It’s the biggest paradox of the corporate world! Even while companies pull out all the stops in reducing attrition to the bare minimum, some management gurus are actually propagating increasing ‘wanted turnover’!
Whoa! In the unbridled war for talent when high turnover is considered absolutely detrimental, whoever heard of actually trying to boost turnover levels?
Well, the truth is that blindly attempting to avoid attrition can be quite damaging.
Jamie Hale, a senior consultant and leader of workforce management practice says: “Optimal turnover is not the lowest turnover you can achieve. Optimal turnover produces the highest long-term levels of productivity and business improvement.” Recent studies corroborate that functional turnover is good as it stimulates a competitive advantage. Therefore, it is essential to actively manage turnover to create a performance culture. That is, even while concentrating on reducing the attrition numbers, organisations can and should try to manoeuvre turnover for positive business and financial results.
Whoa! In the unbridled war for talent when high turnover is considered absolutely detrimental, whoever heard of actually trying to boost turnover levels?
Well, the truth is that blindly attempting to avoid attrition can be quite damaging.
Jamie Hale, a senior consultant and leader of workforce management practice says: “Optimal turnover is not the lowest turnover you can achieve. Optimal turnover produces the highest long-term levels of productivity and business improvement.” Recent studies corroborate that functional turnover is good as it stimulates a competitive advantage. Therefore, it is essential to actively manage turnover to create a performance culture. That is, even while concentrating on reducing the attrition numbers, organisations can and should try to manoeuvre turnover for positive business and financial results.
Some turnover is actually good
Nil attrition levels stand testimony to the jolting reality that an organisation is laden with old skills, stale managers and a somnambulist workforce. Valuable retention efforts are actually being spent on preserving poor performers who do not meet efficiency expectations, but also essentially reduce productivity, drive away customers and breed low morale.
Heaving under the weight of such undesirable elements, how can the organisation build a high-performing workforce needed to face global competition?
Its turnover to the rescue as this helps the management drive out misfits and weak performers. Showing unacceptable employees the door is essential for replacing old skill sets and upgrading talent. This will stimulate the organisation to push and prepare for an inflow of fresh ideas, new blood, vantage perspectives and external knowledge.
This also helps in reshaping the workforce for a better distribution of age groups and filtering out top pay packages and costly benefits. Moving out high-end and overpaid salary earners tenders the opportunity to hire new employees at relatively lower salary levels.
Therefore, instead of exclusively preventing departures and retaining all employees, the focus should shift to keeping a selective group of talented employees only. As acclaimed writer, Fay Hansen expounds in The Turnover Myth, “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!”
So much so that, the current trend is not only to retain highly skilled contributors but at the same time, have an attrition of at least 8-10 percent of poor performers.
Nil attrition levels stand testimony to the jolting reality that an organisation is laden with old skills, stale managers and a somnambulist workforce. Valuable retention efforts are actually being spent on preserving poor performers who do not meet efficiency expectations, but also essentially reduce productivity, drive away customers and breed low morale.
Heaving under the weight of such undesirable elements, how can the organisation build a high-performing workforce needed to face global competition?
Its turnover to the rescue as this helps the management drive out misfits and weak performers. Showing unacceptable employees the door is essential for replacing old skill sets and upgrading talent. This will stimulate the organisation to push and prepare for an inflow of fresh ideas, new blood, vantage perspectives and external knowledge.
This also helps in reshaping the workforce for a better distribution of age groups and filtering out top pay packages and costly benefits. Moving out high-end and overpaid salary earners tenders the opportunity to hire new employees at relatively lower salary levels.
Therefore, instead of exclusively preventing departures and retaining all employees, the focus should shift to keeping a selective group of talented employees only. As acclaimed writer, Fay Hansen expounds in The Turnover Myth, “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!”
So much so that, the current trend is not only to retain highly skilled contributors but at the same time, have an attrition of at least 8-10 percent of poor performers.
Driving turnover
There is nothing to beat bottom performers resigning voluntarily. Unfortunately, this rarely happens. Therefore:
• Terminations are necessary – The onus is on workforce management executives to prise slackers from their comfort zones or hiding places and train/coach/mentor them to step up to meet new needs. If they still fail to correct the problem or improve performance, managers should take steps to terminate poor-performing and disruptive employees. This calls for decisive action after overcoming the overriding managerial reluctance to fire anyone per se.
In the words of a top global consultant, ‘Healthy turnover benefits a firm. It means that the firm is actively evaluating employees and making decisions. Low turnover means that the firm is working around existing people instead of constantly pulling in new people with new ideas to build the organisation. At successful firms, turnover becomes a business advantage!’
• Explore other avenues – If outright dismissal does not seem prudent, HR executives can subtly force the employees’ departure by instigating (older) employees to retire or by offering buyouts.
Some consultants recommend counselling out redundant or low potential workers. Else, they can utilise retrenchment options to cut back on the unsuitable workforce.
The bottom line is to manage and encourage good turnover in the interests of the company.
With these measures, companies can master turnover and thus achieve a maximum return on their human capital investment.
There is nothing to beat bottom performers resigning voluntarily. Unfortunately, this rarely happens. Therefore:
• Terminations are necessary – The onus is on workforce management executives to prise slackers from their comfort zones or hiding places and train/coach/mentor them to step up to meet new needs. If they still fail to correct the problem or improve performance, managers should take steps to terminate poor-performing and disruptive employees. This calls for decisive action after overcoming the overriding managerial reluctance to fire anyone per se.
In the words of a top global consultant, ‘Healthy turnover benefits a firm. It means that the firm is actively evaluating employees and making decisions. Low turnover means that the firm is working around existing people instead of constantly pulling in new people with new ideas to build the organisation. At successful firms, turnover becomes a business advantage!’
• Explore other avenues – If outright dismissal does not seem prudent, HR executives can subtly force the employees’ departure by instigating (older) employees to retire or by offering buyouts.
Some consultants recommend counselling out redundant or low potential workers. Else, they can utilise retrenchment options to cut back on the unsuitable workforce.
The bottom line is to manage and encourage good turnover in the interests of the company.
With these measures, companies can master turnover and thus achieve a maximum return on their human capital investment.
Watch out
Where companies go wrong is that they attempt to drive out older, long-term employees in an attempt to infuse new (read young) talent and hack salaries. What they fail to realise is that not only does this invite age discrimination liabilities but also begets a huge loss of commitment, skills and experience. Indiscriminate firings stack up separation costs, performance costs, vacancy costs and last, but not the least, replacement costs.
Excessive recruitment and training costs can damage a company as much as retention of weak employees. Not to mention the risk of being saddled with wrongful termination lawsuits.
Therefore, the key to avoiding organisational stagnation is to institute a sound selection process that ensnares top performers alone.
If some unsatisfactory elements slip in, management should make efforts to revitalise them with proper training.
This will slowly transform the organisation into a structure with no bad employees and zero turnover too!
Where companies go wrong is that they attempt to drive out older, long-term employees in an attempt to infuse new (read young) talent and hack salaries. What they fail to realise is that not only does this invite age discrimination liabilities but also begets a huge loss of commitment, skills and experience. Indiscriminate firings stack up separation costs, performance costs, vacancy costs and last, but not the least, replacement costs.
Excessive recruitment and training costs can damage a company as much as retention of weak employees. Not to mention the risk of being saddled with wrongful termination lawsuits.
Therefore, the key to avoiding organisational stagnation is to institute a sound selection process that ensnares top performers alone.
If some unsatisfactory elements slip in, management should make efforts to revitalise them with proper training.
This will slowly transform the organisation into a structure with no bad employees and zero turnover too!
PAYAL CHANANIA
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