Significance of Employee Turnover and Strategies to Improve Talent Retention


Executive Summary

The prospect of getting higher pay elsewhere is one of the most common contributors to turnover. This can be observed at all levels of the economic ladder, from executives and generously paid professionals in high-stress positions to entry-level workers in relatively undemanding jobs. However, there is evidence that money is often not the root cause of turnover, even when it is a factor in an employee’s decision to quit. Rather, it is believed that high turnover persists in certain jobs and organisations because they have an atmosphere in which employees look for reasons to leave, and money is a convenient and sometimes compelling justification.
Most evidently, environmental contributors to turnover can be directly traced to management practices. Turnover tends to be higher in organisations where employees feel they are taken advantage of, where they feel undervalued or ignored, and where they feel helpless or unimportant. Clearly, if managers are impersonal, arbitrary, and demanding, there is greater risk of alienation and turnover. Management policies can also affect the market in certain ways such as whether employee benefits and incentives appear generous or stingy, or whether the organisation is responsive to employees’ needs and wants. Management’s handling of major corporate events such as mergers or layoffs also influences on the work place.

Some turnover is demographic specific, particularly for women who are balancing work and family duties at the same time. Such women (or men) may choose to leave an organisation instead of sacrificing their other interests and responsibilities in order to make the job work out.

Retirement of experienced employees can cause high rates of turnover and extreme loss in productivity, particularly in industries where there is little competition. Work stress related to particular types of jobs can also cause turnover.

High turnover can be a serious obstacle to productivity, quality, and profitability at firms of all sizes. For the smallest of organisations, a high turnover rate can mean that simply having enough staff to fulfill daily functions is a challenge, even beyond the consideration of how well the work is done when staff is available. Turnover is no less a problem for major organisations, which often spend millions of dollars a year on turnover-related costs.

The cost of turnover varies with the difficulty of the job to be performed. For example, in a food-processing organisation, showing someone how to put jars of jam into a cardboard box may take five minutes, so the cost of training someone to handle this job would not be high.

In general, reducing employee turnover saves money. Money saved from not having to find and train replacement workers can be used elsewhere, including the bottom line of the organisation’s profit statement. The U.S. Department of Labor estimates that it costs about 33 percent of a new recruit’s salary to replace a lost employee. In other words, it could cost $11,000 in direct training expenses and lost productivity to replace an experienced employee making $33,000. Private industry estimates for highly skilled jobs peg turnover losses at a much higher level, up to 150 percent of the position’s annual salary.

Summary of Key Findings

  • More than three fourth (64%) of the respondents think that highest possible turnover by age groups 26-30, followed by 31-35 age group.
  • Almost 53% of the respondents believe that highest sources of turnover is by position/jobs followed by age groups
  • More than half (51%) of the participants think that the financial incentives are used significantly in their organisations to combat turnover
  • Around 45 percent of the respondents believe that the non-financial incentives are used significantly in their organisations to combat turnover
  • 52 percent of the employees think that financial incentives are used effectively in their organisations to combat turnover
  • Only about 38 percent think that the non-financial incentives are used effectively in their organisation to combat turnover
  • 45 percent of the respondents think that employees leave due to insufficiently attractive incentives in their organisation
  • About 46 percent of the participants believe that employees leave due to reasons outside managerial/organisational control. (e.g. seasonal unemployment)
  • About three quarter of the respondents think that employees leave due to more attractive incentives in competing organisations
  • 43 percent of the respondents think that the existing measures taken to counter turnover have proven insufficient
  • More than half (57%) of the respondents think that significant proportion of employees are constantly on the lookout to leave the organisation for better prospects elsewhere
  • Just over half (52%) of the respondents believe that turnover is a serious concern for their organisation’s management
  • About 57 percent of the survey respondents think that having portable / flexible benefits is important to my organisations’ employee retention efforts

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