By Michael D. Castro
The rate of turnover is something that affects companies due to the costs incurred in training employees that eventually leave. What does this all mean? Turnover leads to production loss – which also equates to money loss
It’s estimated that the average cost of a lost employee is 38 percent of the employee's annual salary. When employees leave, the ripple effect can be felt throughout the company. Lost knowledge, training costs, interviewing costs, and recruitment costs all add up, and companies cannot afford to ignore the long term implications high employee turnover has on the success of the business. The service industry has the fifth highest rate of turnover in the US (Pelose, D. 2018).
There are many factors to consider when dealing with the turnover issue. Why do employees leave a company? Gathering from various sources these are the most common reasons:
1. Lack of or improper training. When training does not adequately prepare an employee for the tasks ahead this creates frustration. Continual training and refresher training ensures that employees feel motivated and assured that they will do a good job.
2. Innefective leadership. Employees don’t leave their jobs, but rather their managers. Leaders who do not create the right opportunities for their employees, don't communicate with them, and don't appreciate them often leads to a high turnover rate.
3. Lack of communication. Being aware of the questions, concerns and fears that employees might have, and, pro actively communicating answers, will build transparency and trust. Employees who feel they are being heard tend to gain more appreciation for the company and thus are less prone to leave.
4. Employee dissatisfaction. A competitive salary and decent working conditions are a key component of employee retention. Changes in management practices that increase employee satisfaction may increase business-unit outcomes, including profit.
5. The employee demographics. On this day and age millennials are the most likely available resources to hire. Millennial mentality is a factor to take into consideration because this generation is not prone to be committed to an organization and tend to skip from job to job.
6. Ambiguity in performance evaluation methods. An employee that perceives that evaluations are not consistent and arbitrary will most likely leave for a job where they feel they will be treated fairly.
7. Involuntary factors. Family, health, personal and societal issues can also contribute to an employees decision to leave a job.
8. Being evaluated solely on quantitative factor and not considering qualitative factors. Employees that are solely measured in terms of production output tend to get dissatisfied.
9. Not being taken into consideration. Employees feel comfortable to stay longer in positions where they are, or feel they are, involved in some level of the decision-making process.
The list above is not exhaustive nor complete as each working environment has its own peculiarities that can add or modify elements to the list of reasons an employee leaves a workplace.
Knowing the reason why an employee leaves a workplace is good as long as it leads the company to take steps to minimize employee turnover. But there is a problem. That is known AFTER the employee leaves. Although there is no way to predict with complete certainty who will stay and who will not, there is a way to get a an idea. Up to now papers, articles and studies have focused on the "why" and offered remedies to minimize the trend. What about creating an instrument used to partially predict the probability of an employee staying or leaving? I suggest creating an Employee Retention Assessment.
The ERA would be a questionnaire on which the candidate will select an option agreeing or disagreeing with assertions made by other employees that have been more than one year in the company and employees who have left prematurely.
The creation of the questionnaire has two phases: compiling of data in the workplace and monitoring the results of the assessment. Both parts of the creation are dynamic so this assessing instrument will be a changing one to adapt; people change and employee culture changes with time and circumstances so this instrument should be modified periodically.
To create it, it will be necessary to ask the employees that have more than nine months or one year for the reason(s) why they have stayed in the company. Once the data is collected the reasons that are more often repeated can be collected and at least five of them can be placed in the questionnaire with the options to answer it ranging from: completely disagree- disagree-agree-completely agree.
To complete the assessment, the reasons given by employees that have left the company in the exit questionnaire can be collected using as criteria the time the employee has left giving more weight to the reasons of those that left shortly after being hired.
After the reasons are collected the questionnaire can be given to the new hires. Those that agree more with the assertions given by persons who have stayed longer in the company have a larger chance of staying, those that agree more with the ones that left prematurely are more prone to leave. This is a hypothesis.
This questionnaire should be administered on an experimental basis. It should be administered to a new group of hires. The next step is to observe if the results match the predictions. This will ensure the validity of the instrument and give room for modifications.
Should the questionnaire prove it's validity the company will have another tool for minimizing loss and maximizing profits. Loos due to turnover is detrimental to a company's profit and is something to that needs to be minimized. The ERA can be an additional tool in the hiring process that can prove to be valuable.
Sources consulted to make this paper:
Hayes, T. (2018). Business-Unit-Level Relationship Between Employee Satisfaction, Employee Engagement, and Business Outcomes: A Meta-Analysis. [online] Factorhappiness.at. Available at: https://www.factorhappiness.at/downloads/quellen/S17_Harter.pdf. [Accessed 1 Sep. 2018]
How to Reduce Employee Turnover: A Leadership Guide Featuring Step-by-step, how-to's.Available at: http://guides.wsj.com/management/recruiting-hiring-and-firing/how-to-reduce-employee-turnover/. [Accessed 3 Sep. 2018]
Impraise Blog - Employee performance management, reviews and 360 feedback. (2018). How high employee turnover hurts your company. [online] Available at: https://blog.impraise.com/360-feedback/how-high-employee-turnover-hurts-your-company [Accessed 3 Sep. 2018].
Pelose, D. (2018). Employee Turnover Statistics and What It Costs Companies | iCIMS. [online] Icims.com. Available at: https://www.icims.com/hiring-insights/article-employee-turnover-statistics-and-what-it-costs-companies [Accessed 31 Aug. 2018].
Rampton, John. (2018). 25 Signs Your Employee Is About to Quit, According to Research.
Available at: https://www.inc.com/john-rampton/25-signs-your-employee-is-about-to-quit-according-to-research.html [Accessed 09 sep 2018].
Sulivan, John. (2018). Predicting Which New Hires Will Quit — a Checklist for Spotting Early ‘Flight Risks’. Available at: https://www.ere.net/predicting-which-new-hires-will-quit-a-checklist-for-spotting-early-flight-risks/ [Accessed 09 sep 2018].
