No one stays in the same job forever — that sounds more like an episode of Black Mirror than fulfilling employment!
Change at work is inevitable, whether we choose to take a new opportunity, move to another city, raise children, or eventually retire. That’s turnover; the rate at which employees leave an organization, and are replaced by new people.
Low turnover is generally considered desirable. Replacing employees is expensive, and every organization wants to hang on to its best people. But not all turnover is bad, or even avoidable!
Today, we’ll explain the 5 major types of employee turnover, and share ways to manage all of them. Turnover is nothing to be afraid of — as long as you know how to navigate its impact on your organization.
Voluntary turnover
This kind of turnover happens when employees make a voluntary decision to leave. They could be taking a new role somewhere else, or focusing on other parts of their life, like caregiving or even travel!
Often, this kind of turnover is regrettable. Voluntary turnover tends to be more expensive, and have more of a business impact, because there often were no performance issues with the departing employee.
Generally, HR leaders aim to reduce voluntary turnover. But of course, it’s inevitable to some degree. Everyone will eventually leave an organization, for voluntary or involuntary reasons.
Managing voluntary turnover
Communication, transparency, and trust are critical to reducing voluntary turnover. Establish clear communication and feedback loops, such as through 1-1 meetings, throughout the employee’s time at your organization. The idea is to stay aware of how people are doing, and how their experience could be improved, before they decide to start looking for other opportunities because they’re burnt out or overwhelmed.
When voluntary exits do happen, take stock of why through an exit interview. Look for patterns as to why people are leaving, so that you can reduce this kind of turnover going forward.
Involuntary turnover
Involuntary turnover means that the organization, not the employee, made the decision to end employment. Usually, this happens for performance reasons. Maybe the employee isn’t realizing important outcomes, or there’s some other kind of problem with their work or behavior.
But involuntary turnover doesn’t always mean a person is unskilled — it may just mean they weren’t a good fit with that particular role. So while low involuntary turnover is generally a good thing, there’s nothing wrong with ending a situation that wasn’t working out.
Managing involuntary turnover
Reduce involuntary turnover by investing more time and energy into hiring the right people. That means spending fine-tuning how you recruit, interview, and onboard candidates.
Do new hires know exactly what to expect? Do you know exactly what their skills, strengths, and interests are? When everyone knows exactly what they’re getting into, things are a lot more likely to work out for all parties.
Attrition
Many people use the words turnover and attrition interchangeably — however there is a distinction between these two terms. Turnover technically refers to the rate at which employees leave an organization and are replaced within a given period of time. Attrition, on the other hand, refers to instances where an employee leaves a company, whether voluntary or involuntary, and the company makes the strategic decision to not fill the role again.
Layoffs are one common type of attrition, caused by company restructuring, downsizing, or the elimination of projects and roles.
If attrition is extremely high, it could be a red flag. But in general, this kind of turnover is nothing to worry about. It’s a natural part of the employee lifecycle, and it’s also normal for organizations themselves to grow and change.
Managing attrition
Reducing attrition is very different from other kinds of turnover, as attrition is mainly due to layoffs, which virtually all employers already want to avoid.
But in general, being intentional and deliberate about not over-hiring can be a good way to reduce attrition down the line. This was made especially clear by the past year’s unprecedented layoffs across the tech sector.
Regrettable turnover
Just like the name implies, this is the most problematic kind of turnover. Regrettable turnover means the company is losing a valuable, high-performing employee — someone they would have preferred to keep.
Any organization is only as strong as its people. That’s why reducing regrettable turnover, and holding on to top talent, should be a key priority for HR leaders.
Managing regrettable turnover
Since a company would rarely terminate high performers, regrettable turnover can be considered a subset of voluntary turnover. It can be managed with the same strategies you’d use to target voluntary turnover, generally. Additionally, high performers have plenty of employment options, so competitive compensation is crucial.
Bad management practices are a top reason that many people leave jobs, even if they otherwise love the work! Investing in great management can help companies retain exceptional talent, and keep overall turnover low.
Internal Transfers
Internal transfers mean employees are taking on new roles, but within your organization.
Generally, this kind of turnover is a good thing! Plenty of internal transfers means your company offers upward mobility and paths for people to pursue their professional goals. This kind of ‘talent mobility’ has been associated with better business outcomes, including profitability, innovation, and customer satisfaction.
However, it’s possible for employees to seek out internal transfers for the same reasons they’d want to leave any other job — poor management, toxic team environments, unrealistic expectations, and unfair pay.
Managing internal turnover
You don’t want to reduce opportunities for internal mobility. But you do want to make sure employees are moving for the right reasons!
Watch for this kind of problematic internal turnover by continuing to hold “exit interviews” when employees transfer internally, even though they aren’t actually exiting your organization.
Monitoring Turnover Rate
When trying to understand the state of turnover at your organization, turnover rate is the most useful metric, not the number of employees leaving or being replaced.
Imagine that a company who employs 5,000 people sees 35 of those employees leave in a month. That sounds like a lot! But actually, it’s much less concerning than the departure of 15 people from an organization that employs just 100. That’s because it’s a much smaller proportion of their total workforce.
Calculating turnover rate is easy. Simply divide the number of employees who left, by the total number of people at the organization (before that departure, obviously). Then, multiply by 100 to find a percentage.
In the above example, the 5,000-person company has a turnover rate of 0.7%. But the 100-person company has a turnover rate of 15% — definitely cause for concern!
What constitutes a “good” turnover rate varies greatly by industry, company, and individual role. As a rule of thumb, 10% turnover or below is pretty good. If you’re not sure, try looking for average turnover rates within your industry, or among your competition.
Communication — the key to managing turnover
To reduce turnover, we need to create workplace experiences that feel healthy, positive, and meet employees’ needs. The only way to do that is to listen to what those needs are, and be open and honest about how we can meet them — but building strong relationships with dozens (or hundreds) of employees is no easy task!
15Five’s performance management platform was designed to make communication and performance monitoring easier and more effective at scale, helping managers get organized and tactical about staying in touch with their people.
Within 15Five’s platform, managers can schedule regular 1-1 meetings, record how they went, generate performance and engagement insights, and track progress towards critical objectives and goals. That means your company has an accurate, big-picture view of what’s going on with your people, all the time.
To learn more, reach out to us with questions or book a 15Five demo today.
