What is turnover?


Employee turnover is the process by which employees leave an organisation over time.

Turnover rate, also known as staff turnover or churn, is the process by which employees leave an organisation over a period of time. It’s commonly used by employers to measure the number of employees that are leaving within a certain period and/or the ratio between departing and arriving employees. Companies need to understand employee churn in order to properly manage their workforce and, ultimately, ensure their success. 

History of turnover 

Turnover has been an issue for employers since the Industrial Revolution when workers were employed on a project-by-project basis. By the early 1900s, companies began to realise that there was a financial cost associated with high turnover rates and began to focus on retention. Since then, the concept of employee churn has grown in complexity with organisations measuring and tracking it more closely than ever before. 

Recent turnover trends 

Due to advances in technology, it’s now easier than ever for companies to track employee churn and analyse its impact. Recent research shows that the average churn rate for all industries is around 18%, with some seeing more than double that amount. Additionally, it’s been found that the cost of replacing an employee can be up to twice their annual salary. 

Tracking and reducing turnover has become increasingly important as skills gaps have grown. As the workforce ages, turnover rates are likely to increase as staff retire, leading to fierce demand for STEM talent. Therefore, reducing churn and increasing retention has become increasingly critical for organisations. 

Advantages of turnover 

A little bit of churn is normal and expected for most companies and despite the financial costs associated with high levels of employee churn, there are also some advantages to a certain amount of turnover. For example, the influx of new hires can bring fresh ideas and perspectives to an organisation that may not have been present before. This type of diverse thinking can often lead to innovation and improved efficiency within the company. 

Disadvantages of turnover

The disadvantages of employee churn are threefold. First, it’s costly to replace employees. This includes the cost of recruiting new staff, as well as training them and getting them up to speed with the latest procedures and processes. Secondly, high levels of employee churn can also create a negative culture within a workplace. When employees are continually leaving, it can be difficult for other staff to build strong relationships and trust with their colleagues, leading to low morale and disengagement. Thirdly, a high turnover can increase the risk to security and proprietary information. 

Use case 

One company that makes a concerted effort to retain staff and reduce churn is retail giant Walmart. Its strategies include recognising and acknowledging employees based on performance and giving added benefits and providing incentives based on their position and status. While many companies don’t include hourly workers in their retention strategy, Walmart makes a point of including all of its staff. It offers its workers affordable insurance and healthcare, workplace flexibility to meet the needs of employees with other commitments, and employee discounts in stores. 

In conclusion, it’s clear that understanding and managing employee churn is an important part of creating a successful organisation. Companies should focus on tracking their turnover rate over time, as well as implementing strategies to reduce it where possible. This can help ensure that the right employees are retained, and the organisation’s culture remains positive.