Managing Employee Turnover

“Far and away the best prize that life offers is the chance to work hard at something worth doing.”” – Theodore Roosevelt

Most businesspeople recognize that high employee turnover is costly. But we sometimes fail to appreciate how insidious the costs are. Besides the actual costs of processing a changeover (accounting, personnel, insurance, workmen’s comp, etc.), turnover is expensive because:

* It lowers the work group’s productivity before, during, and soon after a changeover.

* It usually includes lower productivity on the part of the worker who quits or is fired.

* There is a period of lower productivity as the replacement comes up to speed.

* There is often a cost (direct or indirect) to train the replacement.

* There is the incalculable cost of having company knowledge exported to competitors.

Of course, not all turnover is bad.

Firing bad and irredeemably marginal employees is usually good for productivity, though you will suffer some short-term disadvantages. The key here is to replace weak people with very strong ones. If you can do that, the recovery time will be much shorter and the overall level of output will increase as other employees are challenged by your new superstar. (Remember Message #120and #126.)

And there is a big difference in cost between the loss of short-term employees (whose expectations might have been faulty or whose circumstances are more volatile) and long-term workers. When long-term employees quit, their loss is the most expensive and the most disruptive to the organization. They take with them the training, skills, experience, productivity, and social bonds that help other employees succeed.

Here are some things you can do immediately to lower turnover.

1. Avoid excuses like:

* “If only we could hire better people!”

* “They all leave for more money.”

* “This level of turnover is normal for our business.”

* “That’s just the way things are around here.”

None of these common excuses are very helpful. Putting the blame elsewhere makes it easy to put the solution elsewhere too. The first step toward reducing high turnover is to admit you have a problem – that you are doing something wrong. If you don’t do that, it is unlikely you will do anything else.

2. Create pride in your work force. According to a study conducted by Bavendam Research Inc. ( on 5,000 employees, commitment to the company and its goals was the No.1 reason employees stayed. This was more important than compensation, career advancement, or any other consideration.

I find that very interesting. I’ve seen many such studies that place mobility and recognition above financial compensation, but this was the first time I saw “commitment to the company and its goals” on top.

We’ve looked at this idea before. We’ve suggested that making your employees proud of what they do is a top priority. We’ve said that creating pride has to do with the vision you have, the way you share it, the way you speak about your business, and the way you treat your customers.

3. Provide the potential for advancement. Next to instilling pride in your company, the most powerful thing you can do to keep your good employees is to give them satisfying long-term job prospects.

Remember, the critical issue is whether THEY think they have bright futures – not whether YOU do. So start by finding out (via a third-party survey, if possible) whether your employees feel as if they (1) are recognized for what they accomplish, (2) have a career path ahead of them that is clear and attainable, and (3) have the feeling that you are actively looking to provide them with new and better perks and other benefits.

4. Another thing that is often recommended is to establish a perception of fair management. The idea is that if your employees feel you (or your managers) play favorites, they won’t stay long.

It’s probably true, but I don’t think you’ll get anywhere trying to “manage” preferences. It’s probably much smarter to focus on the work. If you don’t play favorites yourself and you let others know that what matters to you is the vision (see strategy #1), this sort of problem (along with most “political” problems) will sort itself out. Happily, the most important things you can do to lower your turnover turn out to be the same things you need to do to make your business become bigger, better, and more valuable. Establish a vision that can inspire and then let your employees – all of them – be a part of it.