The silliest practice in retention is counting all quits equally in your turnover calculations.
Descriptors… retention/good turnover – eye-opening – how to – data-rich – 4 min. scan
Understanding The Different Amounts of Business Impact From Each Category Of Turnover
It’s a common practice to lump all employee turnover into one basket. This practice is silly and naïve. With numbers and dollars, it’s possible to demonstrate that all departing employees don’t create the same costs and negative impacts. The first step in ending this misleading lumping practice is to realize that there are four distinct categories of employee turnover rather than just one. They are Devastating, Regrettable, Average, and Good Turnover in descending order of impact.
Furthermore, everyone needs to know that each of these distinct categories produces a different amount of business damage. The top category, “devastating turnover,” needs to be given top priority by managers. The damage that turnover in this category causes is… simply devastating! You can find my companion article on devastating turnover here.
However, because most executives and talent managers are completely unfamiliar with the category of turnover that I label as “good turnover.” They need to be educated that this turnover category should be encouraged even though you are losing an employee. So, with that purpose in mind, this article focuses on understanding the different types of good turnover and the positive impact of each type. Good turnover is a case after a bad employee has departed. The affected team’s business and people management results improve in the areas of productivity, morale, engagement, innovation, and team cohesion. Examples of good turnover can include the departure of a bad manager or a toxic, harassing, bullying, or disruptive employee.
A List Of “Good Turnover” Cases With Their Positive Impacts
If you’re unfamiliar with the term “good turnover,” this turnover category has the fewest negative impacts. It can also be called positive, desirable, or beneficial turnover. In my experience, I have found that in many cases, at least 25% of all turnover should be labeled and counted as “good turnover.” After your retention team identifies which of the possible 12 types of good turnover will be encouraged (each is listed below), the team lead should next work with HR to ensure in the future that individual managers are never counted off or penalized after they have had a case of good turnover (Please note that in the list of good turnover cases below, the most beneficial ones are listed first.)
- It may be “good” to lose a bad manager – according to Gallup, at least 75% of the reasons for voluntary turnover are influenced by the employee’s manager. And no position does more damage than a management slot filled by a weak, poorly performing manager. You should also make everyone aware of replacing bad managers with above-average performing ones. They may have the highest positive impact of any retention action. As a result, you should encourage the voluntary or involuntary departure of bad managers. Those are rated as below-average performers (that are not significantly improving). As well as managers who fail to hire, develop, retain, and encourage the movement of talent effectively. So when a senior manager loses a bad manager under them, that turnover loss should be rated as a positive. So it shouldn’t be counted against them.
- Losing toxic employees will reduce team disruption – research has shown that losing a single toxic employee to turnover will save a company over $12,000. A toxic employee disrupts the team by harassing, bullying, discriminating, or threatening other employees or customers. So when a manager loses a toxic employee to turnover, that loss shouldn’t be counted against them. Losing these toxic employees will improve team cohesion and lower your legal risks.
- Losing bottom performers will increase team performance – bottom performers are costly because these employees may make up 15% of a team. Bottom performers can be identified because of their below-average performance appraisal scores, excessive customer complaints, below-average work output, or those on a performance management program that are not steadily improving. And in cases where effective recruiting replaces them with better-performing new hires. Their voluntary or involuntary departure will improve team performance and save termination hassles and costs.
- Losing an employee who behaves badly makes managing easier – managing and counseling employees who constantly behave badly take up to one day of a manager’s time each week. These bad behaviors include being excessively late or absent, having dangerous safety records, lying/stealing, and being referred to HR multiple times. Losing these badly behaving employees will improve team performance because others on the team will no longer have an excuse to copy their bad behaviors.
- Losing employees with declining skills will increase team capabilities – in our fast-moving world, employees must constantly upgrade their knowledge and skills. So, it will likely benefit team performance when employees who are not continuously learning and maintaining or upgrading their skills leave. And the benefits increase even more whenever they are replaced by an employee that continually builds “future skills.” Of course, when everyone on the team is “upskilled,” team performance and innovation will both increase.
- Losing quiet quitters will increase team productivity – Quiet quitters are employees who purposely do the very minimal amount of work necessary to avoid termination. When other team members see that quiet quitters are either forced out or terminated. Others on the team will be less likely to try to copy this damaging behavior.
- Losing your over-employed remote workers will increase team productivity – a remote employee who secretly holds a second full-time job is now labeled as over-employed (a.k.a. moonlighters). And when their second job significantly reduces their contribution to the team. Everyone will be much better off if they quit or are terminated because of this unethical behavior.
- Getting rid of a bad employee faster will help the team – when a manager has the courage to formally terminate a bad employee. That should be considered a sign that you have a good manager with uncommon courage and decisiveness. And, of course, any turnover of an employee that has earned termination shouldn’t be counted against a manager. And when a manager finds a way to encourage a bad employee to quit voluntarily. This will eliminate the delay often accompanying going through the typically long-drawn-out corporate termination process. And the fact that they quit may also reduce the possibility of a termination lawsuit. In order to encourage individual managers to terminate a higher percentage of bad employees, some large corporations have previously set involuntary employee release targets. They include Amazon at 6%, GE at 10%, and 17% at AOL.
- The early departure of a layoff target will save money – when an employee who is highly likely to be included in an upcoming layoff voluntarily quits. You will reach your salary savings quicker. You will reduce the turmoil and legal issues and save the separation costs that would likely be incurred if the employee was actually laid off.
- Losing change blockers will speed up change – some employees, especially long-tenured ones, may be set in their ways. As a result, these team members may be the primary resistors of dramatic change. So losing these “that’ll never work” employees will likely speed up the rate of overall change within your team.
- Losing the overpaid will result in salary savings – when a highly paid employee (i.e., who is well above the compensation norm) leaves. This creates a salary savings opportunity if you replace them with a lower-paid employee who produces at the same level. Losing the overpaid might also reduce conflict and jealousy among the lower-paid members of the team.
- Encouraging disruptive union organizers to quit will increase stability – in a nonunion environment, those who go beyond normal organizational efforts can become disruptive even though you can’t fire labor organizers. Managers who successfully encourage the disruptive organizers to leave shouldn’t have their departure counted as a negative turnover.
And Extremely Low Aggregate Turnover Rate May Not Be the Result Of Good Management
One final area of retention/turnover often misinterpreted is when your organization has an extremely low aggregate turnover rate in any of the devastating, regrettable, or average turnover categories. Extremely low turnover is defined as an organization with an aggregate turnover rate of more than 50% below the industry average (for an unknown reason, some call this phenomenon “zero turnover”). In the cases when extremely low turnover occurs, executives and HR leaders often blindly want to pat themselves on the back. However, they need to be cautious. It is a serious mistake to automatically assume that this extremely low or single-digit turnover rate is occurring because your organization is well-managed. There are a multitude of weak talent management factors that may be actually causing this exceptionally low turnover rate. So, whenever you have an extremely low turnover rate, you need to conduct research in order to determine if one or more talent management weaknesses are causing that low rate. Below, you will find a list of weak talent management factors that may be stealthily causing your low turnover. The most likely causes appear first on this list.
- Recruiters are not targeting your employees – your organization or team may have a low turnover rate because your competitor’s hiring managers aren’t asking their recruiters to target them. The reasons why your employees are not being targeted might include the perception that they have low skills or are not motivated. Another more serious explanation is that you have a weak hiring process that is only landing mediocre people.
- If your employees lack ambition, they will stay longer – if the employees you recruit are not very ambitious or if your culture drains away their ambition. A lack of ambition will mean that only a small percentage of your workforce will be actively looking for new jobs.
- An older workforce will lower your turnover – when your workforce has a large percentage of late-career or long-tenured employees. You will have a lower turnover rate because many of your employees will have decided to stay until they retire. However, even the non-ambitious won’t look for a job externally. Unfortunately, you may experience another painful problem: a high rate of internal churn (transfers).
- Focusing on job security will lower turnover – after nearly 2 years under a down economy. Your less secure employees may have made job security their top priority. Therefore, it wouldn’t make sense for those seeking increased certainty to give up their current job security and go to a company where they would have no tenure.
- Competitors have few open jobs – even though they might want to leave. Your employees won’t be able to if there are no open jobs to apply for in your region.
- Housing issues may prevent movement – high mortgage rates and housing prices limit employee movement. So rather than good management, housing issues may limit the number of your employees quitting to work in another region.
Example – your local post office might have an extremely low turnover rate. But only the naïve would think that great management was the reason why so many employees stay so long.
Note: On 12/4/23, I published a companion article that extensively covers another important turnover category, “devastating turnover.” You can access that article here.
If You Need More Detailed Information
- You can learn more about what’s wrong with most employee retention efforts here.
- You can learn why you should focus your retention on your high-impact employees here.
- You can learn more about the cost of hiring and keeping a toxic employee here.
It’s hard to find a more mismanaged and less data-driven HR area than employee retention and turnover. Executives are constantly sounding off about how “bad” employee turnover is. However, the well-informed already know that one category, good turnover, should probably be higher rather than lower.
Imagine this example of “good turnover.” If you had a poor performing worker named “Homer Simpson.” Suddenly, without warning, Homer announced that he was quitting. Would you consider and then count his voluntary departure as a “bad thing”? Or would you secretly celebrate his departure? Even better, what if Homer left your company and immediately went to work for one of your direct competitors? Wouldn’t that move to a competitor be an additional cause for celebration? So, at least to me, it is time to stop lumping all turnover into one basket immediately. Second, talent leaders should lead an effort to make managers fully aware of every possible “good turnover” situation. Next, educate all managers on how they can effectively encourage more “good turnover” occurrences. Finally, have your retention lead immediately begin working with your CFO’s office to accurately estimate the dollar benefits each type of “good turnover” can produce. So that every manager will know the actual positive dollar value of “good turnover.”
|If you only do one thing – informally survey a handful of HR Generalists working with innovative and fast-moving teams. Then, ask each team member if they have experienced the departure of a single disruptive “bad” teammate. If they did, ask them to highlight the positive team changes that occurred within three months after that disruptive teammate left. Then, use any of the positive examples as ammunition for your business case supporting the exclusion of “good turnover” from the traditional turnover count.
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