10.DIFFERENCES RETENTION AND TURNOVER IN ORGANIZATION

 

             DIFFERENCES RETENTION AND TURNOVER IN ORGANIZATION

Retention and turnover can help companies understand how their employees feel about working with them. High retention and low turnover may show business leaders and managers that their hiring processes are effective and that they have high employee satisfaction. Ensuring low turnover can allow businesses to create a stable work environment for their employees and allow staff to create reliable working relationships. Monitoring retention and turnover might also help businesses save money since it's often cheaper to keep employees than to hire and train new ones.

These two factors can also affect a company's ability to perform its core mission. Businesses that attract good employees with the right skill sets may deliver their products and services more effectively and gain customer support and loyalty. The ability to attract new staff can help a company innovate and expand its operations.

Three Key Differences

The major differences between retention and turnover are:

1. Retention rate does not include new hires. It accounts only for people already employed during the period for which the rate is being calculated. Turnover rate calculations, on the other hand, include people hired during the time period for which the rate is being calculated.
2. Some businesses exclude involuntary turnover from the retention rate calculation, but that’s not a hard-and-fast rule. Involuntary turnovers are departures that result because of an employer’s decision when the employee is still capable of and willing to perform his or her job duties and includes terminations that are the result of performance, behavioral issues, seasonal layoffs and reductions in force (RIFs).
3. Given that it’s a measure of the company’s stability, retention rates are most often calculated over a longer period of time, typically annually. Turnover rates provide important snapshots of employee movement and are, for that reason, calculated and viewed by month or quarter. This provides a more accurate and actionable view of departures that are the result of, for instance, seasonal layoffs and give more accurate long-term insights into that rate. Monthly turnover rates are added together to calculate and compare annual turnover rates.

DIFFERENCES RETENTION AND TURNOVER IN ORGANIZATION

Retention and turnover can help companies understand how their employees feel about working with them. High retention and low turnover may show business leaders and managers that their hiring processes are effective and that they have high employee satisfaction. Ensuring low turnover can allow businesses to create a stable work environment for their employees and allow staff to create reliable working relationships. Monitoring retention and turnover might also help businesses save money since it's often cheaper to keep employees than to hire and train new ones.

These two factors can also affect a company's ability to perform its core mission. Businesses that attract good employees with the right skill sets may deliver their products and services more effectively and gain customer support and loyalty. The ability to attract new staff can help a company innovate and expand its operations.

Three Key Differences

The major differences between retention and turnover are:

1. Retention rate does not include new hires. It accounts only for people already employed during the period for which the rate is being calculated. Turnover rate calculations, on the other hand, include people hired during the time period for which the rate is being calculated.
2. Some businesses exclude involuntary turnover from the retention rate calculation, but that’s not a hard-and-fast rule. Involuntary turnovers are departures that result because of an employer’s decision when the employee is still capable of and willing to perform his or her job duties and includes terminations that are the result of performance, behavioral issues, seasonal layoffs and reductions in force (RIFs).
3. Given that it’s a measure of the company’s stability, retention rates are most often calculated over a longer period of time, typically annually. Turnover rates provide important snapshots of employee movement and are, for that reason, calculated and viewed by month or quarter. This provides a more accurate and actionable view of departures that are the result of, for instance, seasonal layoffs and give more accurate long-term insights into that rate. Monthly turnover rates are added together to calculate and compare annual turnover rates.

Why Measuring Employee Retention & Turnover Matters

If a business doesn’t have the right people with the right skills, it can’t deliver its products and services. And if it can’t attract more people with new and specialized skills, it can’t innovate or execute on growth plans.

Employee turnover and retention rates provide strong indicators about how well the business is taking care of its people. This includes whether it is paying competitive salaries, providing training and opportunities for advancement and offering a good work/life balance for employees, as well as how effective management is. High turnover and low retention rates signal problems with aspects of the organization’s culture and employee experience.

Turnover and retention are closely linked to employee engagement. Companies with higher levels of employee engagement have lower turnover rates — as much as 43% lower for companies that have less than 40% annualized turnover, according to a study of more than 112,000 business units by analytics firm Gallup. And employee engagement is linked to organizational outcomes, with a very important effect being that companies with lower turnover are more profitable and have more loyal customers. When comparing top quartile and bottom quartile engagement business units and teams, Gallup found a differential of 23% in profitability and 10% in customer loyalty.

Who Is Responsible for Retention and Turnover?

The stewards of employee retention and turnover data are human resources professionals and, sometimes, recruiting teams. They are charged with monitoring the metrics that gauge the overall employee experience and ensuring that the business has enough people to meet its immediate objectives and growth plans.

While the responsibility for ensuring good retention and turnover rates belongs to the entire organization—from senior leadership to HR and rank-and-file colleagues—the individual with the greatest singular impact on employee retention is the employee’s manager.

Poor managers are consistently named across retention and turnover studies as a top reason that employees leave—and good ones are a key reason people stay. In the Gallup study, some 52% of employees who voluntarily left a company said their managers could have taken steps to prevent them from leaving. More than half say that, in the three months before they left, no one—a manager or any other leader in the organization—spoke with them about their job satisfaction or future career plans.

The manager is often the main touch point for solving, or at least discussing, many of the issues that cause voluntary turnover, including compensation, lack of a career path and a need for better work-life balance. Unfortunately, analyst firm the Work Institute’s 2020 Retention Report indicates that manager behavior and communication had worsened year-over-year. This is an area HR teams need to address because even modest improvements in supervisor ratings can significantly decrease the likelihood of an employee leaving.

Who Is Responsible for Retention and Turnover?

The stewards of employee retention and turnover data are human resources professionals and, sometimes, recruiting teams. They are charged with monitoring the metrics that gauge the overall employee experience and ensuring that the business has enough people to meet its immediate objectives and growth plans.

While the responsibility for ensuring good retention and turnover rates belongs to the entire organization—from senior leadership to HR and rank-and-file colleagues—the individual with the greatest singular impact on employee retention is the employee’s manager.

Poor managers are consistently named across retention and turnover studies as a top reason that employees leave—and good ones are a key reason people stay. In the Gallup study, some 52% of employees who voluntarily left a company said their managers could have taken steps to prevent them from leaving. More than half say that, in the three months before they left, no one—a manager or any other leader in the organization—spoke with them about their job satisfaction or future career plans.

The manager is often the main touch point for solving, or at least discussing, many of the issues that cause voluntary turnover, including compensation, lack of a career path and a need for better work-life balance. Unfortunately, analyst firm the Work Institute’s 2020 Retention Report indicates that manager behavior and communication had worsened year-over-year. This is an area HR teams need to address because even modest improvements in supervisor ratings can significantly decrease the likelihood of an employee leaving.

 Available at

https://www.performancemagazine.org/employee

Accessed on November 30th , 2022

Available at

https://www.indeed.com/career-advice/career-development retention-vs-turnover

Accessed on November 30th , 2022