February 2007
Employee turnover is without any doubt a general concern of every company. Employee turnover is a ratio comparison of the number of employees a company must replace in a given time period to the average number of total employees. Enormous costs are incurred when an employee leaves and a new person is hired to replace the position. These costs include the cost of advertising, headhunting fees, human resource costs, loss of productivity, new hire training, and customer retention -- all of which can add up to anywhere from 30 to 200 percent of a single employee's annual wages or salary, depending on the industry and the job role being filled. Conversely, a low turnover rate allows the company to focus on productivity, which is important for a company to remain competitive in the market.
As the economy continues to enjoy positive growth, the demand for talent increases correspondingly. This trend, coupled with the rapid rate of globalization results in a rapidly shrinking pool of talent, in turn leads to a fiercer competition between companies in their hunt for top talent.
While lower paying job roles experience an overall higher average of employee turnover, they tend to cost companies less per replacement employee than do higher paying job roles. However, the frequency of occurrence is higher. Therefore, companies should focus on employee retention strategies regardless of pay levels.
Companies need not aim for zero turnover. In fact some employee turnover is healthy and necessary to prevent a company�s business from becoming stagnant; new employees bring essential rejuvenating energy and ideas.
So how can a company keep the talent that it has succesfully attracted?
Most companies find that employee turnover is reduced when they address issues that affect overall company morale. By offering employees benefits such as reasonable flexibility with work and family balance, performance reviews, and performance based incentives, along with traditional benefits such as paid holidays or sick days, companies are better able to manage their employee turnover rates. In addition to overall company morale, individual motivation and strong leadership are also critical. One recent study showed that 50 percent of the typical employee's job satisfaction is determined by the quality of his/her relationship with the manager.
Training and development is another key strategy to increase employee retention rates. A company's investment in the training and continuing education programs of employees not only encourage and stimulate professional growth of each individual, it also make employees feel valued by the company's sincerity in supporting them to grow with the company. The end result is likely to be increased employee loyalty to the company.
