Workforce experts estimate that the cost of replacing a worker is 1.5 times the annual salary of the worker. To minimize your turnover costs and maintain a productive workplace, employers need to look beyond the salary and benefits.
The GCC region’s economic environment requires a different approach to minimizing turnover, however, like many workforce trends, turnover rates track employment growth. In this new era of ongoing soft labor markets and unusually low quit rates, the pressing issue at many companies is not whether voluntary turnover is too high, but whether it is too low to provide opportunities for introducing new talent and resetting salaries, with the managerial reluctance to discharge poor performers.
The costs of unwanted turnover can be huge. Costs such as ramp-up time for new hires, lost sales and lower morale among remaining employees are just a few of challenges that organizations face. Fortunately, it is fairly simply to increase engagement levels and retain valued employees.
Optimal turnover is not the lowest turnover you can achieve. In essence, it is what produces the highest long-term levels of productivity and business improvement. Achieving optimal turnover means understanding both the financial costs and gains incurred as well as controlling who stays and who goes. Although many workforce management executives are satisfied with simply minimizing turnover and measuring it against broad industry benchmarks, others have mastered turnover as a tool for achieving a maximum return on the investment in human capital.
Employers must replace old skill sets with new ones as technology or the customer base changes. And in some situations, companies must reshape the workforce for a different demographic mix or for a better distribution of age groups. A company may simply need to move out low performers and upgrade talent. When the typical annual performance review process is too slow to create significant organizational change companies should adopt semiannual or even quarterly reviews to speed up the process of terminating low performers, including employees who cannot step up to meet new needs.
Critical Success Factors:
- Consistency of treatment for reward and retention
- Implementation of specialized or targeted reward programs where applicable
- Formal, performance-based appraisals/performance evaluations with public recognition
- Measuring employee satisfaction
- Continued employee development at all levels with defined career paths
- Generous benefits package, above-market compensation and benefits
- Creation of a positive and relaxed work environment
- Cultural development initiatives
Tackling turnover is about helping employees to grow. It’s about being fair and consistent. It’s about creating a workplace where you would want to be every day.