Understanding, calculating and preventing high employee churn rates
Gain an understanding of employee churn rate, explore the factors influencing it and discover strategies to maintain low employee churn.
Gain an understanding of employee churn rate, explore the factors influencing it and discover strategies to maintain low employee churn.
In today's dynamic industry landscape, employee churn is more than just a statistic. It's a challenge that can profoundly impact an organization’s success and sustainability.
Businesses should be concerned about losing one of their most valuable assets: Their people. Employee churn disrupts workflows and leads to significant costs in recruitment, onboarding and lost productivity. Research suggests that the average cost to replace an employee ranges from half to twice their salary.
To tackle this issue effectively, organizations must understand what affects employee churn, and what steps they can take to lower employee churn rates for long-term retention.
Employee churn rate is a metric that measures the rate at which employees leave a company over a period, typically expressed as a percentage.
To calculate employee churn rate, take the number of employees who have left the company divided by the average number of employees, and multiply that by 100. You can use the following formula:
The distinction between employee churn rate, attrition and turnover lies in their underlying causes and implications.
Employee churn rate | Attrition | Turnover |
Focuses on the rate employees leave the organization. The data can be analyzed to determine reasons for voluntary departure. | A broader concept that encapsulates employee churn, but also covers involuntary employee departures, including layoffs or dismissals. | Considers both employee inflow and outflow. Turnover encompasses both voluntary departures and involuntary departures. |
Taking all three metrics into account allows HR professionals to understand not only the rate of departures but also the impact of those departures on the overall workforce.
Employee churn analysis helps determine patterns and underlying causes of employees leaving. During analysis, organizations collect data on factors like tenure, department, roles and reasons for leaving to spot trends.
Effective churn analysis enables data-driven decision-making, leading to improved retention, employee experience and organizational stability. It provides insights into workforce stability and indicates patterns of personnel leaving, helping management and HR address areas of concern and facilitate retention strategies.
Forbes describes a toxic work culture as one where employees “don’t feel valued, respected or supported,” citing factors such as high stress levels, poor communication from management, lack of trust and few opportunities for advancement. Toxic work environments can begin with poor direction from employers (with a trickle-down effect to employee level), or it can start from the ground up.
C-suites need to provide a clear company vision, communicate consistently and provide constant support for employees. They also need to make sure that they hire motivated workers with positive attitudes toward the company culture and job scope — otherwise, employees may demotivate each other and spread negative opinions that may lead to higher employee churn rates.
While keeping company roles updated in a fast-moving marketplace can be a challenge, companies that fail to define clear career progression paths risk high employee churn.
Employees thrive in environments that foster growth and advancement. Without proper updates and clear direction, employees may seek opportunities elsewhere.
Work Institute started tracking turnover statistics in 2010. Each year, the most cited reason for leaving a job is career development.
Fair compensation — including salary, commissions and bonuses — is crucial for employees, as many equate its financial value to their efforts and output. Benefits are an additional value-add, and often they’re a factor that employees consider when choosing to join or leave a company.
If compensation is below industry average or significantly disproportionate to employees' perceived effort, staff may feel undervalued and seek better-paying positions. Not offering benefits such as health insurance, retirement plans or paid time off can also lead to employee dissatisfaction, higher turnover and difficulty attracting new hires.
What constitutes work-life balance, or lack of it? Each employee defines the ideal work-life balance differently, based on how much leisure and work time they prefer per week. Regardless, several factors can be linked to it. These include high work demands, low control over their own jobs or tasks, unequal workload distribution and inflexible work arrangements.
Employees tend to resign when faced with little to no autonomy over their professional and personal lives, affecting employee churn rates within the company.
Some institutions resist adopting remote work policies due to productivity and security concerns, collaboration communication difficulties and processes that aren’t easily adapted for work-from-home arrangements.
But from an employee perspective, remote or hybrid work arrangements can greatly improve the work experience. Staff have more flexibility, spend less time and money on daily commutes and have mutual trust with employers. Employees who don’t have these privileges at work may start looking for other companies that offer such flexibility.
Companies should leverage the many digital tools available in the market to establish remote communication processes and facilitate virtual collaboration.
> Read more | Fortifying your organization’s remote workforce management
Positive recognition and appreciation are crucial for boosting employee morale. Recognition involves providing feedback based on results or actions tied to employees' achievements, while appreciation represents a simpler, more personal form of feedback.
It matters when management shows employees that their successes in the workplace have made an impact. When leaders fail to acknowledge achievements, recognize the value of their people, share constructive feedback and provide opportunities to develop skills in the workplace, employees may feel unappreciated, less motivated and ready to seek alternative employment.
Sometimes, employee journeys end sooner than expected. A Paychex survey found that more than 80% of respondents who felt undertrained because of a poor onboarding experience plan to leave their jobs soon.
To ensure effective onboarding, employers should provide timely resources, tools and training for new hires. This includes accurate employee documentation management, warm employee welcomes and assistance in adapting to tasks and the work culture. Without these measures, employee onboarding and training can be significantly affected.
Technology can streamline the hiring and onboarding process by enabling smooth communication, collecting paperwork and facilitating the employee's transition into the company and their team — even when done remotely.
Is your HR team relying on inefficient, manual processes? Find out how Toyota North America, Heinen’s and Kwik Trip improved employee engagement and overcame key challenges with process automation.
It’s important to look out for and determine the cause of high employee churn rates, as they can be detrimental for several reasons:
Recognizing the impact of high employee turnover is key for businesses to enhance retention strategies, create a positive work environment and ensure long-term success.
To maintain long-term success within today's competitive business landscape, it’s crucial for organizations to act immediately once high employee churn rates are detected. Here are steps business leaders can take.
Companies should already be making use of employee churn analysis, which can help:
Employers should implement strategies to raise staff morale, including:
By offering competitive compensation and benefits packages, companies demonstrate to staff that their contributions, well-being and satisfaction are valued. Organizations can do this by:
Employees are more likely to stay with organizations that invest in their personal and professional development. Companies should:
Business leaders can address workplace toxicity by:
Versatile work options acknowledge the diverse needs and life circumstances of employees, greatly enhancing job satisfaction and retention. By offering remote work options, companies can also tap into a larger talent pool. It’s important that organizations:
A well-structured onboarding process can significantly reduce early turnover and lower employee churn rates. Companies can enhance onboarding by:
A robust enterprise content management solution should provide a comprehensive suite of features that work together to effectively process, organize, securely store and identify digital assets. This, in turn, empowers organizations to efficiently manage the document life cycle, and ultimately drive productivity and business success.
Hyland’s intelligent document processing (IDP) software leverages the power of AI to remove human touchpoints from ingestion and content management processes.
By automating these tasks, Hyland IDP:
> Read more | The future of intelligent enterprise is AI-powered IDP
By giving HR employees access to the right documents and resources, new employees can have a smooth head start to their roles.
Are you ready to see our innovative HR solutions in action? Request a demo or schedule a meeting today.
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