How to Counter High Turnover Rates

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How to Counter High Turnover RatesPrepared for: M-Global Corporate CEO

Prepared By:, Branch Supervisor, M-Global

Date: August 9, 2014

M-Global Inc.| 127 Global Drive | Denver, Colorado 55564 | 555-664-8765 (Office) | 555-965-7898 (Company Cell)

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August 9, 2014

Attention: M-Global Corporate CEO

A Study of High Turnover RatesHigh turnover rates have been a problem for many organizations

for decades. After reviewing labor statistics for my branch and other branches I have concluded that it has become an issue for this organization as well. It cost the organization 2000 dollars in labor and payroll registration for every new employee that is brought in.

Every two weeks we conduct orientation to hire new employees. On average it is about 6-10 new hires every 2 weeks. I’ve calculated thatin 26 weeks best case scenario (only 6 new hires) we spend approximately 312,000 in one year hiring new employees. That is not taking into account the loss of productivity, customer service, and employee morale.

In my proposal I will present not only present facts but also statistics that help support my suggestions for counter attacking thisissue. If you wish to speak with me further on this issue you can contact me directly in my office anytime from 7am-4pm Monday-Friday oron my company cell which will be listed at the bottom of this memo.

Sincerely,

, Florida Branch Supervisor


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Executive SummaryI’ve recently began research on my branch as well as others on how much it is costing us to hire. I’ve also looked at our recent (last years) percentage of turnover and it is not impressive. Best case scenario we are spending over 300,000 a year hiring employees. There can be extreme consequences from addressing this issue immediately. There are many strategies that can be used to buffer, predict, and prevent this problem.

I strongly suggest that we establish a human resource program for thebranches themselves instead of just having one on a corporate level. This may help boost employee effort as well as loyalty to the company.The further an issue gets away from an establishment the less care an interest goes into solving it while still considering the employees aswell as the company. I believe establishing a good employee relationship will not only help employee retention but help boost production, sales, and lower the amount of employees needed for hourlypositions.


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Table of ContentsIntroduction

Letter of transmittal………………………………………………………………………………………………………………………………………………2

Executive Summary……………………………………………………………………………………………………………………………………………….3

Table Of Contents 4What Causes a high turnover rate……………………………………………………………………………………………………….5What Comes from high turnover rate...……….……………………………………………………………………………………..6How to Counter a High Turnover Rate…………………………………………………………………………………………………7What roles does management play in High Turnover rates………………………………………………………………….8

Faithful and trustworthy employees……………………………………………………………………………………………………………………….8

List of IllustrationsGraphs of job openings and separations………………………………………………………………………………………………………………………………..6

Chart of strategies to adapt to a high turnover rate……………………………………………………………………………………………………………….7


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What Causes High Turnover RatesFrom Small to large businesses the same question is always raised. What

causes a high turnover rate? There are many issues that are neglected by somecompanies in order to cut back cost or sometimes even complete failure toreward or recognize another employee’s hard work. According to an articlewritten by Jennifer Leahy a writer for insperity.com here are the top threereasons employees voluntarily leave a company.

1) They’re motivated by higher paya) No matter the relationship one may have with a company it is

crucial that an employer stays competitive with other companies as

far as rate of pay and benefits (Leahy, 2012).

2) They’re not challengea) High performing workers (such as myself) need to feel challenged

and feel as if what they are doing is helping advance in theircareer.

3) They’re poorly manageda) Many experts argue that most employees will settle for average pay

at even the most stressful jobs if they carry a good relationshipwith direct and indirect management.

I find that management is the most important aspect of any business nomatter what level of management you’re on. Being proactive and truly engagedwith employees creates a relationship that is similar to family. But evenhuman resource management plays a crucial role in this area because they cancreate a work environment where employees feel safe, appreciated, and wellcompensated for their efforts. I believe management all the way up to the CEOplay the most important role in controlling high turnover rates.

It is our duty to understand that we are not above or better than any ofthe other employees and show them that we are not afraid to get our handsdirty as well. I myself often engage in field work from time to time to showmy employees that I was once too a field worker and I am not afraid to workside by side any employee to make sure a job gets done.


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What comes from a high turnover rate?

No matter the reason turnover rates not only hurt anorganization’s bottom line but it always destroys theirreputation as an employer. According to experts the estimated oftraining a new employee is upwards of twice an employee’s salary(WSJ, n.d.). I have recently had informational interview with theHRM of a partner company. They tell me that hiring one newemployee cost them 3000 dollars per employee on average. Thatdoes not also include the loss of productivity or the loss ofmorale from the remaining employees (C.I.T., 2014). Highturnover rates not only affect our organization but the entirenation as well. According to the Bureau of Labor Statistics, jobopenings increased by 100,000 from April to the last business dayof May. There are 4.6 million job openings which included the 4.7million that were hired and 4.5 million that separated from theiremployers either voluntarily or involuntarily. Economically thisdoes not help our country(BLS.gov, 2014). Below is a chart takendirectly from BLS.gov that shows the shocking rate of jobopenings hires and separations from June 2011 till May 2014.

I also learned from our partner company that they had an over 30%turnover rate 2 years ago. They also had an increase in sales which made it necessary for them to hire more employees. The company housed


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450 employees at that time but needed 550. They lost approximately 140employees last year which means they would have had to hire about 240 employees. That cost their company over 700,000 dollars just to hire a new set of employees. They also lost about 15% from productivity which in turn not only hurt the bottom line but made their customers very unhappy (C.I.T., 2014). Nothing good comes from a high turnover rate. We as an organization need to stop this now before it gets out of control.

How to Counter a High Turnover Rate

There have been effective strategies for counter attacking and adapting to high turnover rates for decades. Many companies do not seethis to be a problem. In their eyes every employee is replaceable and carry no value other than the amount of money they are getting paid. In order to hold employees to a certain level of integrity when performing their jobs, we have to also hold ourselves to that same standard. Research shows that dismissals are associated with these three issues.

poor performance insubordinate employees inadequate employees

Many have always pointed the finger at incorrect hiring procedures for a problem like this. That isn’t necessarily always the case. Poor performance can come from employee morale decreasing from high turnover rates or lack of appreciation for their job performance.It also shows that quits are mostly associated with inadequate compensation for the job being performed or unsatisfaction with the organization (BATT, R., & S. COLVIN, A. J. ,2011).


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Although this hasn’t been systematically proven and research carry mixedresults job training and pay seem to be carry the highest relationship betweenboth types of turnover (BATT, R., & S. COLVIN, A. J. ,2011). According to an article written by Richard T. Mowday, many organizations facing high turnover rates may find creating strategies to increase employee retention unpractical.The reason being is because many employees leave for reasons beyond the organizations control such as personal reason that do not pertain to organization. Below is a simple chart of strategies that can be used to buffer, smooth and predict high turnover rates (Mowday, R. T., 1984).

These simple steps can have an amazing effect on not only preparing for the unexpected (or expected) but also save the organization quite a bit of money. Good examples of incentive systems that boost employee motivation and morale are

extra vacation time merit raises cross training

Also developing an employee skills inventory is a great strategy I have already seen with our sister company that have really turned things around for them. They have a system known as the “Employee Skill Proficiency System” where they have cards posted in every department for every employee that shows the jobs they can do and how well they can do them. This allows for employees that want to perform other jobs to change things up and move around a little so that the job does not become redundant and they lose interest.


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What Role does Management Play in Employee Turnover?

Management at any level can play a critical role in whetherthey either lower or raise employee turnover. According to a studyperformed in 2006-2007, results suggest that innovative managementincreases turnover rate in low-performing organizations, but decreasesthe turnover in high-performing organizations (Ryu, S., & Lee, Y,2013). Strategic human resource management has been statisticallyproven to help balance turnover rates and employee performance.According to an article written by Mathew R. Allen, Jeff Ericksen, andChristopher Collins, an effective management of human resources is oneof the most important predictors in an organizations success andsurvival.

Some companies believe that a high commitment HR team cost morerevenue than having a high turnover rate. This may be true in a fewcases but it is better to consider an HR team as more of a long terminvestment. Effective HRM teams have been proven to increase employeeeffort and increase employee retention. This not only boostorganization revenue but it also raises company morale and preservesthe good reputation of a company.

Faithful and Trustworthy Employees

Faithful and trustworthy employees are what make an organization.Customers of course are just as important seeing as how they are theprofit. But good employees are what make this possible and keep yourcustomers coming back. There have been studies that prove thatcompanies with a higher turnover rate always have a lower customersatisfaction rate than a company with a lower turnover (BATT, R., & S.COLVIN, A. J.,2011). This can easily be connected due to the fact thateven when you do manage to keep older employees they work sub-standardly because the morale of the team is significantly loweredwhenever they work for a company who cannot keep good employees.Lowered customer satisfaction also comes from having several newemployees or hiring incorrectly because you are trying to fill vacantpositions quickly.


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According to our sister company retaining trustworthy andreliable employees has been one of the most important roles inboosting sales and production for their company. Two years ago theywere in a position where one of their most important customers wasgoing to pull their contract because production was at an all-time lowand turnover rate was the highest it’s been in the organizationshistory. This year they have made well over 120 million dollars insales (increase of 30 million) and they have hit sales in somedepartments that have not hit its sales quota in about a decade. Highemployee retention begins with strategic human resource decisions suchas incentive programs, proper benefits and good employeerelationships.

Conclusion

As I explained there can be extreme consequences that come fromhaving a high turnover rate and/or neglecting a turnover rate. I’vealso discussed some strategies that can be used to buffer, predict,and lower turnover rates. Some of these strategies include incentiveprograms, a highly committed Human Resources Management, and carefullychosen managers on all levels. Remember, it is not only ourorganization that suffers from having a high turnover rate, but theeconomy as well. We have to be committed to not only helping ourselvesbut others as well.

Recommendation

My personal recommendation is focusing on refining our HRM strategiestowards helping form a healthy long last relationship with everyemployee possible. I also recommend that they update the incentiveprogram to help boost employee’s motivation by offering merit raisesto those who deserve it. Also reward dedicated employees who arealways reliable and are always there to work overtime and help when itmost needed with extra vacation hours, and small bonuses. This makesthe employee feel appreciated and wanted.


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ReferencesBATT, R., & S. COLVIN, A. J. (2011). AN EMPLOYMENT SYSTEMS APPROACH TO

TURNOVER: HUMAN RESOURCES PRACTICES, QUITS, DISMISSALS, AND

PERFORMANCE. Academy Of Management Journal, 54(4), 695-717.

Carlisle Interconnect Technologies. (2014) How a fortune 500 company lowers there

turnover rate. Retrieved from informational interviews.

How to Reduce Employee Turnover. (n.d.). Management RSS. Retrieved from

http://guides.wsj.com/management/recruiting-hiring-and-firing/how-to-

reduce-employee-turnover/

JOLTS News Releases. (n.d.). U.S. Bureau of Labor Statistics. Retrieved from

http://www.bls.gov/jlt/

Mowday, R. T. (1984). Strategies for Adapting to High Rates of Employee

Turnover. Human Resource Management, 23(4), 365-380. Retrieved from

EBSCOhost.com

Ryu, S., & Lee, Y. (2013). Examining the Role of Management in Turnover. Public

Performance & Management Review, 37(1), 134-153. Retrieved from

EBSCOhost.com


http://www.bls.gov/jlt/

How to Counter High Turnover Rates

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