Ten Effective Strategies to Reduce Employee Turnover

- By Ajay Kumar | July 6, 2023
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Needless to say that organizations want to build and retain an efficient resource pool. The resources’ skill set and hard work decide the outcome of your project’s success. Thus, keeping them for the long haul is vital to ensure profitability and business success.

However, despite following the best resource management practices, organizations often face challenges in cracking the ideal resource retention strategy.

Employee expectations go beyond a mere paycheck today. They prefer a rewarding work environment that will provide them with opportunities to grow and excel in their career.

The onus is on decision-makers facilitating an employee-centric culture while considering the firm’s long-term objectives.

This article takes you through some tips you can leverage when formulating a meaningful employee retention strategy and nurturing a positive work environment. But first, let’s understand the term employee turnover.

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1. What is employee turnover?

Employee turnover refers to the rate at which employees leave an organization and are replaced by new hires. It is a measure of the number or percentage of employees who exit a company within a given period, usually on an annual basis. A high turnover rate can indicate issues within the company, like dissatisfaction or poor management practices, while a low turnover rate can suggest a balanced and content workforce.

Turnover can be voluntary and involuntary. Voluntary turnover is when the worker chooses to leave the company due to better job opportunities, burnout, disengagement, workplace conflicts, etc. Involuntary turnover is when the organization decides to terminate the employee due to performance issues, behavioral issues, etc.

Staff turnover can be expensive for companies. Hence, calculating turnover allows organizations to understand the financial impact of losing and replacing employees. In addition, it can help firms find gaps and opportunities for improvement, leading to better company productivity and growth.

2. How to calculate turnover rates?

Turn around rate can be calculated monthly, quarterly or yearly. To calculate the staff turnover rate, divide the total number of employees leaving the company during the specified period by the average number of employees that work within the selected time. Multiply that number by 100.

For instance, the total number of employees working in an organization is 150 and 25 employees quit the firm in a month. The turnover rate will be approximately 16.7 per cent.

The equation is:

Total number of employees leaving the firm/Total number of employees working in the firm *100

That is 25/150*100 = 16.7%.

Knowing what employee turnover is and how to calculate it, let’s understand the factors leading to a turnover.

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3. What are the main causes of employee turnover?

High turnover rates can be an unfavorable condition for organizations. High employee turnover can be attributed to various reasons:

A. Lack of purpose

LinkedIn says companies with a purposeful mission see 49% lower attrition.

Employees are motivated to work in companies that have purposeful missions. Organizations with a strong culture and clear goals and objectives can retain employees better. The inspiring company culture encourages employees to perform better and make their experience at work more purposeful.

B. Absence of career growth and development

When employees do not see a future in their organization, there are chances of high turnover rates. Without clear pathways for development, employees may seek opportunities elsewhere. Workers may leave the organization when they do not offer skill-based training, coaching, mentoring, career development programs, or leadership development programs.

C. Poor management and leadership

“Employees don’t leave the organization; they leave the managers.” This saying holds in companies where unsupportive managers can contribute to employee turnover. Incompetent managers can significantly cause employee stress that can adversely affect their performance. Negative relationships with a supervisor are common reasons workers seek new employment.

D. Work-life imbalance

According to Flexjobs, 82 per cent of respondents say they would be more loyal to their employers if they had flexible work options.

Employees who persistently experience high-stress levels, long working hours, or an imbalance between work and personal life are likely to leave. Improper work-life balance can cause burnout and job dissatisfaction and impact overall well-being.

E. Excessive workload and employee burnout

When employees are overburdened with work, it leads to burnout which is one of the main reasons to quit the organization. At times, increased workloads are not entirely avoidable. For instance, employees might need to put in more work hours during peak seasons or in larger projects with strict deadlines. However, this may lead to dissatisfaction, stress and burnout.

F. Misalignment in organizational culture and values

If employees feel that their values or beliefs do not align with the company’s culture, they may choose to leave. A toxic or unsupportive work environment, lack of inclusion and diversity, or a mismatch between an employee’s and company’s values can all contribute to turnover.

G. Lack of proper recognition

Employees who feel their contributions are unrecognized or appreciated may become disengaged and seek opportunities elsewhere. A lack of reward and recognition programs or a failure to provide timely feedback can contribute to employee dissatisfaction.

H. Poor compensation

When employees are dissatisfied with their salaries or hikes, it may result in high attrition. Employees often consider compensation a significant factor in their decision to stay or leave a company. Employees who believe they are not adequately compensated for their skills, responsibilities, or market value may seek opportunities elsewhere that offer better pay and benefits.

These are some of the major factors that contribute to high employee turnover. Let’s dive deep to understand the consequences of high employee turnover.

4. What is the impact of high employee turnover rate?

High employee turnover lowers the overall efficiency and profitability of the organization. Here are some expected consequences associated with high turnover rates:

A. Increases overall costs

Employees resigning costs a considerable amount to the company. The cost involved in training, educating and providing specific licenses requires money. Moreover, frequently replacing departing employees can be costly as companies must invest in advertising job openings, conducting interviews, and onboarding new hires. Training costs are also significant, as new employees need time and resources to speed up their learning process. High turnover rates can lead to a continuous cycle of recruitment and training, straining the company’s resources.

B. Decreases workplace morale

Labour turnover may negatively impact employee morale. This can arise when employees are overburdened with work due to a lack of a trained workforce causing stress and disengagement. Additionally, new hires may experience low morale as they struggle to learn their duties and responsibilities. Constantly having such an environment will make it difficult for organizations to retain good-quality employees.

C. Lowers employee productivity

When employees leave the organization, existing workers experience a loss of productivity as they spend time training new hires to get attuned to the new work. Lower productivity and sub-par work quality will affect the business’s day-to-day operations. High turnover rates can lower overall output and negatively affect the company’s performance.

D. Loss of institutional knowledge

Experienced employees who quit the organization take their knowledge, skills, and experience with them. This loss of institutional knowledge can harm the organization, especially if they hold critical or specialized roles. New employees may take time to gain the same level of expertise, impacting decision-making, problem-solving, and overall organizational effectiveness.

E. Disruption in team dynamics

Companies with high turnover rates can disrupt team dynamics and working relationships. Cohesion within teams may be affected as members constantly adjust to new colleagues. Continual turnover can lead to decreased morale, increased stress, and a lack of stability, negatively impacting teamwork and collaboration.

F. Impedes company reputation

High-turnover rates can damage a company’s reputation, both internally and externally. Employees may perceive a high turnover rate as a sign of instability, poor management, or an undesirable work environment. Externally, potential candidates may restrain from applying to the company due to its reputation. This will ultimately impact the organization’s brand.

Hence, it is imperative to proactively address the challenges organisations face due to high turnover rates. Now, let’s investigate the importance of reducing employee turnover.

5. Why must organizations reduce employee turnover rates?

Employees are critical to the success of an organization. Hence, companies must ensure that their employees are cared for to reduce staff turnover. Improving employee retention can help organizations save on recruitment, onboarding, training, and lost productivity costs. Retaining talented employees and minimizing the need for frequent replacements can lead to cost savings and improved financial performance.

Furthermore, when employees stay longer, organizations can retain this knowledge, ensuring continuity, smoother operations, and improved decision-making. In addition, when workers are with the company longer, they become more familiar with their roles, processes, and organizational culture. This helps them work more efficiently, improving their performance and productivity.

Moreover, companies with low turnover rates can nurture a more positive work environment, boost employee morale, and increase engagement. Engaged employees are more likely to be motivated, productive, and committed to the company’s success. By reducing turnover, organizations can increase their chances of retaining key talent. Additionally, organizations valuing and retaining their employees tend to have a stronger employer brand.

Lastly, reducing employee turnover is essential for organizations to create a positive work environment, retain top talent, improve financial performance, and achieve long-term success.

These are some potential benefits companies can derive by reducing turnover rates. Let’s know some of the best practices to lower employee turnover.

6. 10 effective strategies to reduce employee turnover

To retain top talent, businesses must take appropriate measures to reduce staff turnover. Organizations must implement specific methods to improve employee retention besides providing career growth opportunities, work-life balance, compensation benefits, and more.

Listed below are a few strategies:

A. Hire the right resources

Hiring a resource should never be a spur-of-the-moment decision. It requires meticulous planning and preparation to ensure the right fit for successful project implementation.

An efficient capacity planning solution identifies the skill gap and helps employers recruit the right talent ahead of time. It provides foresight into the capacity and demand gap and enables you to take suitable measures to mitigate shortages or excesses of resources. Managers can stay forewarned and proactively implement the resourcing treatments such as training, hiring, adjusting timelines, actively marketing excess capacity etc., to bridge this gap.

It eliminates last-minute hiring costs and maintains a quality resource pool to avoid future project bottlenecks.

B. Allocate the right resource to the right job

If managers allocate a task to a resource that does not align with their skill set, it will disengage them and reduce their productivity. If the resources are underqualified, they can feel frustrated, burnout and delay delivery. If the resources are overqualified, they might lose interest and feel their potential is not getting realized. In either case, the chances of turnover are high. Therefore, allocating the right resource to the right job is important to ensure employee and client satisfaction.

Managers must implement an intuitive resource scheduling tool to ensure successful resource allocation across the enterprise. It provides a unified view of their workforce’s skills and schedules and allows you to book suitable projects. When your employees feel their competencies are deployed in the right place, they will feel motivated and continue with your organization.

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C. Optimize workforce utilization

Deloitte survey reveals that “42% of employees have left their job due to burnout”. Overutilization can put employees under immense pressure and can contribute to employee attrition. At the same time, underutilization can lead to disengagement and low morale. Thus, optimizing employees’ utilization is critical to leverage and retain their skills at maximum potential.

Managers must remember that effective utilization is not just about working too many hours. Productivity must go hand in hand with utilization. They must therefore ascertain that employees’ maximum time is booked for strategic/billable work. Spending time on mundane admin tasks or BAU activities will neither put their skill set to the right use nor generate profits for the firm.

Employers can make adequate use of dashboards to measure and get a comprehensive view of employee utilization levels.

Employee satisfaction and enhanced productivity are the key indicators of effective utilization.

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D. Minimize bench time

Once a project gets over and if resources are not scheduled for another project, they will spend bench time until they are allocated a new project. Extended bench time leads to significant issues such as lesser ROI as the resources is not generating revenue for the organization. It can lead to planned attrition which affects a firm’s reputation, as well as unplanned attrition when employees begin to look for other job opportunities for growth and development.

For effective bench management and to reduce unplanned attrition, managers can employ an effective resource management tool to predict resources that will end up on the bench in advance. Project vacancy reports can be used to quickly assign them to billable or strategic work before they land on the bench. If their skills are unsuitable for project vacancies, on-the-job training or reskilling can be used to make them billable. Moreover, advanced planning on pipeline projects will help you allocate them better

E. Organize effective team-building activities

Facilitating strong bonds among colleagues is proven to improve the efficacy of employees and enhance employee engagement. Companies that highly emphasise employee retention must highly value interpersonal relationships. This is because coherent teams result in enhanced communication, lower stress levels, and greater output

According to Goremotely, “extremely connected teams demonstrate a 21% increase in profitability”. Moreover, employees who feel they have made meaningful friendships at the workplace are more likely to stick around.

Managers should therefore invest in team-building activities to promote a cohesive work culture. One example is the buddy system- when new employees join, they are assigned a mentor (buddy) from the same team who hand-holds in following the protocols. The Buddy system ensures the new employee is well integrated into the team and company. Other ways to empower the team include organizing monthly team lunches, weekly informal meetings, etc.

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F. Offer flexible work schedules

In the post-COVID-19 pandemic era, working from home has become the new normal. A healthy work-life balance is an essential aspect of job satisfaction. Flexi-work hours may be a luxury to specific businesses, but adjusting the hours and planning response times gives employees better focus and results in higher efficiency. Studies have shown that flexible-work schedules can enhance the well-being of employees.

Furthermore, when managers consider team members’ skills and interests while assigning work, it enhances employee engagement and productivity. When you consider your resource’s interests, they feel valued, motivating them to perform better.

G. Plan training & development programs

Providing training and development programs displays the commitment given by the company. A resource manager can help the resources by projecting a career path, thereby giving a purpose and setting direction. Managers can implement an Individual Development Plan or IDP to help employees reach short and long-term career goals and improve current job performance. Training facilitates self-growth and will allow the resources to contribute better. They can take up more responsibility in the team or even be eligible for higher roles.

Managers can track the project’s progress and gauge the employee’s key strengths and weaknesses based on how they perform the tasks. Based on this, they can motivate them to learn new skills and practice on the job. When the workforce feels that their goals and objectives are being taken care of, they are likely to stay with the firm for the long haul.

Retraining/upskilling to future-proof your workforce

H. Identify key performers

Every business needs a set of worker bees who are diligent in their work. Employees are expected to show up promptly on time, get the job done, and keep the flow of work going. To effectively grow your company, you need to nurture and reward the top performers for keeping up the employee morale of those who put a little extra into their work.

Employees who go beyond their job description and exhibit leadership deserve a pat on the back with rewards and recognition.
Study reveals that identifying key performers heightens productivity and strategically improves the business. If it gets rewarded, it is highly likely to get repeated!

I. Share regular feedback

Regularly sharing constructive feedback with employees enables them to see themselves from the employer’s perspective. You can acknowledge their strengths and also address the areas of improvement. When they know their leaders are promoting individual development, it will boost their motivation levels and eventually increase retention.

While giving feedback is necessary to help your workforce grow, it is also important to take feedback from them. Employee feedback through surveys and one-on-one sessions is instrumental in sharing their experience and expectations and makes them feel valued. If something is not aligning with their goals, you can work on it as a manager and provide them with more opportunities. Expressing gratitude should also be a part of feedback sessions to acknowledge their work and efforts.

J. Convey the firm’s goal

Employees must share a common goal and know what they are heading towards. Goal setting facilitates staff across the organization to make decisions considering long-term and short-term targets. This process of aligning the company’s goals with employees’ tasks helps them to achieve tangible results.

Moreover, employees are aware of how their work is helping the organization reach milestones. The company’s goal or vision should inspire all employees to share and inculcate in their daily duties. Because if your resources do not have a set goal, they will show disengagement at the workplace, gradually leading to an unexpected turnover.

For Example, the food giant McDonald’s vision is “To be the best quick service restaurant experience. Being the best means providing outstanding quality, service cleanliness, and value to make every restaurant customer smile.” They define their goals to every employee so distinctly as if to define a roadmap to success.

7. Key takeaways

The workforce is the success driver for any organization. In the long haul, companies need profitability & success to thrive and stay relevant in an ever-evolving market. With an evolved employee-centric culture, employers must ensure that they provide an optimistic work environment to retain their top talent.

The strategies mentioned above, coupled with a modern resource management tool, can sort your resource-related worries and help you retain valued talent within the firm.

8. The Glossary


9. The SAVIOM solution

SAVIOM is the market leader in offering the most powerful and configurable solutions for managing enterprise resources efficiently and effectively. Having more than 20 years of experience, this Australian-based MNC has a global presence in over 50 countries. It is also popular with more than 100 customers and helping them to achieve their business goals. SAVIOM also has products for project portfolio management, professional service automation, and workforce planning software which can be easily customized as per business requirements.

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