Employee Turnover – Is It Really A Bad Thing?

indexAs a business owner you may hold to the traditional view that employee turnover is equated with failure. However, the days of working your entire career at one company and retiring with a defined pension plan, gold watch and a testimonial dinner are long gone. Employee turnover is part of the rapidly changing business environment that many of you face today. In fact according to CareerBuilder’s Candidate Behavior Study, 75% of full-time employees are either open to or actively searching for new job opportunities.

Employee turnover can provide many benefits.

An Improved Workforce

Every company has a percentage of employees who are subpar or have toxic personalities. However, many retain these employees and as a result lose top performers who are overworked and underappreciated. Jack Welch, former CEO of General Electric, implemented a policy of annually evaluating staff in order to “purge” and replace the bottom 10% of performers. The reality is that even employees who are performing adequately can become complacent after a time and are frequently resistant to change. On the other hand, new employees are excited about their jobs and work hard to make a good impression. They bring a fresh perspective and new skills, which may ultimately improve efficiency and profitability.

I’ve outlined below a few ideas that I hope will give you pause to possibly reframe your views on employee turnover in terms of being a benefit to your business.

A Boost to Morale
New employees can breathe new life into your workforce. While disengaged employees can hamper productivity and morale, new employees can inspire their team members to greater heights with their enthusiasm and energy.

Cost Savings

Typically you’d pay long-term employees considerably more than a new hire. Hiring a new employee also gives you the opportunity to eliminate or reduce high-cost seniority driven benefits and perks – number of weeks of vacation, golf club and/or gym memberships, company car, parking spaces, Smartphones, etc.

Is There An Ideal Employee Turnover Rate?

Although there’s no such thing as an ideal employee turnover rate, 10% is the rate most commonly used. However, not all employees are created equal. If you’re losing your subpar performers, then you’re doing well, regardless of the percentage but if your rate for losing top performers is high, you have a problem.

Low Employee Turnover Can Be a Problem

Low employee turnover is not necessarily a sign of a healthy company. It can be a result of poor management, fear of termination, weak performance management or being slow to release surplus labour. Although firing or laying off employees is never pleasant, you should have a plan in place on how to deal with under performing employees.

Employee turnover can be very positive for your company as long as you’re losing subpar employees and not your top performers. I recommend that you carefully review the records of the employees that have left your employ in the last year to determine whether their leaving was of benefit to your company or if you have a problem that needs to be dealt with.


Don’t Put All Your Eggs in One Basket

millennials-networking-ftrAs a business owner, you feel fortunate when landing a large client. This client can become your bread and butter, but this could also mean that your success is tied to theirs, and if they struggle, so will your business. Should another supplier offer your client better pricing or packages, their loyalty to your business can be compromised. Your largest client may have overdue payments or expect lower prices if they know your dependency on them. However, a greater concern is if you are spending all of your time and resources focused on your main source of income, you are likely to neglect or not seek additional clients.

There certainly are benefits to having larger clients, including the consistent revenue stream and workload, aligning your brand with their reputation, and possible referrals and references when trying to land new clients.

In my 30 years of business experience, I’ve found it critical to diversify your client portfolio with large and smaller clients. In doing so, you reduce the risk of the impact to your business if a large client leaves.

1. Advance your marketing efforts
Create a lead generation marketing plan to support your business development efforts. This might include call out campaigns, email blasts, downloads, boosting social networking posts, and pay per click.

Create an action plan for networking and building an ongoing flow of potential clients. Leverage your existing clients for new business. Participate at networking events and seek referrals from clients.

2. Foster Business Development

As the business owner, making a call to your client’s C-level person is critical in gauging the health of their business. Ensure you speak with that person on an ongoing basis and integrate your value. If they do stop working with you, hopefully you’ve laid the groundwork for working with them in other capacities (e.g. as a consultant on an as-needed basis) or keeping the door open for their possible return or referrals to other businesses.

3. Stay connected with all your clients

Here are a few suggestions I’d recommend to help you safeguard your business from the loss of a large client:

Despite your best efforts, losing a key client can be devastating for some businesses, especially when more than 30% of your business is reliant on them.

4. Join a Peer Advisory Board
It’s been proven that by sharing with other like-minded individuals, it helps to increase your bottom line. Members of Peer Advisory Boards are asked to contribute industry information or business ideas and meet on a regular basis, sharing best practices, networking, and putting forward objective recommendations. By hearing encouragement through a different perspective from other business professionals, you can help grow your business.

Through the continual development of a diversified client base, losing a large client will not devastate your business, but stand as a learning experience and opportunity for growth.