Arniston Spa Hotel

Not all employee turnover is bad

Overberg Business

When employee turnover levels are presented at Board/Exco level, there may be a general tendency to immediately go into “fixing” and “solution” mode. But the evidence suggests that there are instances where employee turnover can be a good thing. Here are some pointers:

• Low levels of turnover can be value adding, but high levels of turnover seldom is.

• Turnover of low performing employees removes the effort and energy to manage the performance non-compliance     process.

• Turnover increases promotional opportunities, assuming the business has a talent pipeline philosophy that             deliberately “grows their own timber”.

• Newly appointed or promoted employees who are eager to make their mark, may challenge the status quo, bring      fresh perspectives and ideas, add a new wave of innovation and re-stimulate a potentially stagnant team environment.

• Turnover may have a cost saving effect on the salary bill. Longer tenure employees may earn up to 50% more than     their peers who has entry-level service years. The same applies in the accrual of other benefits.

Research also indicates that some companies are very deliberate in how they manage employee turnover, e.g. General Electric, Microsoft and Sun Microsystems. General Electric for instance has an active approach of firing the bottom 10% of their poor performing employees. In South Africa that will of course necessitate compliance with the procedural and substantive requirements as prescribed in our labour law.

Other companies in especially marketing, research and product development industries will deliberately re-shuffle their teams every 12 to 18 months so as to create opportunities for maintaining innovation and creativity.

In conclusion, when next you look at the employee turnover levels in your business, consider the potential value-adding benefits that can be derived from it.

Sources: Glebeek, A.C. and E.H. Bax. “Is High Employee Turnover Really Harmful? An empirical test using company records.” Academy of Management Journal (April 2004):277-286. Shaw, J.D. et al. “Alternative conceptualization of the relationship between voluntary turnover and organisational performance.” Academy of Management Journal (February 2005):50-68