Employee turnover can have a tremendous impact on the performance of an organization. It not only lowers the productivity of the organization with decreased levels of performance by newer employees and unfulfilled daily functions, but it consumes additional costs for recruiting and training new employees. Other consequences relate to smoothness and continuity of organizational operations, employee morale and difficulty replacing separated employees.
Turnover matters for three key reasons, 1) it is costly, 2) it affects business performance, and 3) it may become increasingly difficult to manage.
One important distinction in turnover is between voluntary and involuntary turnover. Voluntary turnover is initiated by the employee, while involuntary turnover is initiated by the organization. It’s important to pay attention to the voluntary turnover rates of the organization because some part of voluntary turnover can be avoidable and it may stem from causes that the organization may be able to control.
Voluntary turnover can be divided into two parts — functional and dysfunctional. Functional turnover relates to low-performing employees leaving the organization. Dysfunctional turnover can be damaging to the organization. Some examples of dysfunctional turnover are the exiting of key performers, employees with hard to replace skills, and females or minority group members leaving, which wears down the diversity of the organization.
In a recent Society for Human Resource Management survey, the inability to recruit a sufficient number of diverse employees was identified as a second most difficult challenge firms faced while implementing their diversity initiative. This is why it’s very important to understand why minority populations are leaving and to have effective retention strategies in place.
The annual turnover rate is calculated by dividing total number of terminations during the year by the average of the total number of employees over the same period. Employee turnover can be measured by specifically evaluating: 1) how many people are leaving, 2) the relative costs, and 3) what can be done to reduce the current turnover rate in the organization.
Data analysis can be done based on following questions:
• How many employees are leaving?
• To which ethnic group do these employees belong?
• In which division did these employees work?
• Are the employees exempt or non-exempt?
• Are employees leaving voluntarily or involuntarily?
• Are the employees high performers?
• Is the turnover higher during a specific time of the year?
• How long have they been employed in the organization?
In order to determine if turnover is problematic, the overall turnover rate for the organization can be measured and compared to external data. Industry turnover rates can be retrieved from the U.S. Department of Labor website. Turnover rates also can be compared with that of industry competitors, which will enable the organization to evaluate its performance compared to others in the field. Through internal benchmarking, organizations can track the turnover rate over time and could evaluate if it is increasing overall or if there are changes among particular groups or divisions, which may indicate some areas of concern.
Employee turnover and exit interviews
Exit interviews are a powerful tool for obtaining information about why the employees are leaving an organization. It provides useful feedback on the factors that “push” (i.e. dissatisfaction with the current job) or “pull” (i.e. attraction of new job). Examples include feedback on working conditions, flexible employment practices, benefits and management style. The information from an exit interview may pinpoint what is and what isn’t working for the organization and assist management to identify opportunities for improvement. Management may want to use such information in the organization’s strategic planning.
Exit interviews can be undertaken face-to-face, by hard copy or online survey, or a combination of the two. Many organizations choose to go with the post-termination survey instead of the face-to-face interview. The lapse of time encourages former employees to make more rational and honest assessments of the organization.
Exit interview questions should be designed to identify the reasons for the employees leaving, their opinion and view on the overall work environment and the organization, as well as thoughts about how organization might improve. It is very important to keep the questions short and focused. Questions should focus on the level of satisfaction with their job and workplace, benefits, work culture and opportunities for training and development. Additional demographic information allows for more meaningful analysis of data because trends might vary by demographic group. The following key demographics can be added in the exit interview: gender, age, length of service, ethnicity and level in the organization.
Data analysis is the most important piece of this puzzle. In a survey conducted by HR Executive Magazine, 96 percent of HR managers agree that they conduct exit interviews with employees who are leaving voluntarily. However, in most cases the information collected is not put to any useful purpose. In fact, the same study showed that just 4 percent of the companies conducting exit surveys conduct them in a structured and systematic way.
There are four steps involved in a systematic approach to conduct the exit interview process:
1. Gathering and collating the data in a structured manner;
2. Aggregating the results for the organization as a whole;
3. Analyzing the findings to identify consistent trends, patterns and themes; and
4. Using the results to determine and implement strategies to increase retention and reduce turnover.
Exit interviews are a central component of effective turnover management. A well-orchestrated plan of exit surveys in combination with other HR initiatives to maximize employee engagement has the potential to reduce turnover and increase employee satisfaction and commitment.
Anna Maggirwar received an MBA in Human Resource Management from the Rochester Institute of Technology. She is an HR assistant at Canandaigua National Bank and Trust. This article is brought to you by the Rochester affiliate of the National HR Association, a local professional HR organization focused on advancing the career development, planning and leadership of HR professionals. Visit www.humanresources.org for more information.