employe exit sign for employee turnover

High Employee Turnover? Keep Your Top Performers

Earlier this year I spoke at a conference for auto dealers and talked with a guy running a department at a dealership with 100% employee turnover. One. Hundred. Percent.

Now, the average auto dealer has about 75% turnover--higher than the 60% retail turnover rate, and the food services industry turnover rate that's slightly higher. And it's a great deal higher than the ~20% employee turnover rate across all industries.

So, if your employee turnover rate is over 20%, is that bad?

The answer is... not necessarily. In fact, a high turnover rate might even be a blessing. Let me explain.

Do You Have an Employee Turnover Problem? Maybe.

To really answer that question, you've got to know a bit more about the type of employee turnover your company is experiencing. First, imagine you've got four groups of employees leaving your company--because you do. You can identify these employee groups by a combination of their work performance and their tenure:

  1. High Performer + Short Tenure
  2. Low Performer + Short Tenure
  3. High Performer + Long Tenure
  4. Low Performer + Long Tenure
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The least problematic employee turnover is category two where you see low performers quickly leaving. I might suggest taking steps to better identify qualified applicants in the first place, but mistakes happen, and this employee turnover is a blessing in disguise.

Conversely, if the majority of turnover you're experiencing is in category one with high performers leaving soon, well...Houston, we have a problem. Losing high performers with short tenures mean they didn't stay long enough to give you great returns. Losing high employee performers with extensive histories at our companies and a deep well of tribal knowledge is also painful. But until you know what categories you're experiencing turnover in, you don't really know how bad your employee turnover is.

How to Improve Employee Retention

My recommendation: take a minute to list the last six months or year's worth of employees who've left your company. Take into account these previous employee's reasons for leaving and pay special attention to those who left for unavoidable reasons like a relocation for a spouse's job, retirement, etc. You can even download this free "Employee Turnover Analysis" Excel file to record your findings.

3 Steps to Determine Your Turnover Rate

Before we can address whether you truly have an employee retention problem, we need to know what type of employee turnover you have. Follow these easy steps to give you the best picture of where your employee retention stands today:

  1. Build a Matrix

    For the X-axis, we'll use the length of service for an employee at your company. For the Y-axis, plot employee performance. Like this:

    employee turnover matrix

  2. Plot Employee Turnover

    Add all employees that left the company in the recent past in one of these four quadrants.

    employee turnover matrix example

  3. Summarize Your Employee Turnover

    Add up the percent of employees turning over in each quadrant.

Start with the Worst Employee Turnover Problem

Do you have any quadrant with greater than 25% employee turnover? What could you do differently to reduce the impact of these quadrants on your company? Could hiring applicants that match your top performers help reduce your employee turnover?

I've got some thoughts of my own and will be back later with specific recommendations on addressing each quadrant's unique challenges. But remember: if you don't get quality applicants, you won't make quality hires so be sure to check out our free guide to increasing the number of quality applicants applying for your job openings.

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