Today, many companies are experiencing high rates of employee turnover. The focus right now is on avoiding it, or at least reducing it as much as possible. But in order to deal with it, we must first understand what is employee turnover, the types of employee turnover that exist and what causes it. Without this basis, we will not know where to start working in order to limit turnover in our company as much as possible.
What is employee turnover?
Employee turnover is known as the fluctuation of employees during a given period of time. It refers to any movement that exists in reference to the entry, exit or change of position of employees. It usually results in the vacancy of a position that would normally be filled.
In recent years, employee turnover has become a crucial indicator for analyzing and understanding the employee experience. It is understood that the higher the turnover in a company, the higher the level of employee dissatisfaction. This is something we should definitely keep a close eye on.
A high turnover rate can have significant financial, operational and cultural implications for a company’s working dynamics. It is no surprise that it has a major impact on team morale and the high cost of managing the employee’s departure, the search for a replacement and the onboarding that takes place. Although these are just two of the main negative impacts of employee turnover in a company, there are many more.
What types of employee turnover exist?
When we consider the problem of employee turnover, the first thing we must do is to analyze the turnover rate in our company. At this point, we must understand that employee turnover is a working phenomenon that can manifest itself in various ways.
Knowing what types of employee turnover we encounter in our company will allow us to start from a solid analysis that will help us define the best actions to reduce turnover in the most effective way possible.
- Voluntary turnover
- Involuntary turnover
- Unavoidable turnover
- Avoidable turnover
- Functional turnover
- Dysfunctional turnover
What is voluntary turnover?
Voluntary turnover, also known as natural turnover, occurs when employees decide on their own to leave the company. This type of turnover is the one that has the most negative impact on the company, mainly due to the surprise factor, since in most cases it happens unexpectedly.
A clear example would be an employee who does not feel valued or recognized in their company. Although we must keep in mind that voluntary turnover can be the result of very diverse causes that we will explore later. Understanding the motivations behind an employee’s decision to resign is crucial to address and reduce this type of turnover.
What is involuntary turnover?
Involuntary turnover, also known as layoff, occurs when the company decides to terminate the employment relationship with an employee. Unlike voluntary turnover, this type of employee turnover is beyond the employee’s control.
For example, when an employee is dismissed for lack of performance. However, as in the case of voluntary turnover, there are several causes of involuntary turnover. We will explore them below so that we know how to act before the only solution presented to us is related to the dismissal of an employee.
We must bear in mind that making the decision to dismiss an employee has many implications, both in terms of costs for the company and changes in the operations and morale of the team.
It is a type of turnover that does not limit that it can be voluntary or involuntary at the same time. It is mainly due to external factors or factors over which the company has no control.
- Unavoidable voluntary employee turnover: for example, in the event that an employee changes country and has to look for a job elsewhere.
- Unavoidable involuntary employee turnover: for example, in the event that the company goes bankrupt and is forced to implement some kind of redundancy program.
What is avoidable employee turnover?
It is a type of personnel turnover that also does not limit whether it can be voluntary or involuntary. It is mainly due to internal factors that, if they had been changed, would not result in the departure of employees.
- Avoidable voluntary turnover: let’s say a company is aware that it is not paying its employees fairly according to their functions, despite being able to afford salary increases. Employees would end up looking elsewhere for better conditions.
- Avoidable involuntary turnover: for example, it may happen that after an upturn in hiring, things go wrong and part of the workforce has to be made redundant. If the scale of these recruitments had been correctly sized, layoffs would have been avoidable.
What is functional employee turnover?
This type of employee turnover could also be voluntary or involuntary. It is mainly related to the positive impact turnover can have on the company’s operations. In other words, how employee turnover can have a positive impact on the success of the company.
- Voluntary functional employee turnover: for example, a company has chosen to develop a more modern line of work, with horizontal work hierarchies and 100% remote work. A manager decides that she cannot exercise good leadership of her team with these new working conditions because it is not something she is used to. As with any departure, it will generate a certain negative impact, but it is partly a functional turnover, as it will give way to the hiring of a profile that does align with this new line of work and allows the company to progress.
- Involuntary functional employee turnover: this would be the case of a company that has detected that certain workers are not performing their duties adequately. They would be dismissed in order to incorporate new talent into the workforce that does meet the expectations set.
What is dysfunctional employee turnover?
This type of employee turnover, which could also be voluntary or involuntary, occurs when the departure of workers limits or prevents the company from meeting the objectives set. It is a type of turnover that hinders the normal operation of the company.
- Dysfunctional voluntary turnover: the clear example of a great employee who, for whatever reason, decides to leave the company.
- Dysfunctional involuntary turnover: we could recover the example mentioned in the avoidable involuntary turnover. Faced with a situation in which the company is forced to lay off part of the workforce without being in the best interest of the company. It could be that the company cannot afford the salaries and has to proceed with the layoffs. Being fully aware that this action will limit the achievement of its objectives and limit its efficient operation.
What are the causes of employee turnover?
To limit or reduce employee turnover, we must stop to analyze the causes that are causing this high rate of turnover. In this way it will be possible to take the necessary and most effective measures to reduce it.
The causes of voluntary employee turnover
As we have already mentioned, voluntary turnover occurs when employees decide to leave the company of their own free will. Voluntary turnover can be the result of several factors:
- Lack of professional development: it is normal for employees to seek professional growth. It is also normal that at a certain point in time their current job no longer allows them to develop more than they already have. The lack of projection and development may lead the employee to look for more exciting challenges in another company. To address this point, always try to have career plans for employees.
- Insufficient salary: remunerating employees according to their functions is a crucial aspect to avoid employee turnover. It is true that salary is not the most important thing, but we must try to differentiate between what is acceptable and what is not.
- Lack of recognition: when employees feel that their work is not recognized or valued by the members of their company, they begin to lose their commitment to the organization. This is the moment when they start to feel the need to look for a place where their work is recognized. It is important to implement gamified recognition systems that make positive feedback a fun game among the staff.
- Job dissatisfaction: an unsatisfactory or even toxic work environment is a hotbed of turnover. Lack of support, constant conflict, instability, lack of communication, workload, etc. are often the most common causes of dissatisfaction. This motivates employees to look for a better workplace.
- Lack of work-life balance: Excessive workload, lack of work flexibility and remote work and lack of work-life balance can lead to burnout. It is undoubtedly one of the main causes contributing to voluntary turnover.
- Changes in personal life: it may be the case that personal factors, which have nothing to do with the company, lead to the employee’s departure. These could include moving to a new city, family changes or new aspirations.
- Conflicts with their manager: 70% of employee engagement depends on managers. Taking this into account, when there are conflicting relationships with managers, this can significantly affect how the employee feels and contribute to their decision to leave the company. Encourage managers to build strong relationships with their team members, through 1:1 meetings, for example.
The causes of involuntary employee turnover
As previously mentioned, involuntary turnover occurs when the company decides to terminate the employment relationship with an employee. Involuntary turnover can be the result of several factors:
- Performance problems: this happens when an employee does not meet the expected performance expectations. In these cases, the company usually decides to terminate the employment relationship in order to preserve work quality standards. Before making a hasty decision, launch performance reviews to evaluate employee performance through more eyes.
- Organizational restructuring: changes in company structure or strategy may result in the elimination, or change, of jobs. This could result in the need for different skills, resulting in the dismissal of some employees.
- Financial circumstances: financial difficulties, along with performance problems, are often the most common cause of layoffs. The objective of maintaining the company’s financial viability forces the company to lay off part of the workforce.
- Acquisition of the company by a third party: it could be that the purchase of the company by a third party could lead to changes that imply the dismissal of workers.
- Internal conflicts without solution: there are occasions in which certain workers maintain a good performance, but there are problems in other terms. The origin of frequent disputes may lead to the decision to dismiss the employee. So can cultural incompatibility and inappropriate behavior. You can try to avoid and mediate these situations through whistleblower channels.
Employee turnover is a reflection of the health and culture of an organization. In a constantly evolving business world, where talent retention and engagement is essential for the growth and success of companies, it is essential that People & HR professionals understand the complexity of employee turnover and take proactive measures to limit it as much as possible.
Once we have understood what is employee turnover, we must keep in mind that it should not be seen simply as a problem to be solved, but as an opportunity for reflection and continuous improvement. Working on creating a better culture and employee experience will undoubtedly dilute your turnover problems and give way to a workforce committed to the success of your company.
