Four Organizational Forces Driving Unwanted Turnover

By Posted in - Talent Management on February 25th, 2011 0 Comments

As the economy improves, turnover is likely to become a major concern for organizations.  Unwanted turnover represents costs that are greater than simple replacement costs.   The costs of losing a good performer are greater than the costs of losing an average performer.  The true cost of losing a key, seasoned player is hard to estimate.  There is the investment in development of the employee, the value of the knowledge and experience gained, and the lost productivity that also have to be considered to arrive at a true cost figure.  However, much turnover (up to 50% or more) occurs within the first six months of employment and, in an early departure scenario, the bulk of the costs are replacement costs.  When an organization starts to lose significant numbers of senior employees, it is usually indicative of even more serious organizational problems.  Those problems might be found in the four areas of skills, leadership, rewards/recognition, and communications.

Skills – The emphasis an organization places on developing the skills of its employees will have an impact on turnover.   Companies with low unwanted turnover rates tend to spend more money and time on skill development than those with high turnover rates.

Leadership – Leadership problems also are frequently associated with turnover.   Conflicts with immediate supervisors are often mentioned in exit interviews.  Supervisory conflicts are often avoidable and can be addressed by training and improved selection.  Good interpersonal skills and fairness go a long way in keeping employees on the job.

Rewards/Recognition – Better compensation is usually the first reason people think of for leaving a job.  In competitive labor markets, compensation certainly matters.  However, rewards don’t have to be monetary in order to have an impact.  Positive feedback, formal recognition programs, and challenging and interesting work assignments are all ways to improve reward/recognition systems.

Communications – Communication systems have two components: formal and informal.  Formal communication has to do with information sharing.  It can take the form of open forums, newsletters, suggestion boxes, memos, voicemail and e-mail, etc.  People like to be informed and listened to, so opening formal communications can have a positive impact on turnover.   Informal communications are less obvious but also powerful forces.   Consider the following informal messages: (1) the visitor parking lot is the farthest from the company building, (2) plush offices for executives and cramped cubes for employees, (3) scheduling the company sales conference immediately after a long weekend, requiring travel on the free day.  As these examples show, informal communications often conflict with formal communications.  Of course, the most powerful informal communication is the rumor mill.  You hope the rumor mill is saying good things about the company.  If it isn’t, watch out for turnover!

Patrick Hauenstein, Ph.D.

About Patrick Hauenstein, Ph.D.

Patrick Hauenstein is the President and Chief Science Officer for OMNIview. During his free time Pat likes to cook. He is particularly fond of traditional southern cuisine. Pat is also an animal lover ...
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