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Employee turnover — to continue falling

By 6 September 2013No Comments
Employee turnover rates have fallen over the past five years and many employers expect them to fall further over the next 12 months, according to a report released yesterday. The average turnover rate was 13 per cent in 2012–13, down from 18.5 per cent recorded by a similar survey in 2008.The latest survey was conducted by the Australian Human Resources Institute (AHRI), covering the organisations of 561 of its members. ‘Turnover’ means all forms of employee departures, not just resignations.
Overall downwards trend expected to continue
About one-third of survey respondents predicted their turnover rates would decrease further over the next 12 months, and about 40 per cent predicted their rates would continue at their current relatively low levels.
Small businesses (fewer than 100 employees) and large ones (1000 or more) had the lowest average turnover rates — 11 and 10 per cent respectively. The highest rate of 17 per cent occurred in those with between 250 and 499 employees. When compared to the 2008 results, all sizes of organisation showed a reduction in turnover rates, but the rate of decrease was lowest in the 250–499 employees group, which had the highest rate in both surveys.
Despite the above trends, almost a half (47%) of respondents still regarded their turnover rates as too high, although 40 per cent thought their current rates were okay, and the remaining 13 per cent would have preferred higher turnover.
Why is turnover falling?
In a media release issued by AHRI, its President Peter Wilson suggested two possible reasons:
HR practitioners have improved their recruitment and retention practices.
Employees are more cautious about moving, because of general economic uncertainty and predictions that economic growth rates will fall and unemployment will increase over the next 12 months.
Why does turnover occur?
The survey found that the three main reasons why employees leave organisations are:
lack of promotional opportunities (20%)
poor relationship with their manager (17%)
insufficient remuneration (12%).
No other reason was listed in the top three by more than 8 per cent of respondents.
Editor’s comment: This is an interesting result because other surveys of turnover, retention and engagement have found that poor relationships with managers was the main reason for turnover — ‘people don’t leave companies, they leave managers’.
Also, remuneration usually comes further down the list than third. Could it mean that relatively ambitious employees will continue to seek better opportunities regardless of the economic climate, but more cautious employees are inclined to ‘put up’ with their situations rather than take a risk during difficult economic times? Or could it possibly mean that employees don’t perceive the current economic climate as pessimistically as employers appear to?
Either way, there is a potential warning sign for employers that turnover may start increasing again when economic conditions are perceived to be improving. An alternative explanation could be that Wilson’s suggestion that HR practices have improved is correct, and problems with management are simply less common than they used to be.
The wide variety of reasons why people leave — the report lists 13 separate reasons and ‘other reasons’ were mentioned by 9 per cent of respondents — suggests that organisations need to study carefully why employees do actually leave, often needing to probe beneath the ‘official’ reasons provided to uncover the real ones.
What strategies improve retention?
No single strategy was widely regarded as the best, but the most frequently-used ones are improved induction processes, improved communication with employees and improved selection techniques. The most widely-used technique is exit interviews, despite their well-known limitations, used by about half of all organisations. About one-quarter used various types of surveys and 14 per cent used word-of-mouth and anecdotes.
Pay increases were offered by less than 4 per cent of organisations, despite remuneration being one of the three main reasons why people leave.
Editor’s comment: Again there is a need to investigate the needs and aspirations of employees very thoroughly and tailor the retention strategy to suit them. The report lists 16 separate types of possible interventions.
Around 60 per cent regarded the branding of their organisation as a positive retention factor, with 11 per cent regarding it as a negative one.
Who is responsible for retention?
Just 32 per cent of organisations said that HR was primarily responsible for retention of employees. Over 50 per cent nominated senior managers or business unit managers and less than 7 per cent nominated team leaders. However, almost 60 per cent said that HR had the best understanding within the organisation of retention issues and what needs to be done about them.
Further information
The report is the latest in AHRI’s HR Pulse series of surveys. To download the full report, go to the AHRI website.
Purnima Kabra