An employee leaving a company can often be viewed as damaging, however, you could argue that actually, staff staying too long with a company can be just as harmful. What you don’t want is de-motivated and poor performing employees staying with you just because they’re ‘comfortable’.
Organisations need some amount of churn to ensure maintain high levels of motivation and ensure fresh blood is injected to generate new ideas and working practices which will, in turn, help a company to grow.
The point at which you need to worry and take stock is when turnover has a negative effect on company performance.
Why are employees leaving?
There are three main reasons why your staff could be looking to leave, as described below:
- Dissatisfaction in their current role/company
- A change in ‘home’ circumstances
- Attracted by a new opportunity in a different company
The first is under your control, the second, out of your control and the third, a potential mix of both. Looking at the above, it’s clear to see the impact of employee engagement, talent management and retention strategies and implementation, or of course, lack of…..If employees don’t feel appreciated, challenged and satisfied, they will become demotivated and potentially look for a new role in another business.
So, is there such a thing as the optimum churn rate and if there is, how do we even begin to calculate this?
The average churn
In the UK, the average employee attrition rate is 15% with varying rates for different sectors. For example, private sector tends to have a slightly higher churn, whereas the public sector , education, legal and accountancy tend to be lower.
Calculating your attrition rate
– Keep a record of the amount of employees leaving your company month-by-month and compare this to previous years.
I will use an example to explain to calculate the monthly attrition %:
- Amount of employees at the beginning of April: (1000) + new starters (60) – leavers (112) = 948 employees
- (1000 + 948) / 2 = 974
- (112 / 948) x 100 = 11.8% turnover rate for April
This is the basic calculation method per month but click here to show the formula for quarterly and annual attrition rates also.
– Compare your rates to those of your competitors where possible to understand your sector’s norm.
– You can break down attrition rates by location, gender, level, age, department etc. as well to see where the highest turnover lays. The most unhealthy losses are high performers and so you can see why it’s so important to track your rates.
Now to answer the question….
Over time, when you have collated the necessary information, it’s then important to understand why people are leaving; of course this links in with the aforementioned talent management, employee engageement and retention strategies as well as recruitment and performance management.
I don’t really believe there can be a general optimum churn rate, but what there can be is a healthy turnover rate for your specific business, and that’s what you need to decipher what’s right for your business and then the next steps to redress the situation.