Turnover to Advantage: Winning the Competitive Game

Posted in Organizational Development

If there’s one Big Evil that HR professionals can rally against, it’s turnover. Right?

Stats vary wildly, admittedly, but none paint a pretty picture:

  • Turnover costs range from 30% to 400% of salary depending on seniority.
  • For average businesses, turnover costs are more than 12% of pre-tax income.
  • For businesses with high turnover, costs can hit 40% of pre-tax income.
  • Global turnover costs have almost doubled in ten years.
  • 67% of Australian businesses say turnover increased over the last three years.

Overall, a meta-analysis of 300,000 global organizations found “the relationship between total turnover rates and organizational performance is significant and negative“.

That’s that, then. Turnover is irredeemably, irrevocably bad.

Except, maybe not.

Can turnover be a good thing?  

The idea that all turnover is bad is actually relatively new. The so-called cost-benefit theoretical model of turnover suggests “turnover conveys greater benefits than costs at low-to-moderate turnover levels but costs outweigh benefits at moderate-to-high levels”, for example.

This perspective suggests various benefits of turnover, including:

  • Reducing your overall compensation bill
  • Opening space for new employees, with new ideas and perspectives
  • Eliminating poor performers who disrupt culture and productivity

The truth is, the idea that “all turnover is bad” is reductive.

What about the cost of keeping underperformers? The cost of keeping people who don’t want to work with you?

As that well-known Gallup stat says, businesses with the highest employee engagement ratings outperform their peers by 21% on productivity and 22% on profitability. If you hang onto people who’re ready to move on, you risk threatening engagement – which means you’re limiting organizational performance.

Plus, top performers can outperform average performers by 1000%. For every average performer you keep, that’s a huge lost opportunity cost. Imagine if you replaced every average performer with a top performer instead. That’d push your turnover rates up, but you’d also optimize performance considerably.

Plus, if you’re recruiting and onboarding efficiently, you mitigate the cost of backfilling roles dramatically. And if you’ve got a robust succession plan, someone leaving means someone else gets promoted – which has a knock-on impact for morale and engagement.

The point is, there are situations where turnover isn’t so black-and-white. It’s probably truer to conclude, turnover isn’t desirable but it’s also not always the Worst Thing Ever.

Especially if your overall turnover rate is low and employee engagement is high, so you’re only losing people who’ve, say, worked for you for a while and want a new challenge. Or are moving away. Or have a fantastic opportunity somewhere else.

Sure, in an ideal world, you could always create those challenges, accommodate moves and match those opportunities in-house. But that’s not realistic. And when it’s not, turnover might be the next-most positive outcome for the business.

If you harness the moment properly.


Why offboarding matters

We recently published some breakthrough research into the moments that matter most for your employees, and we found offboarding is one of those five. Actually, offboarding is the number one moment your people feel unsupported.

That’s a big problem.

Our research found employees often felt undervalued and unappreciated when they moved on from roles. Felt they were treated without compassion or understanding. Felt they were treated as traitors; like they’d suddenly become sub-human. Felt their negative offboarding experiences cemented their determination to leave and their certainty they’d never come back.

All in all, we found decisively that a bad experience leaving the business overwrites good memories, leaving ex-employees with a bad taste in their mouth.

That has three big negative consequences:

  1. It damages your employer brand. Some 83% of jobseekers base their decision on where to apply based on company reviews… and disgruntled, miserable ex-employees are hardly likely to say good things about you. If you peeve people off before they leave, you might find undesirable word-of-mouth spiraling – and recruitment getting harder.
  2. You’re less likely to get referrals. Employee referrals deliver the highest ROI of any sourcing method. But disgruntled, miserable ex-employees certainly aren’t likely to refer anyone good your way. Take the average Australian turnover rate of 15% and that’s a lot of lost potential.
  3. Employees are unlikely to come back. 76% of hiring professionals are more accepting of hiring so-called boomerang employees – and as many as 8% of employees are currently employed somewhere they previously left. These boomerang employees have a headstart on other new hires from a culture, process and relationship perspective, and they might bring invaluable new skills and perspectives gained from their interim role(s). But disgruntled, miserable ex-employees slam the door on their way out – and often, it’s you who loses. 

There’s good news though: turning the tables is easier than you think.

Our research showed employees don’t have huge expectations. They just want you to acknowledge them. Thank them. Wish them well. Be compassionate, empathetic and understanding.

Surely, that’s not too much to ask? And if you get it right, you stand to build long-term mutually beneficial relationships that could pay dividends down the line.

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Turn the tables on turnover with better offboarding

The workplace power dynamic has shifted, from top-down to bottom-up. Employees aren’t quietly grateful for a paycheck anymore; they’re more aware of their worth and the sacrifices they make for you – and they (rightfully!) expect to be treated well.

That extends to expecting your understanding, compassion and well wishes when they move to new horizons. Our research shows most businesses aren’t there yet, so there’s huge competitive difference on the table if you can be.

Find out how Deloitte’s Colleagues for Life employee alumni program turns turnover into a positive, by downloading our latest eBook

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