A turnover rate is “the percentage of employees that a company must replace within a given time period”. Employee turnover is a HR concern, because it can come at a high cost for companies, especially in lower-paying jobs which tend to have the highest turnover rates.
When an employee leaves, either because of personal choice or for being fired or let go, the organization will have to perform various administrative tasks and maybe even incur in severance pay or other payments. And replacing the employee might require even more effort and monetary investment, especially in the present economic times in which the talent pool is so big and the amount of applicants can be overwhelming. Given the unemployment numbers and the number of people looking to change jobs to ones better compensated, companies have to incur in more activities to find the right hire. From advertising the open position, using a head hunter or staffing firm, carrying out interviews, and eventually training, the process can be expensive and exhausting.
On top of all that, there is a loss of productivity within the organization that occurs during the time after the former employee leaves until the time when the new employee has been fully trained. For some companies that tend to work through account managers or sales people, “replacing employees also could make it difficult to retail clients or customers with whom those employees worked.”
Turnover comes in different shapes and sizes. Some of the turnover is due to downsizing because of the tough economy. This type of turnover is not the norm and comes only in times of uncertainty. But there is another one that must be analyzed in a deep way as it hints of a deeper organizational problem: the revolving door.
The revolving door can be understood as when employees are hired, they stay for a little while, and then leave. This results in a high turnover rate. A high turnover “can be symptomatic of a deeper organizational problem.” And because of the high costs of turnover, it also results and negative impacts to the bottom line. It is a “silent but effective profit killer.”
How much is employee turnover costing your organization? This Online Employee Turnover Calculator by William H. Pinkovitz, Joseph Moskal and Gary Green, from the Center for Community and Economic Development, can help you analyze the impact of turnover on the bottom line.