When your best employees leave, it often feels unexpected. “They’re leaving now? Didn’t we work so hard to keep them engaged?”
The fact is, employee turnover isn’t completely under your control. Sometimes an employee needs to grow in ways you can’t provide, or they need a raise your budget can’t handle. Other times, turnover is high because of a competitive market or other outside factors.
That doesn’t mean you should stop trying. While you can’t stop every employee from leaving, there’s a lot you can control. In this article, we’ll show you powerful strategies to keep retention high. We’ll also explore how to support these strategies with engagement software. Along the way, we’ll cover a handful of topics:
- What are the different types of employee turnover?
- How do I calculate voluntary and involuntary turnover?
- What causes employee turnover?
- Why is reducing employee turnover important?
- 5 strategies to boost employee retention
- How The Predictive Index can stop high turnover
What are the different types of turnover?
Your employee turnover rate can be split into two main categories: voluntary turnover and involuntary turnover.
Voluntary turnover is when an employee chooses to leave. For example, an employee might find a new job or decide to retire. Involuntary turnover is when your organization tells an employee to leave.
Voluntary turnover doesn’t always mean the employee quits. For example, suppose an employee works in your department. Then, they transfer to a different department. This would be considered voluntary turnover for your department. However, it would not be considered turnover for the company as a whole.
How do I calculate the employee turnover rate?
The steps below give you the annual turnover rate. For the quarterly or monthly turnover rate, just substitute “quarter” or “month.”
- Find the number of former employees who left your organization over the past year.
- Find the number of total employees your organization had at the beginning of the year.
- Divide your former employees by your total employees. Multiply by 100.
You can use this result to calculate other important metrics, like your annual employee turnover cost.
Why is reducing employee turnover important?
Turnover is expensive for a few reasons. There’s the obvious problem–you have to find and train new employees. But then there are the secondary issues: Tasks go unnoticed and incomplete. Projects screech to a halt. Knowledge is lost.
On average, turnover costs anywhere from half to twice an employee’s annual salary. Across the whole U.S., that adds up to over a trillion dollars every year.
And then there’s the worst case scenario. If turnover is high enough, it becomes a cycle: People quit, so the remaining employees are overworked. This causes low morale, which means even more resignations. Lose your handle on attrition, and you might lose a handle on your organization too.
That’s an especially big risk right now. According to the Bureau of Labor Statistics, job openings averaged a record 6.2% throughout 2021. That’s not just high–it’s twice as high as usual. It also means that when your best employees look at the employment world, they see opportunity. That makes it harder than ever to keep them.
Every great business is driven by great employees. That means reducing turnover isn’t just about reducing cost. It can be the difference between your organization failing–or dominating the competition.
What causes employee turnover?
In short: Every part of an organization.
That sounds unhelpful, but there’s truth to it. Wherever there’s frustration, friction, or annoyance, there’s the potential to lose employees. Finding the root cause takes more than an article. You need to conduct careful research and listen closely to current and former employees. After all, what motivates an engineer to stay may not be the same as what motivates a dental hygienist.
That said, it’s useful to understand some common causes of turnover. That starts with understanding that “What causes employee turnover?” isn’t one question. It’s two.
- What causes employee turnover in general?
- What’s causing employee turnover in the current market?
What causes employee turnover in general?
These have been the usual suspects since money was first exchanged. As a result, it’s important to take them into account.
Low compensation
Unfortunately, people aren’t elephants: they don’t work for peanuts. Good employees demand good compensation. If you want top talent? That takes top dollar. Sure, you might get away with underpaying an employee for a little bit–but sooner or later, they’re going to run.
Underwhelming benefits
A big paycheck is great. But if you’re one medical scare away from bankruptcy, it’s hard to feel safe. An organization looking to hire fresh college grads might be able to get away with bean bag chairs and a beer fridge, but if you want experienced hands, you’ll need something more substantial.
Bad work-life balance
All the money in the world isn’t useful if you can’t take a day off. Without work-life balance, employees will burn out–and then duck out.
Inconvenient location
Everything about your organization could be perfect, and it might still not be enough. If it’s too difficult to get to work, or it requires employees to live in a city they don’t like, you’re liable to suffer from turnover.
Toxic company culture
Have you ever had a job where your boss or coworkers made you want to walk straight out the door? When people have to deal with a toxic work environment, they start to check out. Absenteeism increases. Employee engagement decreases. And, eventually, they leave.
Isolation
This might seem the same as a toxic company culture. In fact, it’s distinct.
It’s perfectly possible to have a pleasant culture but still leave your employees isolated. If they don’t have opportunities to talk and bond with their coworkers–if they can’t build the relationships that power every business–they won’t feel attached to your organization.
A lack of friends won’t directly drive turnover. But when a better opportunity comes knocking, your employees won’t hesitate to leave.
Few development opportunities
Many employees are ambitious. They feel excited when they learn something new, get a raise, or win a new promotion. They might demand more money as their role evolves—but only because they create more value.
When employees don’t have development opportunities, they often become bored. Bored employees tend to become unmotivated employees, which leads to poor performance. From there, they either quit or get laid off–or, worse, they never leave.
Small annoyances
From the first day, it’s been one frustration after another. Your laptop is from the 90s. The fridge is from the Stone Age. The printer never works, and when it does, it’s haunted. Worst of all, you have 7½ hours of meetings in an 8-hour day.
These small annoyances rarely cause turnover on their own. But, left unresolved, a bad employee experience makes every other problem worse.
What’s causing employee turnover in the current market?
It’s not that the causes of employee turnover in the current market are different from the causes above. But they are more specific, and to address them, you need to understand the details.
Not enough flexibility
When the pandemic began, employers experimented with what used to be niche ways to work: Remote work, hybrid work, flexible hours, and more. Many employers have tried to claw these changes back, with one big problem: Employees liked them. Now, employers risk increased attrition if they don’t provide flexibility.
Of course, it’s too soon to say what “normal” will look like in 5 or 10 years. That said, if you want to keep your best employees? Offering flexibility could be enough to make them stay.
Lack of inclusivity
It’s no secret that many organizations have done a poor job of supporting diversity, inclusion, and equity. For decades, this has frustrated marginalized workers and been a background driver of turnover. Now, it’s come to the forefront.
In fact, 71% of U.S. consumers want companies to act in a socially responsible way. Employee attitudes have changed in the same direction. Increasingly, employees want an organization they can feel good working for. Employers that don’t address this need risk losing high-performing employees.
Unsatisfying jobs
According to SHRM, one-third of resigning employees cite a desire to make a career change. Another 64% said their expectations for what they want in a job have changed since the pandemic.
Sometimes people change careers for the sake of personal fulfillment. Other times, they want a pay bump. Regardless of the reason, one thing holds true: Give employees challenging opportunities, or they’ll find them elsewhere.
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5 strategies to boost employee retention
1. Get better engagement data.
We could give you every suggestion in the world. But if you don’t know the cause of your retention issues, you’ll never stop high turnover.
Many companies will use exit interviews. By the time an employee completes an exit interview, though, they’ve already left. Fortunately, there’s a wide range of tactics you can use to shore up your data before people leave.
You can start by understanding employee engagement through surveys and data collection. The type of survey matters. If you don’t get enough information, you can’t identify the cause of turnover. If the survey takes too long to complete, employees may get frustrated and refuse to respond.
Other tactics include what’s called a stay interview. It’s a formal way of seeing what excites and annoys your employees. It’s a great start if you don’t have any processes in this area.
Ideally, though, you should regularly, informally, and honestly ask your employees how they’re doing and what needs to change. If employees feel psychologically safe, they’re more likely to vent than to leave.
2. Get better people data
Job satisfaction and personality are intertwined. You could have an incredible company culture, great benefits, and a stellar pay package. But if you keep an extroverted employee chained to a desk, they’re not likely to stay.
Many companies use behavioral assessments to see if applicants fit in a role. Not as many take the next step: Using behavior to guide management.
When you know an employee’s personality, you can manage them according to their needs. For example, if a shy employee gets embarrassed by public praise, you might choose a different way to recognize them.
This extends into the projects you offer people. Know your employee likes tinkering and perfecting? Give them a tricky technical puzzle to work on. If they’re independent, let them take charge of a small exploratory project.
These gestures seem small, but they add up. When you treat people as individuals, according to their unique behavioral makeup, they notice and stick around.
3. Get everyone involved in onboarding
One of the strongest defenses against employee turnover is connection. When employees feel connected to their company and their coworkers, they’re less likely to leave.
In other words, you should maximize employee connections from Day One. That means getting everyone–not just Human Resources–involved with onboarding.
We cover the subject in more detail in our onboarding article, but there’s a few key takeaways:
- Ask future coworkers to greet the new hire.
- Assign a buddy or host for the new hire.
- Introduce the new hire to important members of their department.
The results speak for themselves: Effective onboarding improves new hire retention by 82%.
4. Experiment with non-traditional benefits
Stopping employee turnover isn’t about a single strategy. It’s about understanding your employees as individuals and addressing their needs.
Different people have different needs, which is why non-traditional benefits can improve your employee turnover rate. That means going beyond health care to address other needs.
Benefits like mental health resources, flexibility, or child care assistance help address individual needs. When employees believe you look out for them, they’re more likely to be loyal in return.
5. Make career development happen every day, not once a year
When organizations think of development, they think “promotion.” At best, they think “pay for classes.” But many employees don’t just want a bigger title. They want a challenge.
Employees want interesting tasks that keep them engaged. They want to feel like they’re really contributing, not just doing rote work. More than anything else, they want to grow. To feed this need, you need career development to happen every day.
That sounds impractical, even intimidating. But at the core, it’s simple: Ask employees what work they like. Then, give it to them.
You might ask, “How does anything get done in an environment like that?” But when employees work on projects that interest them, they’re not just harder working–they’re more innovative too.
How do I achieve everyday career development?
There are many paths to the final goal, but the most important step begins with the employee-manager relationship.
Make sure supervisors check in on employees and try to give them interesting tasks. Those may vary based on personality. For one employee, a new schema for managing data might be fascinating. For another, it might be pulling together a cross-functional strategic team.
But don’t stop at assigning tasks. Sometimes employees have exciting ideas but fear rejection. These ideas can often transform a department or an organization. You should encourage employees to come up with and pursue these projects, and give them the resources they need to learn, grow, and succeed.
Formalized processes help too. Career pathing can help valuable employees advance internally, instead of jumping ship. Mentorship programs can provide a one-two punch against turnover: Valuable learning tempts employees to stay, while close relationships make it harder to leave.
Committing to a strong career development plan might seem difficult, but the cost of employee turnover is too high for any other choice.
How Predictive Index can stop high turnover
We’ve built every part of the Predictive Index to support your retention strategies. Our assessments improve turnover by making sure new hires are in the right roles. Our engagement surveys give you detailed, actionable advice on how to solve your biggest turnover challenges. With our talent strategy tools, you can build great teams that stick together. Finally, our employee management software gives you a framework to better understand yourself and your team. And all of it is backed by 60+ years of science.
The bottom line? Turnover costs too much to leave to chance. With a combination of data and insight, you have the power to reverse high turnover–and engage your way to new levels of success.
