Average Employee Turnover Rate: Analysis and Strategy for 2017

Jan 3, 2017 4:51:31 PM / by Involvesoft Marketing

Employee Turnover Rates

Quantifying Average Employee Turnover Rate

Every year companies face the challenge of retaining top talent and develop strategies to maintain their highest performers. Quantifying the impact of their average employee turnover rate is a must in today's ever evolving job market. Even more so when it comes to retaining high-level employees in management and leadership positions. Human resource departments face major corporate issues due to the high cost of finding adequate replacements that can achieve strong performance metrics, while also nurturing corporate culture and team building. Not to mention the opportunity cost leveraged when it comes to finding the right replacement within an adequate time frame.

Sources estimate that replacing the right employee can cost between 30% to 400% (average stands at 150%) of an employee's annual salary, conditioned by the individual's skill, performance, network, etc… According to a study from Allied Workforce Mobility Survey, almost 30% of companies reported that it takes at least a year or more for new talent to leverage full productivity.

Who’s Leaving?

In most cases, it is healthy for an organization to have an average employee turnover that does not overlap their industry average retention rate and its beyond 0%. Mainly to sustain a company culture of innovation, leverage growth, and empower diversity. The different turnover profiles will help you understand the impact your average retention rate has in the corporation [1]:

  • Enthusiastic Leavers (Voluntary Turnover): refers to employees that have the want or have the option to pursue a career elsewhere.
  • Reluctant Leavers: entails employees that have a desire to remain in the corporation but will have to pursue a career elsewhere.
  • Enthusiastic Stayers: these are employees who have a desire to remain in the organization and have the leverage to maintain their positions.

Appraising Your Average Employee Turnover Rate

Some human resource managers are still aiming at an unfounded 10% average employee turnover rate without ever analyzing their particular average turnover rate based on their particular industry niche. On the other hand, managers that base their goals on average retention rate tend to deliver within realistic expectations and satisfy shareholders.

When analyzing turnover, human resource managers typically evaluate their retention rate based on voluntary turnover in contrast to total turnover in their department. Let's take a look at the average turnover rate based on industry for 2015:

2015 Turnover Rates By Industry via Compensation Force

Improving Your Average Employee Turnover Rate Through Recruitment Analysis

The following are employee attributes to be analyzed in order to reduce recruitment cost and sustain corporate growth [2]:

  • Proactive Professionalism: proactive employees are likely to have greater career commitments, and also tend to elaborate a powerful vision in terms of corporate objectives due to their drive to tackle challenges and objectives. Instead of jumping ship and evaluate other career options when things get tough, these individuals are typically stimulated by corporate challenges and growth.
  • Career Satisfaction: divert from employees that have second thoughts in terms of their career paths and options. These individuals are highly likely to participate in job search initiatives and interviews.
  • Job Embeddedness: these individuals strive to find an employment position that is embedded in their job and their community. These individuals showcase a distinctive sense of pride in what they do, therefore, tend to have a greater level of commitment to their corporation.
  • Job Opportunities: the level of competitiveness or saturation for a particular job position is also an indication to evaluate when setting turnover rate expectations. Human resources face the challenge to stay competitive in terms of leveraging suitable employment salary alternatives, options, and benefits to leverage long-term commitment from these individuals.
Next Steps

Quantifying the cost of losing your greatest talent is fundamental to properly strategize an optimal retention plan. It also depicts how human resources should utilize their budget to calibrate their average employee turnover rate to suit their corporate objectives. Additionally, keep a close eye on your industry average turnover rate to calibrate appropriate expectations within departments and shareholders. Ultimately, make sure your company monitors employee attributes that have a direct correlation with retention, especially when it comes to keeping top talent.

Elaborating strategies to nurture and challenge your employees is a must to maintain corporate competitiveness, discover how your employee alignment impacts your employee turnover ratio.

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  • [1] The effects of proximal withdrawal states on job attitudes, job searching, intent to leave, and employee turnover.
    Li, Junchao (Jason); Lee, Thomas W.; Mitchell, Terence R.; Hom, Peter W.; Griffeth, Rodger W.
    Journal of Applied Psychology, Vol 101(10), Oct 2016, 1436-1456. http://dx.doi.org/10.1037/apl0000147
  • [2] Lang, J., Kern, M., & Zapf, D. (2016). Retaining High Achievers in Times of Demographic Change. The Effects of Proactivity, Career Satisfaction and Job Embeddedness on Voluntary Turnover. Psychology, 7, 1545-1561. http://dx.doi.org/10.4236/psych.2016.713150

Topics: Reducing Employee Turnover, Employee Retention