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How to strategically manage turnover

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in Leaders & Managers,Management Training

You know turnover is expensive; it forces your organization to recruit and train new employees. And while not all turnover is undesirable, a growing number of organizations are starting to focus on the management of turnover as a strategic business issue, both in terms of controlling bottom-line costs and driving top-line results.

Before an organization tries to address turnover, however, an important first step is to understand where turnover has its greatest impact on your organization’s ability to deliver core business services and on its long-term strategic success.

To start, look at whether your organization wants to retain the people who are leaving. If you do, then figure out why they’re leaving. Is it compensation? Prospects for advancement? Problems with their bosses? Only by knowing the underlying causes can the organization begin taking steps to stem the tide of undesirable turnover.

What is undesirable turnover?

To determine whether your organization is experiencing undesirable turnover, answer two questions: (1) What are your company’s critical roles? and (2) Are you losing good talent in these roles?

If you are shedding employees—even good ones—whose roles are no longer as important as they once were, it might not matter whether they are leaving. If your organization is planning to downsize, turnover might be a less critical issue.

However, a red flag should go up if turnover is occurring in roles that are critical to executing your organization’s current and future strategies. Undesirable turnover in these roles will have more impact on your organization’s abilities to execute its strategy. Therefore, greater focus and investment—in terms of time, money and resources—should be focused on determining what is causing the turnover in these roles and what specific retention strategies and investments the organization should use to reduce undesirable turnover.

The employee value proposition

Whatever is causing undesirable turnover, the organization usually can tie it to its employee value proposition (EVP). The EVP—which explains why employees should want to work for the organization and why it should want them to work there—consists of five components:

  1. Compensation
  2. Work content
  3. Affiliation (entrepreneurial types often don’t like to work for a team-oriented organization, for example)
  4. Career
  5. Benefits.

Organizations looking for the real reason they are losing top talent in critical roles usually can find it by exploring what is occurring inside these five EVP components. One way to do so is to conduct an employee attitude survey. That will help you identify the relationship among elements of the EVP, turnover drivers and actual turnover in the business.

Reducing bad turnover

Once you know the root causes of undesirable turnover in your organization, you can decide what actions to take and how much time, energy and money it will require to fix the problem. You also should calculate the potential return on investment for each potential solution.

The final step is to develop a business case for increased investment in retention initiatives. Working out the potential return on investment will help convince the financial side of the organization that a proposed solution is worth the expense.
Joel Rich is a senior VP of Sibson Consulting. Contact: jrich@sibson.com. Aaron Sorensen is a consultant for Sibson Consulting. Contact: asorensen@sibson.com. This column is based on the article, “How to Manage Undesirable Turnover.” Find the full version (with substantial discussion of the business case) at www.sibson.com.

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