The Beautiful Upside of Employee Turnover

Why Losing Employees Can be a Good Thing

Losing employees can be a good thing.

Leaders can simply identify what is a good employee turnover rate for their organization and team. Then develop a strategy to reap the advantages. Once an HR leader called me and requested a strategy to reduce their high turnover rate. He reported that their turnover rate of 3 percent was far too high. When I asked what his ideal employee turnover rate was he said, “0 percent, of course.”

0 percent is rarely the right employee turnover goal, because some turnover is good. It strengthens and invigorates the organization by removing those who are not a good fit and creates space for new employees with fresh ideas and new energy. It also creates space for employees to grow into roles of greater responsibility which is an essential ingredient in retaining them.

You need employee turnover; the only question is how much? Determine your organization’s ideal turnover rate answering these three questions:

1. What is the turnover rate most closely aligned with your company’s goals?

Your turnover rate should support your organization’s overall strategy. If your goals are related to rapid growth, this requires a fast hiring process and thus can create a higher turnover rate. If your organization is steadily growing, then target a lower rate. If you are striving to build leadership pipeline, where holding on to top talent is especially critical, a target an even lower turnover rate.

2. What is your current turnover rate?

Identify your current turnover rate before you start making plans to change it.This will help you create a realistic target and gives you a clear point to measure the effectiveness of your efforts to change it.If you’re at 30% today, avoid an overly ambitious target of 3% in the next 3 months.

3. What is the competitive environment for top employees?

Your right turnover rate for your organization does not exist in a vacuum.Consider the likelihood of your top talent getting lured away by prioritzing several key external factors:

  • Is your industry experiencing growth, stability, or a downturn?
  • Are there other job options available to employees in the same city or region?
  • Is the economy expanding or in a slow period?

In 2008, there were not as many job options for top performers, so it was often easier to maintainer a lower turnover rate. Today, job creation and availability is at a 9-year high, which often drives up turnover. After you have answered these three questions, you can also go deeper and set turnover rate targets by position and employee level in the organization. Then chart your path forward and establish the turnover rate that is a competitive advantage for your organization and team.



P.S: Download my free report, 7 Strategies for Senior Leaders To Get the Most Out of Their Workforce

A modified version of this article originally appeared in Ben Fanning’s Inc Magazine column