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  • Writer's pictureAndrée Laforge

Can employee turnover be a good thing?

 

In setting thresholds and targets for employee turnover, a question crossed my mind: is turnover really always a bad thing? In our Kara application, we can define a turnover rate target and receive alerts (yellow or red) depending on how far we are from that target. My very competent programmers had initially set up a yellow alert threshold for a few percent above the target, and a red threshold for a larger overshoot. Then I suggested, "We should also set a yellow threshold when our turnover rate is too low, and a red threshold when it's really too low." They looked at me with round eyes: "Isn't it good to have a very low turnover rate?" No, it's not always good. A very low turnover rate can mean that under-performing employees cling like mussels to their rock.


Turnover is often perceived as a financial drain and a source of worry. But surprise! It can also be an opportunity to spring clean. Eliminating underperformers revitalizes the team and injects new blood. Here are a few questions to ask yourself: how much does a mediocre employee cost? What impact does a "bad apple" have on team morale? Stagnation of ideas is another problem. There's nothing like new blood to challenge the status quo.


However, turnover comes at a high cost. For 2024, business turnover is still stable and should remain so, but it's important to understand that it had been rising since 2018 (with a sharp drop in 2023 due to the unstable economic situation). If you'd like to see the results between 2018 and 2023, click here. Turnover costs can be as high as 200% of an employee's salary. A commonly used conservative measure is 1.5 times annual salary (including expenses) for executive positions. Thus, the cost of turnover for an employee earning $100,000 is $150,000. For hourly employees, the cost of turnover is generally at least 1 times the employee's annual salary. While this cost is difficult to assess precisely, it certainly results in lost productivity and possible demotivation.


Turnover is a key indicator for understanding the various aspects of talent management in an organization. I recommend that you examine this indicator in conjunction with others, such as :

·         Cost of turnover;

·         Resignation rate;

·         Retirement rate;

·         Involuntary turnover rate;

·         Turnover rate by hierarchical level;

·         Turnover rate of high performers and high potentials;

·         New employee turnover rate (voluntary and involuntary);

·         Percentage of departures.


A high turnover rate can be alarming. Compare yourself with organizations in your industry and of your size. Assess the employment situation in your region. Make in-depth analyses. Keep in mind, however, that a balanced turnover rate is essential to maintaining a dynamic and adaptable organization. While employee retention is crucial, a certain level of turnover is necessary to ensure the renewal of ideas, the continuous improvement of skills, and the overall vitality of the company.

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