HRM week 5

Turnover Evaluation

Turnover within a company’s workforce has both benefits and drawbacks depending on the circumstances of the exit. There are six different types of turnover including voluntary, involuntary, functional, dysfunctional, avoidable, and unavoidable. We will review the circumstances of two different turnover scenarios to ascertain the difference between positive and negative turnover. We will begin with a discussion of the benefits and drawbacks to different types of turnover.

Benefits and Drawbacks of Turnover

There are many benefits to turnover within an organization. Lower performing employees are more likely to leave an organization (Phillips, 2015). This type of turnover allows the recruiting team to help fill talent gaps and fill succession plans. When there are job openings within a company, it allows for new talent to enter bringing with them fresh ways of thinking, innovation, efficiency, new experiences, and potentially stronger talents. Also, when poor performers leave an organization, there is often a boost in morale to those who remain because poor performers create undue stress on their colleagues (Mayhew, 2017).

Conversely, there are also drawbacks to turnover. Some turnover can be considered regrettable especially when a company’s top performers and thought leaders are leaving the organization. This type of turnover can create a loss of confidence with a company’s clients, uncertainty with the employees left behind, inability to manage the workload, and potentially loss of other employees who follow in their wake. Lastly, turnover can be expensive. Companies need to consider the cost of the loss of intellectual capital, recruiting, training, and the time for a new hire’s learning curve to reach productivity (Lucas, 2016). These costs can hurt a company if they do not plan ahead.

Turnover Scenario: Sales Associate

In the first scenario, we have a sales associate who has been performing on an above average basis in regards to their sales numbers, but they have decided to leave the company and begin working for a competitor. The departure was the choice of the employee so that it would be classified as voluntary turnover. Due to the strong performance of the sales associate, it would be considered dysfunctional turnover because the company would have preferred to retain this employee (Phillips, 2015). It is unclear if the company could have prevented this turnover based on the information given so we are unable to determine if it should be classified as avoidable or unavoidable.

Companies look to retain their top performers so, at first glance, this scenario describes a situation that is negative for the company. Top sales performers are often able to take some of their clients with them even with non-compete clauses in place. Current clients might question the company if they feel the top sales associates are leaving. However, this departure might also be positive turnover. While the sales associate is slightly above average, their performance could have been slipping over time. There may have been changes to the organization making this current sales associate no longer a fit. Also, depending on a market analysis, there may have been an impending downsizing or hiring freeze, and this natural attrition could prevent the loss of other employee jobs.

While there are both positive and negative forms of turnover, there are also many reasons why someone would choose to leave an organization which includes, but is not limited to, unrealistic job expectations, poor management, better external opportunities, lack of development, etc. As a Human Resources (HR) Manager, the type of turnover in this scenario raises some concerns as there is no indication as to why this particular employee decided to leave so no way to determine if it was avoidable. Studies have shown that strong performers are likely to leave for better opportunities, so it will be important to complete an exit interview to understand the reason (Phillips, 2015). From the information obtained from the exiting employee, HR can determine the appropriate retention strategies needed to prevent this from happening again.

Turnover Scenario: City Inspector

Following a year of training, the city decides that they are going to terminate the employment of one of their new inspectors. This type of turnover would be considered involuntary and functional as it was initiated by the city and the employee was not fully performing to the level expected of an inspector. Technical proficiency is only one portion of the measure of an employee’s overall job performance. While this inspector was technically proficient in their role, they did not act in the professional manner the city expected evidenced by the complaints received about poor customer service and their approach with local contractors.

Unprofessional behavior during one's employment increases the likelihood of formal complaints by other employees and clients as well as the risk of potential lawsuits (Phillips, 2015). This turnover would be considered positive as it decreases the risk of litigation and loss of the city's brand image by their clients. Also, retained employees and clients will appreciate the company taking action against an employee who does not support the values the city stands for. No one wants to work with, or for, an employee who acts in a disrespectful manner.

However, this could be seen as negative turnover if the resultant termination and the behavior of the employee was as a result of equally poor behavior conducted by the local contractors. Other employees may become disengaged and unproductive if they feel that the work environment is uncomfortable and that the terminated employee was standing up for what is right. It will be important for HR to fully understand the full picture before making this determination.

Conclusion

Turnover can either be good or bad for a company. Achieving the lowest possible turnover is not always best for an organization because it can hurt the innovation necessary to continue to grow. Companies should strive to achieve optimal turnover because it allows for the right balance needed to achieve top business results and change (Phillips, 2015). Companies need to balance the financial costs of turnover with the gains they can achieve by filling roles with new talent.

References

Lucas, S. (2016). The Balance. Retrieved from https://www.thebalance.com/the-costs-and-benefits-of-employee-turnover-1918271

Mayhew, R. (2017). Houston Chronicle. Retrieved from http://smallbusiness.chron.com/advantages-turnover-11194.html

Phillips, J. M., & Gully, S. M. (2015). Strategic Sourcing (3rd ed.). Hoboken, NJ: Pearson Education, Inc.