CXO

How to use employee turnover as a health check for your company

Employee turnover is an often-misinterpreted metric that can be an indicator of deeper problems. Here's how to understand why employees jump ship.

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Conceptually, employee turnover is a simple metric. However, it can be extremely hard to interpret correctly.

Simply stated, turnover is the number of employees who have left your organization over a given time period. Initially, it might seem obvious that turnover should be minimized at all costs. After all, replacing employees can be a pain and a resource suck. However, some measure of turnover is appropriate. An organization with minimal turnover is often a stagnant organization where safety is valued over innovation and risk taking. So, how do you determine what is too much turnover versus healthy regrowth?

Exit interviews aren't just for HR

At most companies, exit interviews are a fairly routine aspect of someone leaving. They're often seen as an administrative formality— perhaps an online form or a quick discussion with a low-level HR administrator— rather than a potentially valuable health check.

Either way, companies regularly miss out insight as ex-employees are often surprisingly frank. For many employees, leaving their job requires soul searching and careful decision making. So, they've put a significant amount of thought into the strengths, weaknesses, and future prospects for the organization.

You need not create a burdensome process or elaborate feedback loop, but simply call a departing employee every few weeks, especially if turnover numbers are starting to increase. You may be subjected to blistering criticism from an embittered employee or two, or banalities from others who don't wish to share their reasons for leaving, but you will also begin to notice themes that will indicate why people are leaving.

Consider who is leaving

Also consider the past performance and positions of those who are departing. Random turnover is to be expected at any organization, but if your highest performers start leaving in droves, that could be an indication of deeper problems. Similarly, check if certain demographics or departments are leaving at a high rate. If your young talent is departing right when they're hitting their stride, you've either become a farm league for those who want to move onto bigger and better things, or you're eating your young, and not providing a clear upward path for your next crop of managers and leaders.

If your middle and low performers are leaving, that's generally a good sign. You've created a high performance culture that weeds out those who cannot meet the demands. However, if your top performers are leaving, spend additional time trying to identify the root cause, and invest a bit more diligence in the exit interview. By their very nature, top performers are often attempting to grab the most challenging roles, and want to work in an environment with clear upward potential. A subtle uptick in high performance employee turnover can be the canary in the coal mine, serving as an advance indicator of stagnation or decline.

Beware of the sinking ship

One of the worst themes to hear from exit interviews is that departing employees left because they felt your organization was a slowly sinking ship. You may hear comments like "I don't believe in our strategy anymore" or "Everyone is just keeping their heads down." Worse yet, you might hear comments that the company has lost focus on its customers, or can't seem to find a consistent strategic direction. When these themes are recurring among high performers, it's time for a serious investigation by the leadership team into the health of the company.

Righting the ship

Your employees who remain may be more tuned in to the reasons for their peers' departures than you are. Or, they may be looking to leadership more closely to see if they have any clue as to why their peers are heading for the exits. Simply acknowledging increased rates of turnover can be somewhat reassuring, but directly acknowledging the reasons for turnover that you've learned through the exit interview process, and presenting a plan to mitigate these issues, can go even further in restoring confidence.

It may take months or years for tweaks to your strategy to appear throughout the organization, but turnover can be an early bellwether of positive or negative effects. Whether you're addressing existing issues, or trying to move your organization in a new direction, use turnover to see the short- and long-term prospects of your organization as a whole. While surveys and consultant studies are fine, nothing truly reflects the state of employee morale more than whether your employees are terminating their relationship with your organization or happily staying put to join in future successes.

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About Patrick Gray

Patrick Gray works for a global Fortune 500 consulting and IT services company and is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companion e-book The Breakthrough CIO's Companion. He has spent ...

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