires into a company’s culture, brand, and organizational operations.  Make sure to provide plenty of relationship building activities, share key tenants of your company’s brand, and get new hires up to speed on who’s who (leadership/management intros) and what’s what (team/department information). 
  • Assign a buddy or mentor– Onboarding completion doesn’t mean the new hire has acclimated to the company. Partner your new hire with a “buddy” or mentor that will check in on them, take them to coffee, offer insight into office politics, and help them avoid common pitfalls. Ideally this person should be chosen based on similar interests or backgrounds (Both UX-ers, both went to University of Florida, etc.). This will help create a level of trust right from the start. 
  • Consider a career journey and path to productivity– Remember the employee productivity statistic earlier? Be proactive by working with managers to identify what materials, tools, or training the new hire will need to successfully operate in their new role. Use that information and build compatibility with a learning management system like Lynda or LinkedIn Learning, or set up peer-trainings where new hires can learn on the job from employees who have experience. If your company has a professional development program or budget, consider leveraging it for new hires. 

Measure the Effectiveness of Your Onboarding Program, and then Optimize 

Once you’ve mapped out all the essential components and launched a pilot of your onboarding program, make sure you collect feedback and evaluate the effectiveness of the program.  

Develop a metric system that measures the impact of your new onboarding program in terms of retention, morale, productivity, and engagement. Companies have a variety of options including surveying their new hires, managers, or current employees; conducting focus groups; correlating mid-year performance reviews; or asking managers how new hire productivity contributes to their team.  

Don’t forget to set a cadence for evaluating your program. These outputs should be used to optimize the program and make it as valuable to new hires as it can possibly be.  

Partner With Leadership 

Reducing turnover is everyone’s job. Bring together leaders across your company to make retention a top priority. Create a yearly or bi-yearly plan to review your company’s business and workforce strategies. During your review process conduct a SWOT analysis, outline all activities and incentives already in place that impact employee development, and evaluate the level of impact these activities and incentives have. Make sure to set both short-term and long-term goals that are aligned with your company’s mission and will continue to enhance employee growth. 

The truth is companies can’t really stop turnover, but they can allocate resources to activities that increase employees’ engagement, expand their skill sets, and improve their job-readiness. Combating turnover also requires long-term commitment from leadership, HR, hiring managers, and new hires to instill a strong sense of purpose. By evaluating turnover, conducting exit interviews, and building a robust (and ever-evolving) onboarding program companies can start understanding why employees depart and create strategies that target priority issues. By learning from your past, you can reinvent your company’s future.

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