Is Your Employee Turnover Rate Too Low? Understanding How It Hurts You

It’s a mistake to focus exclusively on high turnover because a too-low rate will also cause damage.

This is a think piece – for making leaders interested in unusually low turnover rates.

Don’t Reduce Your Focus On Employee Retention, Because It’s Still The #1 Priority 

If you are among the many talent management leaders that feel that the “great resignation” and the related employee turnover issues are subsiding. Think again! Because a just-released survey found that the top operational priority for corporate managers remains employee turnover. It also earned the top priority ranking among leaders in HR. If you need comparison baseline data. The average turnover rate last year in the US was 47%. And because turnover varies widely by industry. You should also be aware that the highest turnover occurred in leisure and hospitality (82%), and government organizations had the lowest rate of turnover.

Surprisingly, A High Turnover Number Can Be A Positive Thing

Average turnover rates can be misleading, just like with most numbers. Damage can occur in cases when the targeted number is either too high or too low (e.g., your heart rate). Of course, most in recruiting focus on keeping the very best performers in the most impactful jobs. However, I am attempting to shift some of the attention to a different, consistently ignored turnover category in this article. Which actually focuses on increasing turnover among your less-needed employees. However, then call them less desirable or surplus employees. I prefer to call them “ok to lose” employees. Talent managers should be alarmed whenever the turnover rate among these employees drops below a targeted percentage. It’s desirable to lose 100% of them. Because keeping a single one of these “ok to lose” employees will continually cost you. Both in lower individual and team performance as well as in a reduction of innovation. 

Of course, you should realize that just like every other employee, at some time, these “ok to lose” employees will try to leave because they do try. But it turns out they are not leaving primarily because our weak managers and talent management processes have failed to give these employees the skills and capabilities they need to be competitive within their industry. And over time, keeping the “less needed” employees will actually harm the image of your company to the point where it will damage your image as a prime source of talent. As a result, your company will likely make almost every manager’s permanent “don’t hire list” over time because they have come to expect mostly “quiet quitters,” “lazy girls,” or even toxic employees.

Begin creating a process by… Separating Your Employees Into Two Retention Groups

The most important strategic retention lesson to learn is that rather than being a sign of weakness, reaching a nearly 100% turnover rate among your “ok to lose” employees is a sign of organizational vitality and great talent management. So if you decide to begin trying to increase the turnover rate among your “ok to lose.” Your first important strategic step is to separate the most desirable of your employees (the keepers), from the employees that you wouldn’t mind losing. 

  • Group I – Regrettable or keeper employees – the employees in this first group are called “regrettable employees” because management would regret losing even one of them because of their high performance, future skills, or the critical importance of their job, team, or business unit. So these high-priority employees would become the focus of your primary proactive retention effort. And ideally, your retention target for this group should be to retain at least 90% of them.
  • Group II – Your “ok to lose” employees – this second group likely needs a different type of attention from the first group. Where instead of a full-scale retention effort. The managers of these “ok to lose” employees. First, they need to be educated on the real costs of retaining too many of these employees. Managers next need to learn how to minimize any resistance that might directly or inadvertently slow their leaving.

And in some cases, you may also need to teach individual managers how to facilitate or actively encourage these individuals to quit subtly. Employees in this “ok to lose” group usually include low performers, toxic employees, employees with fixed skills, or employees working in a job to be replaced by technology. Ideally, the turnover rate among this group of employees will approach 100%. And the lowest acceptable minimum turnover rate among employees in this group should in most cases. Be set at 10% and 20 % of your current overall turnover rate.

Next, Gain Management Support By… Communicating The Talent Management Benefits That You Miss When You Have Extremely Low Turnover In Your “Ok To Lose” Group

Because I have written extensively on “why all turnover is not bad.” I know that in some cases, increasing turnover can be an extremely positive action. However, I have also found that to get the full support of managers and executives. Talent leaders need to fully educate everyone from the beginning about the many positive benefits the organization will miss out on should they, for any reason, have a lower than the targeted turnover rate among this “ok to lose” group. So in this next section, you will find the top seven talent opportunities you will lose out on whenever “ok to lose” employee turnover is too low. Note that the most impactful missed benefits and opportunities appear first.

  • You will experience an injection of fresh blood – healthy turnover among “ok to lose” employees, of course, results in the loss of some talent. However, at the same time, these vacancies created by turnover will open up positions for new hires. This new talent will bring new energy, fresh ideas, no groupthink, and many new perspectives. And those replacement hires from top companies will also bring benchmark current and “next practices. Obviously, your team will miss out on these “fresh blood” benefits if the turnover rate among this group of employees is too low. 
  • Upcoming vacancies will drive employee improvement and growth – anticipated vacancies that will be created by upcoming turnover can provide other employees outside of this group with more reasons to continually improve. So that with this preparation, they can take advantage of the increased opportunities for promotions that will occur when “ok to lose” leaders depart.
  • Losing many low performers will eventually boost productivity – obviously, if you facilitate the loss of a significant percentage of your low-performing employees. If that is accompanied by an updated data-driven hiring process. As a result of hiring better performing replacements. The total productivity of your team will actually increase.
  • Thankfully, you will lose the feeling of entitlement that some current employees have – as an employee’s tenure increases. They may become complacent or even bored. They may also become so “bought-in” to the status quo. That they eventually stop questioning, learning, and innovating. So when you lose some of your longer-tenured employees from your “ok to lose” group, you may simultaneously lose a lot of unneeded rigidity. And remember, if you realize that letting a long-term employee go was a mistake. Remember that you can always rehire them as a boomerang rehire at a later date.
  • Turnover will likely increase your team’s technology capabilities – especially in cases where your organization is not “tech savvy.” Turnover among your “ok to lose” employees weak on technology will likely lead to the addition of a new-hires. And almost always, you’ll find that new hires will join with much more updated technology interests and capabilities. 
  • Turnover will likely increase diversity – obviously, losing a non-diverse employee gives you an opportunity to fill that position with a diverse new hire. And if your current diversity recruiting process has improved and becomes more data-driven since you hired the departing employee. It’s realistic to assume that your overall diversity representation will improve as a result of turnover from within any of these two groups. 
  • Your replacement new hires will likely be cheaper – if the departing “ok to lose” employee was paid above the starting wage for their job. Losing them and filling the position with a new hire will, in most cases, result in significant salary savings because most new hires start at a lower salary grade.

And If You Have Time… Also, Assess These Talent Management Factors

If you’re serious about implementing a retention plan component that focuses exclusively on avoiding extremely low turnover rates among “ok to lose” employees. Here are two additional talent management actions that you should consider.

  • Assess the quality of your workforce – you can at least partially assess the quality of your overall workforce by proactively determining where your top departing employees end up. You can do that by checking each departed employee’s updated profile on LinkedIn. Begin by calculating the percentage of your departing employees that went to top-rated companies. And then calculate the percentage of your departing employees who went to lower-ranked companies. Obviously, if a higher percentage of your departing employees go to other top companies each year. You know that the quality of your workforce is improving.
  • Assess the strength of your recruiting effort – You can partially determine the strength of your recruiting effort by visiting the updated LinkedIn profiles of each of the finalist candidates (that you didn’t hire). Obviously, when a higher percentage of your finalists end up at the top-ranked companies. You can view that as an indication of the strength of your sourcing. This process will also help you to determine which companies are your chief talent competitors. 

Stop Creating More “Ok To Lose” Employees In The Future By… Fixing The Talent Management Process Weaknesses That Make Our “Ok To Lose” Employees Less Desirable To Recruiters

Of course, it’s reasonable to expect that your “ok to lose” employees will periodically try to leave your organization for various reasons, including more money or a change of venue. However, you should be alarmed when you learn that when they try to leave, in most cases, they simply can’t. And the primary reason they can’t leave is that external recruiters and hiring managers don’t find them worth pursuing. So if you have time, the next section highlights the multiple talent management processes that are likely making your “ok to lose” employees less desirable. Seven hidden talent management problem areas are likely reducing the desirable recruiting among your “ok to lose” employees. Those 7 talent management problem areas include:

  • Poor employee development efforts make your “ok to lose” less recruitable
  • A weak hiring process will consistently select less desirable new-hires 
  • Powerful golden handcuffs benefits will artificially keep employees from leaving 
  • Bad managers fail to fully train, develop or grow their employees, making them less recruitable 
  • Employee exit agreements (nondisclosure) will create artificially low turnover rates 
  • Poor performance management means that you won’t release enough weak performers 
  • Failing to release surplus employees will artificially reduce turnover until layoffs are inevitable.
If you only do one thing volunteer to work with a staff member from both your CFO’s and your COO’s office to come up with a mutually acceptable estimated rough cost of keeping each “ok to lose” employee for another unnecessary month. Then use that estimate to convince your managers about the value of increasing turnover among your “ok to lose” group.

Final Thoughts

Currently, 100% of the time and resources devoted to managing corporate retention efforts are focused on reducing high levels of turnover among your most desirable employees. This exclusive investment likely occurs because everyone already knows about the costly damages that occur as a result of high turnover rates among top talent. However, in my view, it’s time for those with turnover responsibilities to broaden their perspective. So they have a two-pronged attack on retention. One effort that deals with the traditional overall travel rate. And the second focuses on the mostly hidden causes of too-low turnover among your “ok to lose” employees.

Author’s Note 

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About Dr John Sullivan

Dr John Sullivan is an internationally known HR thought-leader from the Silicon Valley who specializes in providing bold and high business impact; strategic Talent Management solutions to large corporations.

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