“Our staff retention is almost too good”. Wow, I hadn’t heard that one for a long time. This was a statement that a new client prospect told me this week. I asked what he meant by this. He said that his staff retention has dropped from around 16% to below 12.5% and he held some mild concern that some staff may have become too comfortable and therefore may not be working to their full potential.
As General Manager of a professional services firm with offices in Sydney, Melbourne and Brisbane this gentleman clearly knew his business. He told me of his engineering and statistics background and his passion for data. Without blinking he was able to state the past three years staff turnover rates, absenteeism figures and detailed salary package information.
So it got me thinking about what the optimal staff turnover rate should be for a business to remain efficient, effective and high performing, whilst avoiding stockpiling ‘static’ employees who just turn up to work for the pay cheque and cruise the day away doing as little as possible.
According to a recent survey by The Australian Human Resources Institute (AHRI) with results taken from 561 human resource professionals the average staff turnover rate in Australia for the past year has been around 
13%. This was down from 18.5% five years ago. AHRI Chairman Peter Wilson was quoted as saying that (13%): “By usual standards, that would be regarded as a number more in keeping with best practice”.
So my potential new client is doing pretty well at 12.5%. Or is he? Can low staff turnover be a bad thing? I believe it can be a bad thing for both the organisation and its people. There is much to be said for a stable workforce if you are a manager and a regular, reliable income stream if you are an employee.
However managers who are too focused on running a stable team may overlook opportunities to source new talent and complementary skills if they don’t continually refresh their talent stocks.
What is the cost to an organisation of not effectively managing its workforce through the total employment lifecycle? A healthy organisation keeps people challenged, engaged and provides promotion opportunities from within. It understands that most jobs have finite lifespans whether that is six months, a year, five years or more because people generally want to continue to learn and do more, and often the needs of the business change over time. So with that comes a time when it is fine for staff to leave the organisation altogether. In fact, it can be quite a healthy exercise for both parties.
As a business owner, CEO, General Manager or other senior executive, getting this balance right is critical to running a great organisation. There is enormous value in really managing the hiring, induction, training, daily output, succession and promotion processes along with the smooth exiting of employees. But how to do this effectively in a way that benefits both the organisation and its people is the focus of ongoing boardroom debate.
On the other hand, if staff are unproductive and disengaged, yet turn up to work every day purely a means to an end with regular pay in the bank, they may be ignoring opportunities to up skill elsewhere or reinvigorate their passion for work with another company or even in a different role. And surely there is a wider impact on one’s life when they arrive home from a job they don’t enjoy and take out frustrations on their loved ones.
The 2012 Insync Surveys Retention Review is an analysis of exit survey responses from over 11 000 employees and 40 Australian based organisations over a four and a half year period assessing reasons for leaving employment. There are several themes that came out of this study but the one that really jumped out at me is the fact that 80% of staff turnover is within the employer’s control. This includes the job itself, pay and conditions, and work relationships. So for those organisations with high staff turnover much can be done to improve the situation. High staff turnover can hurt productively, morale, customer service delivery and cost a great deal of money. It can be the difference between a profitable business and one that goes bust.
But what about those organisations like the one I mentioned earlier that have very low turnover. Can low staff turnover hurt their business? Maybe the General Manager I was speaking to has simply got it sussed out and his company is an absolute best practice employer. Nothing wrong with that if the business is thriving, highly profitable with staff and management who are fully engaged and they have customers who are giving repeat business as well as referring other clients.
But it maybe they have an over friendly management style and they are not challenging their staff nor stretching them beyond their areas of comfort. Maybe opportunities are being missed along the way and taken by competitors who are hungrier and more prepared to innovate and offer additional value to their customers? And maybe employees are not being encouraged to develop new skills to make themselves more valuable in the employment market. Who knows!
I guess it comes down to what the individual employee wants from their job and career and also what the business owners and managers want for their organisation.
Ben Walsh – General Manager; Recruitment