Business Case –Turnover

1. Table of Contents
1. Turnover. Definition and Implications .................................................................................................................... 1
1.1 Definition ........................................................................................................................................................ 1
1.2 Implications .................................................................................................................................................... 2
2. Causes and Effects .................................................................................................................................................. 2
2.1 Causes ............................................................................................................................................................. 2
2.1.1 Lack of Growth and Progression ............................................................................................................. 2
2.1.2 Being Overworked .................................................................................................................................. 2
2.1.3 Lack of Feedback and Recognition ......................................................................................................... 2
2.1.4 Micromanagement ................................................................................................................................. 3
2.1.5 Poor Employee Selection ........................................................................................................................ 3
2.2 Effects ............................................................................................................................................................. 3
2.2.1 Loss of Company Knowledge .................................................................................................................. 3
2.2.2 Decreased Efficiency ............................................................................................................................... 3
2.2.3 Low Workplace Morale........................................................................................................................... 3
3. Countermeasures ................................................................................................................................................... 3
3.1 Rewards and Compensations ......................................................................................................................... 3
3.2 Improvement of Selection Process ................................................................................................................. 3
3.3 Provide Considerate and Thorough Feedback................................................................................................ 4

1. Turnover. Definition and Implications

1.1 Definition

Employee turnover refers to the number or percentage of workers who leave an organization and are
replaced by new employees. A general definition is that turnover occurs when the employment relationship ends,
regardless of the initiator.

Turnover is in a strong relationship with attrition which refers to the end of the employment relationship due
to retirement, job elimination or employee death, and is distinguishable from turnover because when attrition
occurs, the position is not filled with a new employee.
Employee termination for poor job performance, absenteeism or violation of workplace policies is called
involuntary turnover – also referred to as termination, firing or discharge. It’s involuntary because it wasn’t the
employee’s decision to leave the company.

When an employee leaves the company on his own choice, it’s called voluntary termination, and there are
multiple reasons for this.

1.2 Implications

Measuring employee turnover can be helpful to employers that want to examine reasons for turnover or
estimate the cost-to-hire for budget purposes.

Also, according to multiple studies, it is estimated that it will take between 4 to 6 months before a new
employee begins to provide as much value to the organization as the company is expending to train the employee.

Turnover isn’t always a negative event – when we are referring to desirable turnover, which occurs when an
employee whose performance falls below the company’s expectations is replaced by someone whose performance
meets or exceeds expectations. It is damaging to an organization to keep poor-performing employees, or fail to deal
with misconduct appropriately and in a timely fashion. Inaction is not only detrimental to morale and work group
relations, but could cost far more in terms of employer liability than the cost of replacing the employee.

Conversely, undesirable turnover means the company is losing employees whose performance, skills and
qualifications are valuable resources. On the medium-long term, this has multiple effects over the organization –
financial, public perception, etc.

2. Causes and Effects

2.1 Causes
2.1.1 Lack of Growth and Progression

Opportunity for growth and development is very important for retaining good employees. If an employee
feels trapped in a loop position, they are likely to look towards different companies for the chance to improve their
status and income.

2.1.2 Being Overworked

While new challenges and extra activities are desirable to employee development, introducing permanently
extra work will cause frustration and a lack of motivation for performing the job at the same professional level, and
in the end, it will end in losing a valuable asset.

2.1.3 Lack of Feedback and Recognition

If an employee is struggling, honest feedback can help them manage their workload and refocus. Ignoring
the opportunity for feedback, or providing unhelpful feedback, will leave employees to struggle, become
disheartened, eventually, give up.
2.1.4 Micromanagement

Stifled, over managed employees are likely to grow frustrated with the lack of freedom, which contributes
to high turnover.

2.1.5 Poor Employee Selection

Finding the perfect employee is difficult, but forcing a match with an employee that is clearly not right for
the company culture or values will bring a more negative outcome than it’s expected, with a high chance of turnover
in a short frame of time.

2.2 Effects
2.2.1 Loss of Company Knowledge

When an employee leaves, he takes with him valuable knowledge about the company, customers, processes
and procedures, current projects and past history.

2.2.2 Decreased Efficiency

If an employee resigns, then a good amount of time is lost in hiring a new employee and then training him.
This leads to increased costs with the training, and also a temporary decrease of efficiency and productivity of the
team/company. Lower productivity and sub-par quality of work can result from a disruption in daily operations due
to an overall low number of employees or inexperienced employees without complete training

2.2.3 Low Workplace Morale

This may stem from overworked employees who have had increased workloads and responsibilities due to a
lack of an active or trained workforce.

3. Countermeasures

3.1 Rewards and Compensations

All employees need to acknowledge the importance of their work, and that their contribution is valued by
the company.

3.2 Improvement of Selection Process

In order to have a higher rate of success, a company needs to define his roles and job descriptions very
clearly, to clarify whether the candidate has the desired skills and knowledge, and to ensure that the candidate fits
the company culture.
3.3 Provide Considerate and Thorough Feedback
Providing appropriate, well-considered feedback is a major contributor to ensuring success. Feedback helps
an employee to reflect on their performance, acknowledge areas for improvement, and develop their skills.