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8 Questions You Need to Ask to Turn Around Employee Turnover

by Oct 15, 2013, 6:45 am ET

Some of you like turnover, I realize: after all, you’re recruiters. But others on this site are in-house recruiters who’d like to keep who they’ve recruited. It doesn’t seem to matter if you are a small company or multi-national, selling food, clothes, or technology, or servicing patients or homeowners. Employee turnover is affecting every organization in every industry from New York to California, from Canada to Japan. Even India and China are beginning to experience high rates of turnover.

That begs the question: Why do employees leave?

A quick Google search reveals nearly a million reasons, far too many to mention here. Unfortunately even the least-discriminating person can see that most are anecdotal and rhetoric. The culprit? Few managers, HR included) rarely if ever collects data, other than going through the exercise of an obligatory exit interview. Even fewer mine the data after the fact. The solution becomes pass the buck or hit-or-miss tactics.

Finding a solution(s) that works lies in asking the right questions, aggregating data, and then continuously analyzing it. Once a company takes a deep dark look into the data it has buried in employee files and spreadsheets, reducing employee turnover generally boils down to one of several common sources.

Topping nearly every list for employee turnover is poor supervisory fit or poor supervision. Research has proven time and again that employees don’t quit companies, they leave supervisors.

If your organization is experiencing turnover, first place to look is the supervisor. I am taking a humongous leap of faith in assuming that the company is doing a good job at screening out high-risk employees and selecting the right ones.  To be fair, there might be other causes and supervisors can’t be the scapegoat. But before you find yourself running down rabbit holes and blaming your own recruiters and HR professionals, it is realistic to consider the supervisors’ role.

Poor supervisory fit has several faces.

The most popular and undeniable cause of turnover is an interpersonal conflict between supervisor and employee — something in each person’s make-up just rubs the other person the wrong way. It could be attitude, or communication style. It could be different approaches to work. Often times neither party is wrong or right, good or bad, their styles just don’t work together … and the employee leaves voluntarily or involuntarily.

Interpersonal conflict is not always the cause.  Often it’s just mismanagement. Research consistently confirms that more than half of front-line supervisors fail due to poor management skills, often the result of little or no people-management training. Many front-line supervisors are hired based on past technical accomplishments but lack adequate experience or training managing teams and motivating other employees to complete projects. Internally, many workers are promoted to management as a reward for tenure and loyalty.  Both strategies are recipes for higher turnover and lower productivity.

To eliminate supervisors as a cause of turnover, you need to ask:

  1. Has he or she received adequate training?
  2. Does one supervisor have more or less turnover than another?
  3. Is turnover high on one shift or in one location but good in another?
  4. Does the supervisor have performance goals that include retention, turnover, and employee engagement?

To evaluate other potential causes of turnover, ask:

  1. Are employees leaving after three to five years or during their first 12 months?
  2. Are you providing millennials enough opportunities to learn?
  3. Are you providing generation X enough opportunities to advance?
  4. Are your wages and benefits competitive … and do they meet the needs of a multi-generation workforce?

Higher turnover is a trend that will be more common in the near- and long-term future. It is increasing in many organizations from a shrinking labor pool, even among those companies who have not experienced turnover in the past. HR and managers feel compelled to fill open positions quickly with less-qualified people. (Qualified includes job fit, team fit, and cultural fit, not just education/experience.)

Long-term employees (especially Baby Boomers) who are retiring or leave the organization are replaced by younger employees who tend to change jobs frequently. It is not uncommon for a 20- or 30-year employee to be replaced with a millennial who tends to change jobs every two to three years. Even Generation X hops more jobs compared to baby boomers and veteran/traditionalist generations.

Solving employee turnover has a lot of chicken-or–the-egg thinking in it. The right solution requires a good hiring process and effective leadership development. It means placing the right employees on the right teams with the right managers. Likewise, equipping supervisors and managers with the right people management skills and resources is no longer optional and a just “nice-to-have” but essential for improving productivity and sustained business growth.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  • http://www.thehiretalent.com Fletcher Wimbush

    One critical point here is what role the hiring manager/ direct supervisor has in the selection process. Are they equip to handle that process correctly on their own in a manner that will produce a superior hiring decision?

    As Ira points out many managers are often times not trained to manage very well. They receive even less training on how to make good hiring decisions, how to properly interview a candidate, how to manage the selection process cycle, and how to on board “A” talent.

    This article discusses the important of practicing how to make good hiring decisions. http://www.ere.net/2013/07/31/what-golf-and-interviewing-have-in-common/

    Same principles apply to learning how to become a more effective manager, training, practice, training and then more practice!

  • Keith Halperin

    Thanks, Ira. As you pointed out, turnover (TO) is good from a recruiter’s perspective: as long as they have money to pay us -the more TO, the better. That said, until the job market becomes much better than it is now (http://myweb.rollins.edu/wseyfried/forecast.htm), employers really only have to worry about TO from “the Fab 5%” or other much in-demand skill sets. Most folks will have to take it or leave it, BECAUSE THEY HAVE NOWHERE ELSE TO GO AND THERE ARE A LOT MORE WAITING WHERE THEY CAME FROM.

    No Cheers,

    Keith

  • Richard Araujo

    Nice summary article. The only issue I see is that this has been known for quite some time and nothing has been done about it for the most part at most companies. The most likely reason being what Keith has pointed out. I’d say, for various reasons, that the economy is always managed into a labor surplus higher than would otherwise exist, and as such poor practices will persist even is supposed ‘good times’ because the incentive to change them is reduced. Plus there’s the summer school valedictorian syndrome; when you’re in a sea of mediocrity just good enough becomes stellar performance, relatively speaking. In this situation that is to say that so long as the majority of employers have bad practices, they will all generally get by with bad practices and think nothing of it.

  • Keith Halperin

    Thanks, Richard. I also think there may/should be something out there called “optimum TO” which will probably vary from department to department, firm to firm, industry to industry, and time to time, but darned if I know what that would be or if anybody else does, either…. I’ll see if I can find anything.

    -kh

  • Keith Halperin

    Here’s what I’m finding:

    Searching for The Optimal Level of Employee Turnover: A Study of a Large U.K. Retail Organization

    W. Stanley Siebert1 and
    Nikolay Zubanov2

    + Author Affiliations

    1University of Birmingham

    2CPB Netherlands Bureau for Economic Policy Analysis

    Abstract

    We study the relationship between sales assistant turnover and labor productivity in 325 stores of a large U.K. clothing retailer tracked over 1995–99. We find that the turnover-productivity relationship is contingent on type of work system. For a large group of part-timers, managed under a “secondary” work system, the relationship clearly has an inverted U-shape, but for the smaller group of full-timers, managed under a “commitment” system, the relationship is the conventional negative one. Implications for the contingency view of the link between turnover and productivity are discussed.

    ============================================================

    More recently:
    Is High Employee Turnover Really Harmful? An Empirical Test Using Company Records

    Arie C. Glebbeek1 and
    Erik H. Bax1

    + Author Affiliations

    1University of Groningen

    Abstract

    We tested the hypothesis that employee turnover and firm performance have an inverted U-shaped relationship: overly high or low turnover is harmful. Our analysis was based on economic performance data from 110 offices of a temporary employment agency. These offices had high variation in turnover but were otherwise similar, allowing control for important intervening variables. Regression analysis revealed a curvilinear relationship; high turnover was harmful, but the inverted U-shape was not observed with certainty.

    ==============================================================

    Meta-Analytic Review of Employee Turnover as a Predictor of Firm Performance

    Julie I. Hancock
    David G. Allen
    University of Memphis

    Frank A. Bosco
    Marshall University

    Karen R. McDaniel
    Arkansas State University

    Charles A. Pierce
    University of Memphis

    Julie I. Hancock, Department of Management, Fogelman College of Business and Economics, University of Memphis, Memphis, TN 38152-3120, USA. Email: jibarker@memphis.edu

    Abstract

    Previous research has primarily revealed a negative relationship between collective employee turnover and organizational performance. However, this research also suggests underlying complexity in the relationship. To clarify the nature of this relationship, the authors conduct a meta-analytic review in which they test and provide support for a portion of Hausknecht and Trevor’s model of collective turnover. The authors’ meta-analysis includes 48 independent samples reporting 157 effect size estimates (N = 24,943), tests six hypothesized moderator variables, and provides path analyses to test alternative conceptualizations of the turnover–organizational performance relationship. Results indicate that the mean corrected correlation between turnover and organizational performance is −.03, but this relationship is moderated by several important variables. For example, the relationship is stronger in manufacturing and transportation industries (−.07), for managerial employees (−.08), in midsize organizations (−.07), in samples from labor market economies (−.05), and when organizational performance is operationalized in terms of customer service (−.10) or quality and safety (−.12) metrics. In addition, proximal performance outcomes mediate relationships with financial performance. The authors discuss implications of their results for theory and practice and provide directions for future research.

    &&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&&

    Statistics Wonks: Can you simply explain this to us?

    Thanks,

    Keith

  • Richard Araujo

    The answer is there isn’t one answer. For positions which are easily trainable and don’t require much investment nor tenure in or from the employee, higher turnover is tolerated better with minimal impacts on company performance. To my mind it’s likely too complex and contingent an issue to really come up with one rate.

    What you likely can do is determine, within your own company and departments, what the useful and most productive life span on an employee tends to be and manage to that standard. Since the system is so complex and depends on so many variables, often the best thing you can do is just benchmark yourself and try to target improvements to your specific needs.

    For that, what other people have done is valuable because you can learn a lot from how other managers and companies dealt with similar issues. I think it would be wrong though to take someone else’ goals for improvement, be it turnover or target profit margins or whatever, and simply impose them on your own organization.

  • Richard Araujo

    As an example, in a company I know, one group of employees tend to be very young, so they come in kind of cheap relative to market. But, they train up very quickly and their value on the market increases as quickly. An intern who comes in and learns the business can be at or around 70-100K on the market in a few years. So that company has had to be more aggressive in that department with raises and opportunities to retain those employees.

    My guess is that would hold for any company who gets people right out of college. It’s a good source for qualified people and their lack of real world experience makes them very cheap which is a good initial control on overhead, but if you really want to keep them, and their field demands higher salaries when they do have experience, you need to acknowledge their increasing value and act accordingly and aggressively.

    Unless of course you don’t mind the turnover for whatever reason. There could be business reasons behind such a judgment, you might have a massive change of some sort coming up and want people to leave on their own to limit the need and scope of potential lay offs, basically allowing attrition before a rebuilding phase.

  • Keith Halperin

    Thanks, Richard. I also think companies need to not only the rate of TO, but the nature of it- is it voluntary or involuntary, who is leaving and why and when? This sounds like excellent work for a very highly paid-outside consultant to determine.

    Cheers,
    Keith

  • Richard Araujo

    It is excellent work if you can find it. However, I find most companies don’t care, or don’t want to know to be honest. Hire an outside consultant and you generally get two possibilities: yes men who ‘independently’ confirm what management wants confirmed; or, you get someone who tells truths many people would rather not hear. I can’t count the number of companies I’ve heard of second hand from a friend who does consulting who have found very basic but severe problems and simply didn’t act on them. At one company he had some pretty in depth surveys done for their salaries and found that they were persistently below 25 percentile for their area. However, the owners were not open to the idea that paying a bare dime or so above minimum wage is not a recipe for a successful skilled workforce. I have no idea what happened to the company since he no longer works with them, likely they’re still limping along and trying to figure out why their work environment sucks and people keep leaving for that other plant down the street.

  • Keith Halperin

    Thanks, Richard A. The fact that a client doesn’t act on what they paid a large sum of money to hear is secondary to the fact that they paid a large sum of money to that person. As our friends at Despair.com say:

    “Consulting-If you’re not a part of the solution, there’s good money to be made in prolonging the problem.’

    “Yes men who ‘independently’ confirm what management wants confirmed”: In our field, aren’t they called “Self-Proclaimed Recruiting Thought Leaders”?

    Cheers,

    Keith

  • http://www.workforcetrends.com Ira Wolfe

    Thanks to all for the lively discussion. I do agree with Fletcher that managers need to be trained how to hire right. More importantly they need to be held accountable – at least in part – for employee engagement and retention. For as much as bad managers screw up good recruiting and selection decisions, bad HR/talent practices certainly handicap good managers.

    Regarding optimum turnover, thank you Keith. I thought I was the only one struggling to find some solid research describing optimum turnover.

    I think we’d all agree it needs to be specific to the industry, business, and even position. Better analytics will certainly help but that’s another discussion. The reason management doesn’t respond may not be inaction on high turnover but lack of quality of data on what is really causing it.

    I’m working with a client of mine – a hospital with 2000+ employees- who last year saw a spike in turnover. Their initial reaction was looking for another pre-employment test but after a very brief conversation they couldn’t answer if the problem might be related to a specific manager, specific shift, specific department, competitive pay, change in policy compared to competitors. As it turned out, a major employer closed, many employees were transferred or took jobs elsewhere, and their partner/spouses relocated with them because it was easy to find healthcare jobs in other locations. But they still aren’t monitoring the other potential causes.

    Hopefully better analytics will raise more flags that will cause more monitoring of turnover which might trigger some action.

  • Richard Araujo

    Very interesting, Ira. I’m dealing with something similar right now, though I would say in my case more of the reason for the turnover rests internally than externally. You are right, the quality data is often not there.

  • Keith Halperin

    You’re very welcome, Ira. I wonder why there seems to be either rather little written on this, or if a lot, it seems well-hidden? I’m also thinking that in some cases there may be a few factors involved and they may be independent variables, while in others they may be numerous and dependent. At that point, “the little grey cells” seize up and I crawl back to my recruiting lair….

    Cheers,
    Keith