Our Ultimate Guide To Reduce Employee Turnover and Increase Retention

Put on your seatbelt, because our team of experts has been developing professional human resources competency for more than 100 years altogether.  We are going to give you the ultimate guide with real strategies that will allow you to bring turnover to a halt. 

What is Employee Turnover?

Turnover measures how many employees leave and must be replaced over time.

Employee turnover is the rate at which employees leave an organization and have to be replaced. Turnover is measured over a specific period of time (usually one year) and is usually expressed as a percentage.

Turnover can substantially impact organizational performance and bottom line.

Managing turnover requires understanding what causes it.

There are two main types of turnover:

Voluntary Turnover: This occurs when employees voluntarily choose to leave the organization. Common reasons for voluntary turnover include dissatisfaction, limited career opportunities, stressful work environment, or inadequate compensation. Employees may quit to pursue better opportunities elsewhere.

Involuntary Turnover: This occurs when employees have to leave the organization against their will. Common causes are layoffs, firings, retirements, or other dismissals initiated by the employer. Involuntary turnover stems from organizational restructuring, performance issues, or budget cuts.

Both types of turnover lead to vacancies that need to be filled by new hires. The costs of turnover include recruiting, interviewing, hiring, onboarding and training replacements. There are also indirect productivity costs as new hires learn their roles.

High turnover disrupts organizational stability and continuity. Loss of talented employees means loss of skills, experience and institutional knowledge. This drain on human capital can reduce innovation and growth.

What Is Attrition?

Attrition refers to the gradual loss of employees over time through voluntary resignations, retirements, firings, etc. It is the reduction in workforce due to natural causes rather than layoffs. Technically and historically, attrition is used to reference loss of personnel that is purposely NOT replaced by the company.

In other words, attrition is a reduction in headcount that the company lets happen and dos not work to counteract.

Is Attrition Different Than Turnover?

Yes. Although the terms attrition and turnover are sometimes used interchangeably, they refer to related but distinct concepts:

• Turnover considers the entire cycle of employees leaving and being replaced. It focuses on the equilibrium of arrivals vs. departures.
• Attrition solely focuses on employees that leave, rather than also incorporating replacement hires. It looks only at the outflow rather than the equilibrium.
• Turnover emphasizes the ratio of filled positions changing over time. Attrition emphasizes the absolute headcount reduction over time.
• Turnover conveys a sense of fluidity and motion, with employees constantly cycling in and out. Attrition conveys a sense of gradual shrinkage and erosion.

So in summary, turnover refers to the entire process of employees leaving and being replaced. Attrition narrowly focuses on those that leave without considering any new hires. Both measure workforce reductions, but attrition focuses exclusively on the outflows.

Is Churn the Same As Turnover?

No. "Churn" refers to customers while "turnover" refers to employees.

While churn and turnover are related concepts, they have some distinct differences.

Churn refers specifically to the rate at which customers stop doing business or end a subscription with a company. It measures the percentage of customers lost over a given period. High churn means a company must continuously acquire new customers just to maintain the same level of sales revenue.

In contrast, employee turnover refers to the rate at which employees leave an organization. It measures what percentage of staff leave during a set time period and must be replaced with new hires. High turnover signifies an unhealthy or unstable workplace.

While both concepts deal with loss rates, churn deals with the loss of customers while turnover deals with the loss of employees. They measure fundamentally different things.

There are some similarities though. Both high churn and high turnover can signal deeper issues that need to be addressed. For churn, it may reflect problems with product quality, customer service, pricing, or changing tastes. For turnover, it may indicate poor company culture, compensation, lack of growth opportunities, or ineffective management.

Additionally, both churn and turnover lead to costs for the company, such as marketing expenses to acquire new customers or HR expenses to recruit and onboard new employees. Minimizing churn and turnover helps optimize spending.

The key difference remains that churn solely measures customer losses while turnover measures employee losses. They are distinct metrics, although excessive levels of either one can hamper a company's performance and growth. Evaluating them requires looking at different data sets and implementing different mitigation strategies.

Why Worry About How to Reduce Employee Turnover?

Employee turnover is expensive. Various studies estimate the cost of replacing an employee to be anywhere from 50% to 200% of that employee's annual salary. This includes the costs of recruiting, interviewing, hiring, onboarding and training a new employee, as well as lost productivity while the role remains vacant. High turnover also causes the loss of organizational knowledge and experience, disrupts continuity, and can lower morale for remaining employees who have to pick up the slack. Reducing turnover has a direct positive impact on a company's bottom line.

In addition to the financial costs, employee turnover negatively impacts a company's culture and ability to build institutional knowledge. Relationships and rapport between team members are lost when someone leaves. Experienced employees take their knowledge with them, including information about customers, vendors, processes and why decisions were made. A revolving door of employees hinders a company's ability to learn from experiences over time. Stability in the workforce provides time to perfect processes, improve products and services based on feedback, and leverage what has worked well.

When employees leave, their institutional knowledge leaves with them.

Some examples of lost knowledge include:

• Knowledge of key contacts such as vendors, partners and clients
• Understanding of company systems, software, processes and infrastructure
• Awareness of why past decisions were made
• Familiarity with day-to-day responsibilities and tasks
• Historical interactions with various teams or departments
• Access to past communications, data or documents

Encouragement for Leaders

Now is the time for decisive action to engage your people for the long haul.

Losing top talent to "greener pastures" saps company knowledge, productivity and culture. Recruiting and onboarding replacements strains time and budgets. Yet quick fixes like across-the-board raises temporarily mask deeper issues driving turnover.

The hard truth? Retention starts from within. Analyze your culture honestly - do employees feel valued, trusted, heard? Do leaders model empathy, integrity and work-life balance? Or does overwork and favoritism spread?

Probe for root causes of resignations. Compensation often tops the list, but dig deeper. Do exit interviews reveal poor management, lack of recognition or unhealthy team dynamics? Preventable turnover indicates areas needing change.

Cultures thriving on collaboration and transparency retain innovation and experience. Employees give their all when they feel cared for holistically, not just regarded as “resources.”

As an organization’s heartbeat, you set the tone. Double down on onboarding new hires effectively and celebrating tenured employees. Keep listening and taking action on engagement survey feedback. Lead with the wisdom that businesses don’t succeed - people do.

The cost of inaction is continual talent bleed. But united in purpose, engaged teams transform companies. They propel competitive advantage that no competitor can replicate.

Take pride in the privilege you have to steward an environment where all employees reach their potential. The dividends to your culture and bottom line will astound you.