19 October 2021
Retention, turnover, and post-pandemic reality
Retention. Turnover. Two words with definitions that set them poles apart, yet are closely related. In the simplest of terms, retention is about people staying while turnover is about people leaving. What is driving both of those choices in a post-pandemic reality?
As the world struggles to adjust and find its footing in a time of rapid change and transformation – with societal issues such as a global pandemic, climate change, and the integration of advanced digital technology into multiple facets of human life – it's never been more important to turn our focus back to people again. The sudden onset of an unprecedented global pandemic, and the unique and uncertain circumstances it has created, has incited a variety of responses from businesses and their workforces. As situations changed dramatically, some businesses tightened their belts and announced layoffs or hiring freezes. Others started hiring frantically as particular job roles surged to meet demand. The traumatic and unusual times since early 2020 and made managing turnover and retention rates, something that was already a struggle in normal circumstances, even more difficult. But shying away from, glossing over, or blatantly ignoring challenges will not erase the problem.
(Is your digital marketing team in shape? Get our free guide to assessing your team in critical strength areas like retention, reskilling, and more!)
An organization's workforce affects its performance and ability to achieve strategic goals, and people are at the centre of that workforce. Employers can study the results of retention and turnover rates to understand the motivations and worries of the driving factor – the people – behind an organization's growth and success. Regardless of industry, an awareness and understanding of employee retention and turnover rates will highlight issues and help organizations plan for the future. But what exactly are employee retention and turnover rates, how has the global COVID-19 pandemic affected them, and what can organizations do to plan for and manage post-pandemic rates?
What is employee retention and turnover?
Employee retention can be defined as an organization’s capability to maintain its workforce. The rate of retention is the percentage of employees who have stayed at an organization over a set period, the most common timeframe being a year. But retention can also be measured by the median number of years that employees remain with an employer. Organizations with excellent employee retention are those where people choose to stay at their place of employment without actively looking for other job prospects. In other words, it's when people don’t quit their jobs and remain with a single employer for a longer period.
Employee turnover is the opposite of retention. The rate of employee turnover is the number of people who leave an organization during a specified time, typically for a year. In another sense, employee turnover can be translated as the loss of talent and skills. The loss may include voluntary turnover, terminations, layoffs, transfers, retirements, or even deaths. Although it's inevitable for some employees to leave a workplace, take your pick from a multitude of valid reasons, having a high turnover is a red flag and signals that improvements could be made.
Why is it important to watch retention and turnover rates?
Understanding turnover trends can provide valuable insights into industries and the overall economy. Analyzing these trends can also help organizations anticipate when they need to invest more in recruitment and retention. After all, long-term investment in retention is one of the most effective approaches for an organization's ongoing growth and success regardless of fluctuations in the market.
Employee turnover is a normal part of business operations and can be turned into an opportunity. Analyzing employee turnover gives organizations data and insights into their hiring practices, helps them re-evaluate whether they have the right people in the right positions, and provides an opportunity to fill the critical gaps that they were previously unaware of. Furthermore, evaluating employee turnover and retention can act as a window to understanding an organization’s employee experience, workplace culture, policies, compensation and benefits, procedures, etc.
Having a high employee turnover causes major disruptions to business productivity, company culture, damages reputations, and causes excessive costs if unmanaged. These excessive costs are an accumulation of unnecessary spending on recruitment, training, onboarding, replacement hiring, and benefits. Turnovers are also costly in the sense that organizations lose talent, knowledge and skills. But an awareness of employee turnover and retention rates, causes, and the ways to overcome them are an effective solution. At the end of the day, gaining and retaining top talent is the key to long-term success.
The impact of COVID-19 on retention and turnover
Even before the arrival of COVID-19, the struggles with retention and turnover rates have been a constant issue for many organizations. For years, organizations across the globe have battled low engagement and morale, sluggish productivity, absenteeism, excessive costs, and have failed to find a balance. A study conducted by Work Institute across North America in 2019 revealed up to 64% of employees intended to leave their jobs in 2020. The same study also revealed the worrisome fact that voluntary turnover trends in the U.S. demonstrated an 8.3% increase over 2018 and 88% increase since 2010.
Although employee turnover and retention rates differ between large enterprises and SMEs (small and medium-sized enterprises), they vary the most between sectors. Across the globe, hospitality and retail are two sectors that tend to have the highest turnover rates. Average turnover for all industries in the U.S. is around 15%, but turnover rates in the retail sector can be over four times higher and Human Resources Today found that retail turnover translates into more than 230 million days of lost productivity and $19 billion for recruiting, hiring and training expenses. In the UK, which also has an average employee turnover rate of 15% across sectors, the wholesale and retail trade sector had a combined turnover of almost 1.4 trillion British Pounds in 2020, due in large to the impact of COVID-19.
The COVID-19 pandemic has caused an economic shock and massive upheaval throughout different sectors. Hospitals face unprecedented turnover rates, teachers are afraid to return to school, and industries slashed their workforces. National lockdowns forced business to shut down, whether temporarily or permanently, resulting in cut hours and available jobs. In Belgium, 70,900 full-time jobs were lost in the first quarter of 2020 and unemployment was projected to rise due to a higher likelihood of bankruptcies in the most affected sectors. It took until the third quarter for government measures to stabilize and improve employment rates.
The implementation of national lockdowns has changed the way people work, with teleworking and remote working the new norm. Although most organizations had pre-pandemic remote work policies available for some employees, few were prepared to have their entire workforce working from home full-time.
How have conditions evolved, and where does that leave employers-and employees-now? We'll answer this question next; in the meantime, keep up with the conversation on social media.