Does a Low Employee Turnover Rate Yield Less Profit?

Jan 5, 2017 3:44:22 PM / by Involvesoft Marketing

Understanding The Difference Between High and Low Employee Turnover Rates

Employee Turnover Rates and Profitability

Contrary to popular belief, can lower employee turnover rates actually yield you less profit? It seems pretty crazy to think that as you retain employees, your profits decrease. But let's dive a little deeper into this. What’s the big talk about sustainability in the workplace today? Some questions that arouse could include, how can I change my turnover rates, how can I retain millennial talent, or how can I let go of employees without hurting my business? It’s the talk of 2018. As the new year gets ready to begin, it’s a good time to reflect on what your long-term objectives are.

So what’s the difference between high and low employee turnover rates? Low turnover rates fall in the category of good business practices. It is a reassurance that the employees hired are the best fit for the company they work for. Employees stay longer, which on the surface could resemble a healthy workplace. However, another meaning may be hidden here. When employees are in a company for a long time a constant maintenance check needs to be in place. Sure,  you’ll have great trustworthy employees, but you’ll need to make it a conscious effort to keep them around. This is where an employee alignment program can come to good use. If done right, low employee turnover rates are far better for the longevity of your company.

High turnover rates could mean one of two things. Either the turnovers in your company are voluntary or involuntary. A voluntary turnover can include a situation where employees choose to leave a company (which you do not want). An involuntary turnover is when employees are let go for specific reasons. When turnover rates are high, employees are constantly being trained and let go, propelling individuals into a continuous cycle of a cog in a working machine. In this case there is an intention for a high turnover rate.

Intentional High Turnover Rates

Cycling through employees, how could that be any good? There are 3 main reasons for intentional high turnover rates. These include:
• Staying Competitive
• Avoiding Contentment
• Improving Talent

Staying competitive is crucial in a world of constant change and innovation. According to Rupert Murdoch, “The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow." In some cases, companies that remain competitive need to constantly change and adapt to new environments. Change can be tough, especially for those who have been established in their workplace and do the same tasks day to day. Without an open mind, it’s hard to adapt to new environments. This is where an intention for high turnover rates comes to play. Being able to cycle through new individuals allows the freedom of not having to alter the mind of a fixed mindset employee.

Avoiding contentment also comes to play when trying to increase profits. They say the fruit of failure comes from the seeds of success. Often when employees become too complacent where they are, they stop experimenting with new things. The moment you stop challenging yourself is the moment you begin to lose your momentum. Many companies that engage in intentionally high turnover rates do this because they want a forever-altering environment.

The rate at which technology is evolving is the driving force for constantly looking for the next best thing. In the case of intentional high turnover rates, it’s trying to cycle through various employees until the best one is found. The problem with this mindset is that a company will forever be hiring “B” players. The individuals that do as they are told and are not expected to think outside of the box. Sure, you’ll find those “A” players eventually, but until you do you’ll be spending most of your time hiring and firing people that only work in exchange for a salary.

So what’s next? We’ve gone over the fact that some companies do choose to have high turnover rates in the hopes that it will increase their profits. Sure it, works, depending on your company's needs, but there is no room for innovation and long-term value between employees and employers.

Why Low Employee Turnover Rates Give You The Most Value

Value, something money cannot buy. Here’s a reason why you may want to consider keeping your turnover rates low; alignment and retention of employees. Remember the talk about “B” players? Why not hire passionate employees and turn them into “A” players? Being able to actually retain a group of individuals may not yield an increase in profits right away, but your ROI will be far greater in the future. Building and running a company isn’t a sprint, it’s a marathon. Establish meaningful connections and learn to have a love for people. Giving back to society will take your business a long way.

Find out how Involve is helping decrease turnover rates and increase employee retention through a customized employee alignment plan. Request a Demo to learn more.

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Topics: Employee Engagement, Reducing Employee Turnover