Can Employee Turnover be Too Low?

Chris Young
May 21, 2008 — 2,578 views  
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Provocative question... can employee turnover be too low?

Your initial reaction was probably "of course not."  After all, you are likely familiar with the staggering cost of employee turnover; a cost which the Society for Human Resource Management (SHRM) estimates on average to be 150% of an employee's annual wage and benefits. 

It may surprise you, but low turnover rates can actually be a symptom of a larger, more costly problem - a lack of employee engagement.

Let me explain...

While the costs of employee turnover are well known and publicized, less attention is given to the costs associated with employees who stay in a job but have quit emotionally.  These employees arrive to work each morning, "punch-in," but never really got out of their cars.  As a result these employees limit an organization's potential, reduce productivity, damage customer good will, and destroy employee morale.

Do you really want these individuals on your organization's bus? 

There are two situations where undesirable employee retention is often found:

--A slowing economy

--Communities with few opportunities for gainful employment

Let's take a look at each of these situations and examine how each can contribute to an organization experiencing a lack of employee engagement and unwanted low turnover.

When the economy cools down organizations often respond by laying off employees or implementing a "hiring freeze" to cut costs and protect the bottom line.  When this happens on an aggregate level the end result is a greater number of workers competing for fewer jobs.  Because of this the desire to leave one's job is greatly diminished as the exit barriers have increased substantially.  Simply put ... a job one can't stand is better than the thought of being unemployed for an extended period of time.

As a result employees are more likely to be thankful for the job they have and tolerate it than they are to leave and face an uncertain job market with little guarantee of finding employment.  Employees who stay in a job for these reasons are likely not engaged in their positions and are rarely as productive as they could be. This impacts the entire organization as other employees must "pick up the slack" left by the unengaged employees.  This creates frustration, breeds contempt, and ultimately reduces the morale and productivity of the entire organization. 

The other situation where high retention and low engagement is often found is in communities with relatively few opportunities for gainful employment.  Most often this occurs in smaller, geographically isolated communities where opportunities to move from one job to another are limited.  This is not to say that good jobs are non-existent, but rather that there just aren't a lot of these jobs for an individual to choose from.  As a result these individuals stay in a job not because they want to, but rather because they feel they have to.  This can be as detrimental to an organization's success for the same reasons that were highlighted in the previous example with a slowing economy.

That said the goal of any employee retention strategy should not be just to reduce employee turnover, but rather to reduce unwanted turnover of highly engaged, highly productive employees.  In the long run this is best for both parties as no employee wants to be stuck in a job they hate and no organization wants a workforce comprised of employees who hate their jobs.

This is where the challenge lies - how to hire and retain employees who will be emotionally engaged in their work.   One of the biggest factors for ensuring employee engagement is the placement of individuals in positions for which they are a good fit for.  This requires much more than looking at an applicant's educational background, work experience, and how well the candidate "hit it off" with those conducting the interview.  Proper job fit requires an in depth look at who a candidate really is - their natural behavioral style, what motivates them, and what personal attributes they posses - and evaluating how well the candidate fits the behaviors, motivators, and attributes needed to succeed in a position. 

For example when a candidate who desires high levels of social interaction is placed in a position with an isolated work space and little people interaction there will inevitably be problems... Think of a social butterfly in a detail intensive accounting position.  Another example - a social worker who is motivated more by money than the desire to help others... again problems are inevitable.  If employment opportunities are plentiful this isn't such a big problem as the poorly fit employee will likely leave quickly.  However if the economy is slowing or a misfit employee is working in a community with few employment opportunities this can become a big problem as the employee may feel little choice but to stay in a position they don't connect with. 

Could employee turnover be too low in your organization?  A couple of things to consider...

--If your employees wanted to work elsewhere, could they?

--How abundant are employment opportunities in your community?

--Were your team members carefully selected on how well they fit the unique needs of the job?

--Does your organization rely on traditional hiring processes, or does it take a scientific approach to finding the right employee for the job?

--Is productivity and morale suffering?

Companies with low levels of turnover are often showered with praise.  However, there may be more to the story than meets the eye.

Seriously consider the issues above.  Could high levels of employee retention be a sign of an unengaged workforce that is keeping your organization from reaching its full potential?

Chris Young


The Rainmaker Group is a human talent maximization company specializing in helping organization maximize their bottom lines by improving employee retention, hiring the best talent possible, and strategic talent management and coaching services. From the Fortune 50 corporation to the small medical office, The Rainmaker Group guarantees lasting organizational change via a unique blend of energy, insight, and science to maximize talent, transform organizational culture, and provide strategic intervention.