How to Reduce Employee Turnover

Most people know what to expect when it comes to a traditional performance appraisal, but there are some extra tips and tricks to make them as useful for your team, and ultimately, your business. 

Conducting an effective employee appraisal is an essential part of managing a high-performing team. Why? Well, appraisals give managers the opportunity to evaluate an employee's performance, set future goals, and create development plans. When done correctly, appraisals provide valuable feedback that helps employees grow in their roles while aligning their efforts with the company's objectives. But, if they’re not handled properly, appraisals can feel stressful or even demotivating for employees, so it is important to get to grips with the key steps for conducting fair and constructive employee appraisals. 

In this guide, we’ll take you through everything you need to know, including goal setting, providing regular feedback, evaluating performance, creating development plans, and ensuring everything is documented for HR records.

Our top strategies for retaining talent

Imagine a world where employees are so engaged and satisfied that they never want to leave. Sounds too good to be true, right?

Employee turnover is a huge challenge that many organisations face, and reducing it is critical if an organisation wants to remain productive, stable, and have a motivated workforce. High turnover rates can disrupt team dynamics, increase recruitment costs, and negatively impact company culture, but fortunately, there are proven strategies to reduce employee turnover and keep talented workers engaged.

What is employee turnover?

Employee turnover is the rate at which employees leave an organisation and are replaced by new employees. This includes both voluntary turnover, where employees choose to leave the company, and involuntary turnover, which happens when employees are dismissed or laid off.

Turnover can be measured over specific periods, but is typically calculated annually, and is expressed as a percentage of the total workforce. A high turnover rate can be a signal of deeper issues within an organisation, such as dissatisfaction with the work environment, lack of growth opportunities, or poor management, which is why a high turnover rate often has a negative association. 

Why does employee turnover matter?

Employee turnover matters to any organisation, not just because high turnover rates come with significant costs, but because recruiting and training new employees is time-consuming and expensive. It has also been understood that high turnover can lower team morale and disrupt day-to-day operations and processes, which can lead to decreased productivity. In general, retaining employees who are engaged, skilled, and aligned with the company’s goals is far more cost-effective than constantly replacing team members, which is why organisations keep track and manage their turnover rates.

What is a good employee turnover rate?

The ideal employee turnover rate varies quite significantly by industry, but a general benchmark is that a rate between 10-15% annually is considered healthy. Some industries, like retail or hospitality, naturally experience higher turnover due to the nature of the work, whereas professional services or industries that require highly skilled workers might aim for lower turnover rates.

It’s important to consider though that turnover is not always a bad thing; there are positives that come with a certain amount of turnover, for example new recruits which can bring fresh ideas and energy into the organisation. However, the key is to identify when turnover becomes excessive and detrimental to the company's success, and to take proactive steps to reduce it - and that is where our strategies come in. 

Strategies to reduce employee turnover

There isn’t a one-size-fits-all approach to reducing employee turnover, and it definitely requires a multi-faceted approach that touches upon everything from compensation to company culture. On a daily basis, HR managers face the challenge of finding high-quality applicants and have to  ensure that they retain top talent. Of course, retaining that talent will depend on the organisation, the way it functions as well as its culture - so what strategies can be put in place to reduce employee turnover? 

1. Recognise and reward employees

One of the main reasons employees leave a company is dissatisfaction with their compensation or the benefits that a company has to offer. These days, offering a competitive salary isn’t enough, and many top applicants expect benefits as part of their reward package. Employees are much more likely to stay with a company that pays them fairly and provides a benefits package that meets their needs.

How can you make sure your compensation is and remains competitive? 

• Benchmark salaries - It is highly recommended to regularly review industry standards for similar roles to ensure your pay is competitive and attractive in a crowded market. Compensation should reflect not only market rates but also the skills and experience of your employees.
• Comprehensive range of benefits - As well as a competitive salary, consider offering a robust benefits package that could include healthcare, pension schemes, and wellness programmes. Additional perks such as flexible working conditions, paid time off, and mental health support can also make a significant difference in attracting and retaining top talent.
  
  

2. Provide career development opportunities

Employees want to know that they have room to grow within the organisation. Without clear career paths or opportunities for development, employees can often start to feel stuck, or as though their role has gone stagnant, and may start seeking new opportunities elsewhere. Giving employees the tools and motivation to progress in their career can boost employee engagement, improve their skill sets, and reduce turnover.

How to support employee growth:

• Offer training and development opportunities - Employees appreciate businesses that invest in their professional growth, so we recommend offering regular training opportunities, whether through in-house workshops, online courses, or external certifications, to keep motivation high. 
• Offer mentors and peer support - Pairing employees with mentors who can guide them in their career development and help them navigate challenges can not only provide support, but also helps to build connections and could open up future opportunities within the organisation.
• Internally promoting - Employees who see that their hard work is rewarded with a promotion are more likely to remain loyal to the organisation. Internally promoting and recruiting employees from within the business is a great way of keeping motivation and productivity levels up.
  
  

3. Encourage a culture that is inclusive and supportive

Although it may seem obvious, company culture plays a big role in employee retention. It goes without saying that a supportive, inclusive, and positive work environment makes employees feel valued and connected to their colleagues. On the other hand, a toxic or negative culture can push people to leave, even if they are satisfied with other aspects of their job.

How to build a great company culture: 

• Open communication - Foster open, transparent communication between management and employees. Employees should feel heard and able to voice concerns or suggestions without fear of reprisal.
• Work-life balance - Promote work-life balance by offering flexible working conditions, such as remote work options or flexible hours. Overworked employees are more likely to burn out, leading to higher turnover.
• Inclusivity and diversity - Cultivate an inclusive culture where employees from all backgrounds feel respected and valued. Diversity brings a wide range of perspectives, which can enhance creativity and innovation in the workplace.
  
  

4. Get to the bottom of why employees leave with exit interviews

When employees resign, exit interviews offer a unique opportunity to gain valuable insights into the reasons behind why they want to leave. These interviews can shed light on potential organisational problems, such as ineffective leadership, lack of development, or dissatisfaction with pay, which can all help to shape and drive actionable change to reduce turnover. 

How to get the most from exit interviews:

• Always ask open-ended questions to employees - Encourage employees who have decided to leave to share candid feedback on what led to their decision to move on. Open-ended questions can be a great method of uncovering deeper issues that might otherwise go unnoticed.
• Keep note of common themes and reasons for leaving - Collect and analyse data from multiple exit interviews to identify trends or recurring problems. If multiple employees mention similar reasons for leaving, it’s likely a systemic issue that needs to be addressed and fixed if you’re aiming to reduce turnover. 
• Act on feedback from employees - There’s no point in conducting exit interviews unless you actually act on the change. Use the insights gained from exit interviews to implement changes that could reduce future turnover. Whether it's adjusting management styles, revising compensation packages, or improving work conditions, taking action based on employee feedback can lead to significant improvements.
  
  
  

Reducing employee turnover for a more stable workforce

While employee turnover is an inevitable aspect of business, excessive turnover can significantly harm productivity, morale, and financial performance if it continues for too long. To mitigate these negative effects, organisations must take a proactive approach to address key factors such as compensation, career development, company culture, employee recognition, and exit interviews.

Remember, employee retention isn't just about keeping workers in their roles, it's about creating a workplace where people want to stay, grow, and thrive.

Get in touch with GoodShape today to learn how our services can help you retain top talent through absence management and health monitoring.