Employee Turnover: It’s Not Always As Bad As You Think
In business most professionals understand that employee turnover is bad while employee retention is good. Perhaps because in the corporate world success is measured in dollars gained vs. dollars lost and most know that employee turnover is a big expense. The cost of replacing entry level employees is 30-50 percent of their annual salary while mid-level employees may cost a company as much as 150 percent of their salary to replace.
Retaining employees for as long as you are able to avoid turnover costs is rational, however turnover can also be beneficial. Years ago my colleague was speaking about turnover with a gentleman who ran a call center. This manager found that turnover, after a period of time had elapsed, was beneficial because he could hire entry level call center agents at a pay rate lower than what the exiting agents had been earning. Periodic turnover allowed the call center manager to reduce costs.
One issue often associated with employee turnover is a decrease in company morale as remaining employees have to shoulder the responsibilities the departing employee left behind until the role is filled. Low employee morale of course can also be created by retaining a disruptive employee who poisons your culture and office atmosphere. The departure of such an employee could produce positive results within days. In a previous post I pointed to a study which revealed that avoiding a toxic worker, even one in the top 1% for productivity, saves a company far more than the cost savings they would receive from employing the superstar.
Turnover also provides the opportunity to inject more energy into your business. Long retained workers may lose passion for what they do. While they leave to seek greater challenges elsewhere with a renewed vigor, your company may provide a similar challenging opportunity to an incoming employee. Though you may have to train them, their energy level and spirit for the new challenges that lie ahead may spark morale and spirit in the workplace.
Turnover, especially in senior positions, may eliminate the tendency for mirror image hiring. Mirror image hiring is a hiring manager’s propensity to hire those with similar backgrounds or behavioral characteristics. According to I/O psychologist Allen Gorman, “The ‘similar-to-me’ bias could also lead to creativity stagnation and lack of innovation in organizations. This happens because as organizations continue to hire employees that have the same backgrounds and experiences as those already in the organization, employees begin to think and behave in the same fashion due to their shared experiences.”
Turnover is uncomfortable not just in terms of revenue lost and the expenses associated with finding/training a new employee but also the concern of how a new employee will fit into one’s corporate culture. Change however brings new life and enthusiasm and so turnover should be viewed as an opportunity to not only improve your company but potentially reduce expenses in the long run.