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How to Reduce a High Employee Turnover Rate

Have a high employee turnover? Learn the reasons employees leave and what you can do to prevent that from happening.

You know your employees are an important part of your business.

As Jack Welch, former Chairman and CEO of General Electric said, “There are only three measurements that tell you nearly everything you need to know about your organization’s overall performance: employee engagement, customer satisfaction, and cash flow.”

As an HR leader, it’s up to you to own the employee engagement piece and help the business manage people effectively to meet its goals.

So how do you know when your organization is falling short?

Your employee turnover rates are high.

Tackling employee engagement and turnover can feel like fuzzy problems to solve.

How do you identify the source of the problem? Where do you start?

The good news is there are strategies your company can adopt to get things back on track. In the same way that the finance department can tighten up its accounts receivable procedures and the customer success team can conduct training, you can work on your employee retention strategies.

In this article, you will find:

Top strategies to reduce high employee turnover

What is considered a high turnover rate?

Before jumping into solutions, make sure you actually have a problem.

You can do this by conducting a benchmarking exercise:

  • Comparing this year’s number against previous years, across the organization and by department
  • Comparing your turnover rates to your industry’s turnover rates

According to LinkedIn data, the turnover rate across all industries is 10.9% with variation depending on the industry:

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Industry

Turnover rate

Technology & software

13.2%

Retail and Consumer Products

13%

Media and Entertainment

11.4%

Professional Services

11.4%

Government/Education/Non-Profit

11.2%

Financial Services and Insurance

10.8%

Telecom

10.8%

Turnover rates may also vary depending on your company’s specialization or what the market’s doing.

For instance, while technology turnover rates stand at 13.2%, the turnover rate for data analysts sits at a whopping 21.7%.

Your high turnover rates may be due to high market demand rather than an employee engagement and company culture issue.

That said, doubling down on your engagement efforts may help you keep in-demand employees in a hot candidate market.

Another important metric related to employee turnover is time to fill. How long does it take for your company to hire someone new from the minute a position opens up?

This also differs by industry. For instance, the average time to hire in financial services is 66 days.

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Industry

Time-to-Fill

Media and Entertainment

120 days

Retail

104 days

Manufacturing

90 days

Pharma

84 days

Government

82 days

Professional Services

77 days

Technology

74 days

Financial Services

66 days

Telecom

63 days

Insurance

62 days

Source: Gartner Recruiting Optimization Diagnostics

It’s worth gathering data at the role level within your company. If you’re a financial services firm, 66 days may be an accurate number for an underwriter but not for an administrative assistant.

Understanding your time to fill helps you understand how much of a financial impact an empty seat will have on your bottom line and whether you need to streamline your recruitment and interviewing processes.

Sparkbay makes it easy to go to one spot and have a bird's eye view of what's happening. Each manager can pinpoint the goods and where to improve.

How NARS reduced turnover by 10% with Sparkbay

Learn more

What are the causes of high employee turnover?

You’ve identified an increase in your year-to-year turnover rate across different functions. What’s causing this problem?

There are a number of possible issues. Before choosing a course of action, invest time into identifying the correct source of the turnover.

Employee turnover related to employee dissatisfaction

If you’re in HR, you know there’s a strong link between low employee engagement or job dissatisfaction and high turnover.

In fact, there’s research that outlines the steps an employee goes through to transition from disliking their job to actually quitting:

  • They think about quitting
  • They weigh the cost of looking for another job and the risk of quitting their current job
  • They make plans to start looking for another job
  • They start looking for a new job
  • They evaluate what’s on the market
  • They’re presented with specific opportunities and compare them to their current role
  • They quit

How far an employee moves through this funnel depends on how bad their work experience is.

After a tough week, they may go no further than step two. After an awful year, they may jump straight from step 1 to step 5.

The key thing to understand your company’s culture is strong enough to keep employees from jumping past step 1.

Job dissatisfaction stems from many sources. Your employees may be dissatisfied because of:

  • Limited career growth
  • Toxic managers or colleagues
  • Low pay or few benefits
  • Lack of strategic direction or support
  • Micromanagement
  • Lack of challenging or interesting opportunities

Identify the most pressing sources of employee dissatisfaction and take steps to address them. You may decide to:

  • Introduce clearer career progression plans to demonstrate there are opportunities for growth
  • Re-train leaders to implement effective management techniques, identify toxic behaviors, and implement a zero-tolerance policy
  • Conduct a salary benchmarking exercise to bring your employees’ compensation in line with industry standards
  • Communicate the company’s mission and purpose and create a framework that describes how each function contributes to larger business goals to provide a sense of direction

Sparkbay makes it easy to go to one spot and have a bird's eye view of what's happening. Each manager can pinpoint the goods and where to improve.

How NARS reduced turnover by 10% with Sparkbay

Learn more

Employee turnover related to age

Age is another cause of employee turnover. As your workforce gets older, the number of people leaving due to retirement or early retirement increases as well.

While this is not a sign of disengaged employees, it is a sign that you’ll need to plan ahead in terms of recruitment.

It’s also a sign to create a plan for documenting “institutionalized knowledge”.

When older, experienced employees leave they take ample knowledge and experience about how to get stuff done with them.

Outside of retirement, research shows there isn’t a strong relationship between age and voluntary turnover (people leaving for work at another company).

Whereas a slight decrease in employee engagement can lead to an uptick in employee turnover, the same isn’t true for age.

Employee turnover related to tenure

Thirty-eight percent of employees leave within the first year. Of those employees, forty-three percent leave within the first 90 days. This may be due to a poor onboarding process, lack of support, or unmet expectations.

On the flip side, longer tenure employees tend to stick around. That said, an employee with a long tenure may not be the most productive employee.

According to one study, employee productivity went up after one year and began to decline after five years. Keep in mind that this isn’t about age, but about the length of time that an employee has been with a specific company.

It’s important not to make blanket generalizations that deem every long-term employee unproductive.

Instead, understand your tenure-related turnover and tenure-related productivity. If you notice an issue take corrective measures like:

  • Improving your job descriptions or employee onboarding when you experience high turnover among employees working for less than a year
  • Improving development opportunities and clarifying advancement opportunities when there’s increased turnover among employees working between 3 and 5 years
  • Re-evaluating compensation rates and workplace expectations when there’s a diminishing return on investment for long-term employees

Employee turnover related to career risk triggers

Life events and meaningful dates can cause employees to step back and reflect on their career. They’ll ask questions about their happiness, sense of fulfillment, and whether their current role aligns with their values or desires. This includes events like:

  • Work anniversaries
  • Birthdays
  • Marriage or divorce
  • Childbirth
  • Loss of a loved one
  • Serious illness

Other potential triggers are major changes within the company such as a massive lawsuit, a change in leadership, or a merger.

Proactive companies address these career risk triggers by scheduling career check-ins around important dates or events when they know about them.

These conversations give employees an opportunity to speak freely about their shifting priorities and for employers to see how they can hang on to a valued team member.

For example, a new parent may question whether their current workload or hours are sustainable. A proactive employer can come to an alternative working arrangement.

What are strategies for reducing a high employee turnover rate?

Replacing an entry-level employee can cost 30% to 40% of their annual salary. This goes up to 150% for mid-level employees and 400% for highly-skilled employees. If you have a high turnover, fixing it is a worthy investment.

Use data to predict when employees are likely to leave

Don’t wait until your employees say they want to leave to try and convince them to stay.

At this point, they’ve lined up another job and are excited for this change.

Plus, job seekers are usually advised not to accept a counteroffer from their current employer.

Instead, use data to understand when to have retention conversations.

Segment your data based on demographics, tenure, job type, and any other metrics you believe impact your employee turnover rates. Use this data to identify when managers should schedule retention conversations. Your HR team will receive an alert when employees reach their second year. This triggers a one-on-one conversation about that employee’s goals and what their future at your organization looks like.

You can also conduct exit interviews, collect that data, and use it to identify other employees dealing with the same challenges.

Sparkbay uses feedback data from recently departed employees to uncover the causes of turnover. Then, it uses trends to understand which employee segments are most likely to leave.

After you identify employees that are likely to leave, take actions to address these issues. An investment in retention is essential to put your predictive analytics to good use.

Ultimately, re-engaging disengaged employees is a smarter investment than hiring brand new ones.

Keep your compensation and benefits competitive

Your employees work to make a living. If they can’t do that, they’ll begin to look for other opportunities.

Ensure the salaries and compensation you offer lines up with what other companies offer for the same roles and the same level of experience.

You can determine your floor and ceiling by looking at the market through a salary survey or benchmarking exercise. This will give you salary brackets that you can further sub-divide based on level of experience.

Another way to determine your ceiling (not your floor) is to determine how much a specific role is worth to your company.

You determine this by figuring out how much they’ll make (for revenue-generating positions) and how much they’ll save (for non-revenue-generating positions). If you work with a staffing agency or recruitment firm, you can ask for their input as well.

Use these market rates as a guide, not a trap.

If you’re hiring a product management executive with experience developing the exact product you’re trying to create or marketing director with extensive experience breaking into your new target market, don’t let salary bands get in the way of the hire.

This goes back to the other method we mentioned for determining your ceiling: Determining what a role is worth to your company.

Part ways with employees who aren’t suited to the role

Firing employees sounds like a counterintuitive way to reduce employee turnover rates.

Nevertheless, it’s an important way to keep turnover low. The wrong hire can disrupt a team, create a toxic work environment, or put others in the position of fixing their mistakes.

This causes a scenario where several good employees leave for every one bad hire.

Amazon offers employees a cash bonus for quitting. Employees are eligible for $2,000 after year one, with another $1,000 for every year until they cap out at $5,000. Amazon believes keeping an employee that doesn’t want to be there is bad for business.

Recognize and reward employees

Employees are 63% less likely to look for a new job when they feel recognized and rewarded for their efforts. In one study, nearly 80% of employees who quit their job cited a lack of appreciation as a major reason.

There are different ways to recognize employees including gifts, awards, cash bonuses, and public acknowledgement. Companies can introduce formal programs that give colleagues an opportunity to acknowledge their teammates.

Recognition impacts how much effort employees put into their work. When managers reward employees for their efforts, there’s a natural instinct to continue doing the things that elicit that praise.

It also encourages employees to put in more “discretionary effort”, which is the work they don’t really have to do.

This might be going above and beyond with a customer, looking for creative solutions to a problem, or designing a new process that saves the team time.

Since employees are paid the same amount every two weeks, there isn’t much financial incentive to go above and beyond aside from a potential bonus at the end of the year.

Recognizing employees who go above and beyond increases the amount of discretionary effort. It also reinforces expectations since other employees learn what receives rewards.

Be intentional about your recognition program. Building a recognition program is different from the kind of casual praise an employee might receive from a supervisor that’s paying attention.

Identify the desired behavior you want to see in your organization and tie them to rewards.

Revisit your hiring and onboarding process

Are you hiring the right people?

If you’re hiring individuals whose values don’t align with your company’s values, then there’s a chance they’ll be leaving rather quickly.

Evaluate your job postings and consider whether they offer a realistic picture of the work new hires will do.

For instance, do you hire developers with the promise of working on interesting projects only to relegate them to “code monkey” roles? They’ll likely leave for something more compelling within a few months. It’s worth either restructuring the role or being more transparent in the job posting, so you can attract the right fit.

Another cause of turnover is a poor onboarding process.

Sometimes, organizations suffer from a bad onboarding process, because they don’t completely understand what onboarding is. Case in point: Mixing up orientation and onboarding.

Orientation happens on the first day and includes tax forms and cursory information about the company.

On the other hand, onboarding is a long-term process that helps employees understand the company’s unique value, understand how their work fits into the larger business strategy, and find the information and tools they need to succeed.

Good onboarding programs include:

  • Mentors who serve as a new hire’s guide to the organization and help them integrate into the team
  • Clarity about their goals and expectations and an understanding of what they’re expected to achieve and when
  • One-on-one meetings with their managers to receive guidance, ask questions, and receive constructive feedback to avoid anxiety and uncertainty about their performance to date
  • Overview of their potential career trajectory and what the opportunities are within the company
  • Introductions to key stakeholders the employee needs to work with as well as an opportunity to get to know team members

An effective onboarding program can mean the difference between a great new hire floundering and a great new hire sticking around for the long haul and delivering value to the company.

Support your employees’ development

Employee development is when companies help their employees learn new skills or enhance their existing skills. This is beneficial for both employers and employees.

For employers, it adds to the company’s internal capabilities. This is more important than ever as employers realize re-skilling, not hiring, is their best strategy for keeping up with an increasingly digital, data-driven economy.

For employees, professional development enhances confidence and helps them feel like they are progressing as employees instead of stagnating.

Employers can offer a yearly allowance for professional development activities that employees can put towards courses or earning professional designations.

Employers can also offer advanced training seminars for skills they want to build within their workforce such as digital skills, leadership skills, or creative problem-solving skills.

Your professional development initiatives work hand in hand with your career planning efforts to reduce employee turnover.

When you discuss possible career paths with your employees, you’ll share requirements for obtaining promotions such as years of experience, advanced degrees, or professional designations.

Once employees know that they can advance and have a clear path, they can use your professional development offerings to move forward, deepening their relationship with your company and their plans to stay long term.

Analyze your company culture

Company culture has a big impact on your employee turnover. Company culture refers to the values, attitude, and behaviors of the people that work within an organization.

Leaders can’t force culture, but they can certainly model and reward desired behavior.

Some company cultures may focus on fierce competition and individualism while others focus on collaboration and teamwork.

One culture isn’t necessarily better than another. For instance, a company that makes its money through sales may want to encourage healthy competition while another focused on research and development may want to foster collaboration and teamwork.

The most important activity for HR is understanding the culture and making sure it aligns to the organization’s goals.

Once you understand your culture, you can reinforce desired behaviors and choose employees who are suitable for the work environment. Understanding that you’re a high performance, results-driven company helps you avoid hires that don’t thrive well in that environment.

This extends beyond obvious roles, like sales roles. For instance, if you’re hiring for an administrative role in such a culture, you’ll want a receptionist or administrative assistant that understands how to prioritize requests to capitalize on business opportunities.

Analyzing your culture also helps you spot toxic elements and address them before they drive out your people. A toxic culture can be due to fear, like fear of failure or fear of speaking up, harassment, disrespect, or confusion about the company’s direction and expectations.

If you’re not sure what the cause of dysfunction is, prioritize asking them. Distribute pulse surveys to get a sense of employees’ biggest concerns and then act on them to build goodwill.

It’s worth investing in retention strategies to reduce employee turnover

Employee turnover is one of the most important business metrics. HR leaders can enhance their function’s value by identifying the common causes of employee turnover, such as job dissatisfaction and engagement, using data to identify “flight risks”, and taking steps to improve employee retention.

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