Following up on the last instalment, let’s imagine that time and resources have now been given to grow your people into politically influential knowledge experts within your company. You have seen them bring in some great results and you are excited about their potential. However, while helping someone grow professionally is one matter, keeping them at the company is another. Boushey and Glynn (2012) note that when an employee leaves a company, finding a suitable replacement can cost the company more than 12 months’ salary. With costs like these and with over 83% of executives claiming that talent is the number one priority for their organisation (LinkedIn Talent Solutions 2017), employee turnover is an important issue.
Understanding the factors that drive employee turnover can allow management to retain valued talent, reduce the rate at which employees leave the organisation, and spend less money on recruitment thereby freeing up resources to invest elsewhere.
To understand employee turnover a little bit better, we will spend the rest of this post highlighting:
- Four types of employee turnover
- Eight main reasons why employees leave
Four types of employee turnover
1. Involuntary turnover is when an organisation wants an employee to leave yet the employee would prefer to stay. “Involuntary turnover” sounds like another way of saying “firing employees,” however this need not be the case, especially if managed properly. In the management consulting industry, involuntary turnover is often referred to as “counselling out.” For example, a firm might give a junior consultant a formal performance review every six months over a two-year period and make it clear whether the consultant is on track to be promoted to the next level of responsibility. Consultants who are not in line to be promoted may be assisted in finding their next role at a client, government agency, or elsewhere. In this way, management consulting firms build a network of successful alumni who they can draw upon later for work.
2. Voluntary turnover is when an employee initiates the process and decides to leave the organisation. There are two types of voluntary turnover.
Desirable turnover is when an unproductive or undesirable employee chooses to leave without being asked
Undesirable turnover is when a valued employee chooses to leave
3. Internal transfers are when an employee moves from one area of the business to another, but stays within the company
4. Retirement is when an employee resigns and doesn’t seek employment elsewhere. This would include workers who leave due to old age, but also workers who leave due to illness or to become stay at home parents.
Voluntary Turnover is the type of turnover that is of primary interest to managers. Involuntary turnover is desirable, internal transfers are under the control of management, and employee retirement is unavoidable. Research has found that the likelihood of employees voluntarily choosing to leave an organisation is heavily influenced by managerial and organisational practices (Liu, 2014)
This is good news since it means organisations can reduce voluntary turnover by improving the way they behave. However, to do this, an organisation needs to figure out why people are leaving. So, what are the main reasons that employees decide to jump ship?
Eight reasons why employees choose to leave
There are four primary reasons why employees voluntarily choose to leave organisations:
1. Material – The employee is inadequately rewarded, receives a better offer elsewhere, or feels as though the amount or quality of the work they produce is not being compensated respectfully.
2. Opportunity – The organisational environment does not encourage or enable success, provide opportunities for career advancement, or support professional growth and development.
3. Organisational – There are too many workplace conflicts, relationships between bosses and employees are complicated or strained, or there is a lack of trust in the organisation or in the leadership team.
4. Personal – An employee lacks challenging responsibilities, recognition for work well done, influence or authority within the organisation, or sufficient youth and vitality to keep pace with the demands of the role.
In addition to these four primary reasons, there are four other reasons why employees may voluntarily decide to leave an organisation:
5. Industry dynamics –In a competitive industry that seeks top talent, like technology or management consulting, employee expertise is highly sought after making it more likely that they will be headhunted away if offered a better package.
6. Income inequality – If there is a large difference in income between internal employees and externally hired consultants, then employees have an incentive to leave and become consultants.
7. Level of education – Employees with more education usually have more opportunities available to them, and therefore have higher turnover rates.
8. Personal life dependency – Employees leave demanding professions like management consulting and go into industry in order to free up time to focus on their personal lives e.g. to have or raise children
In this post, we identified four types of employee turnover and highlighted eight key reasons why employees leave organisations. Stay tuned for the next instalment in which we will explore the negative consequences of high turnover rates, and ways to reduce employee turnover.
Aneta Kosinska is a Polish-Canadian and soon to be dual master degree Ivey MSc + CEMS MIM alumni. Having worked on consulting projects in North America, Asia and Europe she has developed an international mindset with an edge in technology and culture management.
Image: Modire
References:
Boushey,H., Glynn,S. (2012). There Are Significant Business Costs to Replacing Employees. Retreived from: https://www.americanprogress.org/issues/economy/reports/2012/11/16/44464/there-are-significant-business-costs-to-replacing-employees/
LinkedIn Talent Solutions (2016). New Report Reveals the Trends That Will Define Recruiting in 2017. Retreived from: https://business.linkedin.com/talent-solutions/blog/recruiting-strategy/2016/7-trends-that-will-define-recruiting-in-2017-infographic
Liu J. L. (2014). Main Causes of Voluntary employee turnover: a study of factors and their relationship with expectations and preferences. Retrieved from http://repositorio.uchile.cl/bitstream/handle/2250/129705/Main%20causes%20of%20voluntary%20employee%20turnover%20%20a%20study%20of%20factors%20and%20their%20r.pdf?sequence=1
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