Marketing and Business 101

Employee Turnover

The national average in the United States for employee turnover in all businesses in 2006 was about 23.4%.  Employee turnover rates vary by industry, and by country or region.

Some turnover is healthy for the organization, bringing in new ideas, and fresh attitudes as more senior employees move on to seek more financially and emotionally rewarding careers.

Unusually high turnover equals bad management.

If you have high turnover in one department, then odds are the Department Manager is to blame; if the high turnover is in one division, the Division Manager is to blame; and if you have high turnover throughout the company, then the CEO is to blame.

Why do people leave a company?

Some leave because they are at or near the top of where they can go with-in the company and they want more opportunity.

Some leave simply for more money, but there are frequently unexpressed or hidden feelings.  It is always wise to privately ask the individual why they are leaving, be sure it is done in an atmosphere of trust and understanding.  They may not tell you the underlying reason, but at least you've tried. 

One very common reason is that the individual does not like the way they are being treated.

Perhaps they are being talked down to by management; or being ignored; or in some other way made to feel unimportant.

In other words, management has not developed a sense of worth or self-esteem with-in the individual.

Is that managements job?

Yes. It is.

Sure there are lots of other aspects to being a manager, but helping your team grow and to feel confident and proud of their work is also an important and necessary part.

Too many managers—especially first time managers or supervisors—have a tendency to lord it over their subordinates.

I saw it a lot in the Army when someone would first be promoted to Sergeant, (pay grade E-5). I call it the E-5 Complex.

Suddenly the newly promoted feels they can't have anything to do with the lower ranked individuals who only yesterday they were drinking beer with and sharing jokes.  The promotion goes to their head and they treat their former friends as second-class citizens. Not nice at all.

Unfortunately this "E-5 Complex" is not confined to the military, you will find it just about any time someone without supervisory experience or training is promoted into a supervisory position.

But I'm digressing a bit. Not only is high turnover a sign of poor corporate health, it is also very expensive.

According to different articles I have read, the cost of hiring and training a new rank-and-file employee is around 25%, (some gave a higher percentage – 25% was the lowest), of their annual wage; higher management positions have a higher training cost.

Let's assume that a company has 100 employees, of which 75 are the rank-and-file employees. Just to keep it simple lets also assume that the average wage of these 75 employees is $9.00 per hour.

If the company has just the "average" national turnover rate of 23.4%, that means the company is hiring about 17 to 18 individuals a year.

Since the annual wage for someone earning $9.00 an hour is $18,720.

That $18,720 times 25% training expense, times17 to 18 employees is $79,560 to $84,240 every year . Just to get those new people up to speed.

If your company is higher than that, and several industries are, then it is an even bigger expense.  But if your company is higher than the industry average . . . well, you've got a serious problem.

Two problems actually.  The first is bad management, and the second is an out of control expense.

Both of which are easily controllable. The bad manager can get training, or be terminated. Either action should lower the turnover rate.

But it is so easy to improve employee relations and reduce turnover; all you have to do is treat your people with respect, understanding, and simple kindness.

They know you are the boss, you don't need to constantly remind them, or hold it over them. You can be friendly without being friends.

High turnover = bad management.

Period.