Staff Turnover is (not) a problem

Staff turnover is the cause of massive costs for businesses everywhere. There is the direct expenditure for recruiting, selecting, and training new employees, and there are the costs caused by the loss of knowhow or the disruption of work. More and more companies are beginning to think about how to make so-called high potentials in particular stay with them for the long term. At the same time, there is a massive gap between common conceptions of employee turnover and retention and the data coming from evidence-based research. David Allen and colleagues (2010) have debunked five common misconceptions:

Popular Misconception 1: “There is only one type of staff turnover – and it is bad.”
An empirical look reveals that there are indeed many types of turnover: voluntary or involuntary, functional or dysfunctional, and avoidable or unavoidable fluctuation. Of particular importance is the distinction between functional and dysfunctional turnover, as it concerns the loss of high potentials whose unique abilities makes them hard to replace. Functional turnover, by contrast, refers to the replacement of employees whose performance might be rather below-average or whose skills and contributions are easily replaced. Far from being problematic, this can make such functional turnover an actually desirable mechanism.

Popular Misconception 2: “Money makes people leave companies.”
Many studies have shown that salary systems or the cash in people’s pockets are poor predictors for individual turnover decisions. Turnover intentions need to be understood more on the level of leadership and supervision, the work design or job satisfaction, or people’s general relationships with the colleagues around them.

Popular Misconception 3: “People leave companies, because they are unhappy with their work.”
Dissatisfaction is only responsible for fewer than half of people deciding to leave their employers. There can be many other reasons at work, including the type of work, the leadership experience, or individual preferences, not to forget the actual presence of alternative employment options or sudden shocks.

Popular Misconception 4: “Managers have little influence on people’s decisions to move on.”
Evidence tells us that there are many people management practices that can counter employees’ turnover intentions or decisions. This begins immediately with how they experience the recruitment process, which should give them a realistic vision of their future job and avoid later disappointments and unhappiness. Sound selection practices, development opportunities and career prospects, personalized and fair remuneration, and executive development can also help keep people happy where they are.

Popular Misconception 5: “A simple one-size-fits-all strategy is most effective for staff retention.”
Retention strategies that take the wider context into account are much more effective than off-the-peg solutions. This means a thorough analysis of the actual reasons why people are leaving the company or deciding to stay. Benchmarking is also necessary to understand how one’s own company compares to others in the industry. So-called exit interviews, regular staff surveys, and other multiple data collection strategies have proven to be particularly effective when trying to develop a sound retention strategy or to understand how problematic staff turnover actually is for the company in question – in specific terms for its unique and concrete context.

For practitioners, this means taking a closer look at the raw fluctuation data (or collecting it in the first place) and distinguishing between functional and dysfunctional fluctuation. There are many footholds for a more context-aware approach and effective responses to be found in all HR activities, from recruitment via executive development to the eventual exit interviews.