| Now that the economy and the labor market are back on track, managers will inevitably see some turnover in their staffs as people move on to different jobs. While some turnover is expected, a lot of turnover in a department is usually considered bad and minimal turnover is usually considered good. While that may sound sensible I think it’s important to think of turnover as a symptom of other departmental traits, both good and bad. Turnover statistics, when taken out of context, can be misleading.
First, let’s evaluate a department that has very little turnover. That’s a good thing, right? The manager must be doing a great job. Everyone is happy. That might not always be the case. I am reminded of a conversation I had a few years ago with an Engineering Manager at a company in Delaware. He was very happy to tell me that he didn’t need to hire anyone because no one ever quit his department. Candidly, he was pretty smug. Out of curiosity, after the conversation, I did a Right Recruiting database search of people I had on file from his department. Of an 8-person department, I had resumes from 6 people. They all wanted to leave. Not only did I have resumes from ¾ of his group, I knew that his staff was answering every ad posted online and they had been doing that for over a year. They’d all had interviews. The real reason the manager had no turnover in his group is that no one else wanted to hire any of his people. Frankly, they weren’t good enough to work anywhere else. Lesson One: you can always eliminate turnover by staffing your department with below average talent. People will stay with you because they have to, not because they want to. Not an advisable strategy.
Second is a company in South Jersey with low turnover. Usually they lose 1 or 2 people each year out of a 25+ person engineering department. Good metrics, good manager? Maybe not. The people they lose are always new people. There is a core group of about 20 people who have been there 15+ years. They have always worked together and have their own little way of doing things. Outsiders are not welcome, especially outsiders with ideas. Every year the company tries to hire new people to bring a specific skill or methodology into the company. Like clockwork, after a few months, the new person gets frustrated with the core group’s resistance to anything new and leaves. Not a lot of turnover but maybe the worst type of turnover. Lesson Two: the worst turnover to have is when the people with the freshest ideas leave. Without them your department might be just treading water if not slowly sinking.
Third is an electronics firm in the western suburbs with low turnover. As a division of a very large firm, they pay extremely well with excellent benefits. Must be a great place. However, a behind the scenes look shows us that almost every person there, from manager on down, hates the environment. It’s a pressure-cooker culture where no one can ever relax. Basically, it’s a sweat shop. People stay, reluctantly, because of the high salaries and benefits. It’s not the joy of working there. Golden handcuffs. Lesson Three: you can always buy a low turnover rate. That low rate does not get a happy and efficient workforce though and has both obvious and hidden costs.
Now, let’s turn the tables and evaluate a company that has a lot of turnover. While it’s generally considered a sign of poor management to have a lot of turnover, sometimes the reasons for a high rate of turnover can be deceptive too.
Take a chemical firm with a plant in the western suburbs. They hire a lot of very good junior engineers in both process and project jobs. Generally, when hiring junior people they hire either very good fresh grads or very good people at the 2 year level. I figure within 4 years 20%-30% of them will leave. On the surface that sounds like a symptom of poor management but the company seems happy with this. Why?
Their philosophy is to hire the best person that they can and to give them the best training that they can. Quality people will always have more options than average or below average employees. Because this company’s staff is composed of very good people, if one of them decides to look for a new job, he almost always gets an offer. It’s the antithesis of the first example above. In the first company, no one in the company was good enough to get hired elsewhere. In this company, everyone is good enough to be hired. Because of the quality of their staff they have a higher turnover than other companies.
In this instance the company has made a conscious decision to de-couple turnover as a management metric. They feel that they thrive by hiring the best. People challenge each other and it’s an aggressive environment. They are willing to lose a few people in return for maintaining their staff’s quality level. Many people who have "graduated" from their facility have gone on to eventual leadership roles in other firms locally. Both sides have prospered.
Next example is a semiconductor equipment firm in the area with a reputation as a hire/fire company. Layoffs create turnover and in some industries layoffs come with the cyclical nature of their market. Their turnover rate will always be high. As a manager, you operate differently in a cyclical company and can’t be judged heavily on the turnover of your staff. Your job is to identify and nurture the better people because they are the one’s you will want to keep during a downturn. It’s who leaves and not how many leave that is important.
There are many reasons that people leave their job. I was at a seminar a few years ago where a HR consultant presented a paper saying that, in her studies, very few people leave their jobs for money. There are always other reasons: respect, culture, etc. She was adamant that no one really left a job because of money.
Not to be cynical, but I‘ve filled over 1,000 jobs in my 20 years of recruiting and I think that is nonsense. While salary may not always be the No. 1 issue it is always one of the three top issues and is usually No. 1 or No. 2. When people are asked what is most important to them in a job, salary is often way down on their list. It makes them feel better about themselves to say that. However, when they change jobs the reality of paying the mortgage and sending their kids to a good school steps in and money moves up quite a few notches. If you underpay your staff you will have turnover. I don’t care how great a culture you have, sooner or later someone like me will contact one of your people about a job that will allow them to buy a better house and have a better life because it pays $15,000 more a year. If, as a manager, all your company gives you to work with is corporate culture rhetoric and lousy budgets, maybe it’s time for you to look too. Over time, they have dealt you a losing hand. You need to pay fairly, have a good culture and treat your people with respect. If your CFO won’t let you pay a fair wage you are at a disadvantage. If your HR person wouldn’t know how to create a good corporate culture if their life depended on it you are at a disadvantage. If you don’t treat your staff with fairness and respect you are at a disadvantage. In a market that will become increasingly competitive for people it will take all the tools in your quiver to do your job well.
I hope you have a great Spring if it ever gets here. Go Phillies and don’t forget Right Recruiting for your employment needs.
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