employee turnover rates

The Hidden Benefits of Employee Turnover

by Jun 4, 2024Culture, Growth, HR, Talent

Over the past few years, as companies across various industries have grappled with the war for talent, turnover rates have become increasingly significant. Businesses have invested substantial time, money, and energy into reducing employee turnover. After all, when you’re facing challenges due to a shortage of staff, it’s natural to do everything possible to retain the employees you already have.

While turnover is an important statistic, it might not alone tell you everything you need to know about the health of your culture, how long people stay, and how all of that aligns with your business’s future vision.

There may even be circumstances when your turnover rate might be too low to support a healthy culture. Let me explain.

Turnover Versus Longevity

Given the renewed focus on keeping people inside the organization rather than losing them, alarm bells go off anytime a company’s turnover rate reaches 10 percent. If that turnover rate reaches 20 percent, people will start to panic.

But what if I told you this might be a normal attrition rate?

To better understand your turnover rate, consider its inverse: your longevity rate, which is how long people remain working for the company.

If you have a 10 percent turnover rate, for example, that will mean that, on average, the typical employee stays with the company for 10 years. Some will stay longer, some shorter. With a 20 percent turnover rate, the longevity rate would fall to 5 years. Interestingly, that is the average reported by the Employee Benefit Research Institute.

Acknowledging that those are average numbers, don’t they put the turnover rate in a new light?

A lot depends on your industry and the nature of your people’s work. But nowadays, no one expects employees to work for a single company for decades until they retire with a gold watch. Those days are long gone. A five-year tenure at a firm can be considered a victory for many industries, especially those seen as pathways to other careers. Ten years would be unlikely. Others, such as retail, have far lower figures.

Leaning Into Turnover

Obsessing about lowering your turnover rate can sometimes even have the unintended consequence of hurting the health of your business. Before you toss stones at me for corporate blasphemy, consider some of the positive aspects of bringing new talent into the organization (above and beyond the costs associated with attracting new talent). New people bring new ideas and fresh perspectives to problem-solving that can fuel future growth while ensuring you are pruning underperformers who could hurt your culture. I work with a firm that has recently refreshed a management team that was tired and didn’t have the vision to drive the company to new heights. The new team has all those capabilities.

At the same time, if you never have any turnover in your senior leadership or management ranks, you limit opportunities for your younger, high-potential employees to move up inside the organization. That means you’ll either stunt their development or, more likely, you’ll lose them to a competitor instead.

The key is to focus on moving out your C and maybe even B players at times to make room for your A players to shine–constant pruning and renewal, just like a healthy garden.

A Design Opportunity

The key message regarding turnover is that it’s not something to fear. It’s something to be designed around. If you expect shorter careers from your employees, plan differently with the kinds of training and systems you use to support them.

If you expect employees to stay 10 years or more, you might consider allowing a bit more turnover to create opportunities for your up-and-coming A players in specific roles.

In other words, turnover doesn’t have to be bad if you accept it, understand it, and plan to make the most of it.