There seems to be a major disconnect between what senior managers think is the cause of employees leaving for another company, and the real reason why employees quit. A recent Paycor report identified this disconnect and why employees “fire” their companies.
Executives tend to rationalize why employee’s leave for another job is based on their own prior experiences. They view it as a career-building move. While this may be true in some cases, it’s not the major reason, at least not in today’s workforce. Senior management views the reasons that employees leave their company for another job:
- To increase their compensation
- To advance their career to the next level
- The desire to add responsibilities and perform at a higher level
That may be partially true, but it’s not the main drivers as expressed by employees themselves. Employees describe their reasons for leaving their job for very different reasons:
- To get away from a bad boss and find a mentor
- To become recognized and rewarded as a valued contributor
- To get a better balance of life between the professional and personal, and avoid “burnout”
A senior manager’s perspective may view high turnover as having nothing to do with the lack of management skills of the people below them. In other words, “We can’t be that bad for employees wanting to escape to another organization”.
Some executives may not understand the impact and cost of turnover. Or if they do, may not have the numbers to show them that turnover is very expensive. If an average employee makes $40,000 a year, and a corporation has 1,000 of them, with a turnover rate of 22%, and the average cost of a replacement is $15,000 (including recruitment, supervisors’ time, training time to get up to speed, lost productivity, the strain on employees who remain to take up the slack, and so on), then the total cost of turnover is at least $3.3 million, and that’s conservative. Turnover of the most talented and productive employees is not only expensive, but also will significantly affect the results of the business. A turnover at higher levels of mid-management may be closer to $50,000 to $200,000 per change, including relocations.
So, what should be done?
- Management should track, report and add up the cost of turnover, both voluntary and involuntary, including indirect costs.
- Identify the root causes of turnover and the areas where high turnover is prevalent. Something is wrong when a supervisor continues to turn over employees consistently.
- Trend turnover by department, company and comparable to competitors or the industry. How out-of-norm are you and for what reason? Sometimes it’s a function (like nurses in a healthcare organization) or another supply/demand issue.
Ask yourself, “Do we have a turnover problem, and if so, what’s the cause?” There is another turnover problem, and that’s when turnover is not high enough. In other words, the company is retaining unproductive employees. It’s called “deadwood”. But that’s for another time.
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