No Image Available

Jess Tilley

The Chemistry Group

Consultant

Read more about Jess Tilley

Talking Point: Is low staff turnover for losers?

pp_default1

Who on earth ever said that low attrition rates were the mainstay of business success?

Staff turnover levels have been obsessed over for years and are still the cause of many a furrowed brow in meetings on the subject.
 
Some teams are even trained to worry – far too much – about an issue that actually, if they knew the business requirements better, they wouldn’t be concerned about at all.
 
But there is a proviso to all of this – what ‘healthy attrition’ looks like in each business needs careful consideration and an understanding of the organisation’s current and future needs, particularly if it is operating in a high speed environment that is subject to a lot of change.
 
We all know that, if a lot of valuable people are lost to the company, it ends up being costly in terms of recruitment, training and potential damage to performance, brand and services. But is the same true of losing less crucial personnel?
 
Perhaps brilliantly, perhaps worryingly depending on the company you keep, management consultancy Deloitte’s recent ‘Talent 2020’ report revealed that 80% of employees plan to stay with their current employer over the next year.
 
The figure amounts to an incredible jump on the previous year, which indicated that a huge 65% intended to leave. Nonetheless, some 31% said that they were not happy with their job.
 
What constitutes healthy?
 
But would you want nearly a third of your staff to stay in a role that they found unsatisfying? What effect would that be likely to have on their ability to handle their workload, their performance, the people around them, the customers that they serve and the brand that they represent?
 
If your company’s attrition rates are very low and you feel proud, perhaps even a little smug about it, perhaps you should think again. If teams aren’t gaining new experience or experiences, stagnation can set in, energy levels run low and performance suffer.
 
According to Deloitte’s report, there are five industries, including financial services, technology, media and telecommunications, life sciences and healthcare, which run the highest risk of losing talent.
 
Yet companies operating in these environments are continuing to experience a lot of change, which means that higher attrition rates might actually be a good thing in order to keep up with the changing needs of the business.
 
But the key is that every employer should know, on the one hand, what constitutes ‘healthy’ and, on the other, who it is that is leaving them. To this end, it is essential to understand ‘what good looks like’.
 
This means identifying the type of people that you need now and in the future in order to be successful. It means understanding individuals’ intellectual abilities, values, motivations, behaviour and experience in order to see whether they fit in with today’s business requirements and will continue to do so as such requirements evolve.
 
Another recent report from management accountancy organisation, the CGMA, found that chief executives and chief financial officers generally understood the need for a quality workforce – so much so in fact that 43% partially attributed their failure in hitting key financial targets to ineffective people management.
 
Talent maps
 
About the same number also indicated that inefficiency had reduced the ability of their organisation to innovate.
 
But a talent map can help in such circumstances. A lot of organisations use them in order to identify their rising stars and undertake succession planning, but rarely much more broadly than that, and certainly not for each employee.
 
They also don’t use them as the basis of an attrition plan. The idea here is that, if an employer discovers they are losing people with low potential and low capability, it could be that they see a high attrition rate as a positive thing. But if those leaving are rising stars, it is clear that they have a problem.
 
In order to understand what attrition rates mean for your business, however, it is necessary to understand the underlying data.
 
But targeting and monitoring staff turnover rates based on your talent map can help to stimulate conversations about what attrition rates would be considered ideal –75% among the 15% least valuable members of your workforce and less than 5% in the most valuable, for example – in order to develop actionable and targeted people strategies that can be monitored and measured effectively.
 
Another thing to think about is that you are unlikely to derive any benefit from having high attrition rates if you don’t replace those leaving with the right people.
 
This means that it is important to align your recruitment processes and tools with your idea of what good looks like, taking both current capabilities and future potential into account and bearing in mind that hiring based on today’s skills alone does not amount to a sustainable business practice.
 
Top tips
 
  • Stop worrying about whether attrition rates are high or low per se and aim for staff turnover rates that are healthy for your own business
  • Understand what good looks like in order to identify the type of employees that you need now and into the future
  • Create a talent map by understanding what your entire workforce looks like
  • Come up with a plan of action based on your talent map on how to achieve ideal attrition rates
  • Ensure that your talent is provided with suitable development and career opportunities, financial rewards and benefits.

Jess Tilley is a consultant at talent management consultancy, The Chemistry Group.

2 Responses

  1. Is Low Staff Turnover for Losers?

    This article is extremely informative. Some additional points which are worthy of consideration are the following:

    1. Employees must be selected on the basis of merit and motivated through respect, rewards, caring, sharing, appropriate training which takes into account the volatility which exists in the business environment, etc. A business is like a garden which grows weeds from time to time and it is understandable that these weeds must be released from the business enterprise.

    2. Bad bosses adversely affect the emotional health and productivity of employees. Bullying, i.e., criticizing, insulting or degrading employees in the presence of others, being too picky, while assuming that one is perfect, not sharing information as and when required, will impact an employee’s work and his personal life and the problem must not be allowed to escalate. Some managers are too controlling, too suspicious, too pushy, too critical, and hard to please. They forget that workers are free agents, rather than fixed assets. When this continues, an employee may quit due to the cumulative effect of seemingly trivial issues. People leave jobs for opportunities or for circumstantial reasons, but many would have stayed, if treated well enough to warrant a continuation of their employment.

    3. Instead of focusing on mere numbers, leaders, managers, and supervisors should understand that people matter; their recruitment, training and motivation within an ethical team environment will contribute to success in line with corporate goals. First of all, leaders should ensure that they themselves have formal training in the field of business management, instead of belonging to the category of “technicians who have been promoted to supervisory or managerial positions, without ensuring that they have adequate managerial skills.” Sadly, it is often assumed that great technicians have “natural” managerial talents. The result:

    (a)  de-motivated employees,

    (b)  lower productivity,

    (c)   higher employee turnover and increased costs and stress in terms of hiring replacement employees, training them, rebuilding relationships because new employees have to be able to work effectively with existing employees, mistakes due to lack of an in depth knowledge of the areas of responsibility, and so on.

     

    This adversely affects the bottom line and then leaders complain of dwindling profits, even though they themselves are responsible for these dwindling profits!

               Leaders often feel the need to control employees via an aggressive approach, in order to obtain results in line with corporate goals. If people are selected on the basis of merit and motivated accordingly, via respect, caring and sharing, etc., there should not be any need for aggression, in a family-based approach to participative management.

    Maxwell Pinto, Business Author

    http://www.amazon.com/s/ref=sr_nr_i_1?rh=k%3Amaxwell+pinto%2Ci%3Adigital-text&keywords=maxwell+pinto&ie=UTF8&qid=1323793453

  2. Attrition rates

    A very interesting and thought-provoking post.

    However, I once worked for a retail company that had horrendous attrition rates among the front line teams. There were at least two causes for this – one was the recruitment policy of only employing people who were good at maths. Potential new recruits were given a maths test as soon as they arrived for their interview – if they ‘failed’ it, they weren’t even interviewed. So we had a front line team who were all great at maths but not brilliant at customer service. We were recruiting for skill, not attitude.

    The other problem was that the managers who were responsible for the front line team members were not recruited by the line managers who were responsible for the teams – there was a recruitment team who looked after all of that, and only one of them had any front line experience.

    This was a company that was aggressively wanting to grow sales figures each year, but was paying little attention to ‘hidden’ costs such are recruitment. We worked out that we were recruiting over 200 new team members every year, with a workforce of around 800, at a cost of at least £2,500 per new team member.

    There are lots of other issues that affect attrition, but I will leave those for others to comment on!

No Image Available
Jess Tilley

Consultant

Read more from Jess Tilley
Newsletter

Get the latest from HRZone.

Subscribe to expert insights on how to create a better workplace for both your business and its people.

 
 
 
 

Thank you.