It often takes three weeks or more to hire a new employee. That’s three weeks of lost productivity, revenue, and innovation. Plus there’s the time other employees have to spend training the new hire. Managers and hiring professionals strive for low turnover to alleviate these potential losses, but low turnover isn’t always a positive for organizations, says David Shanklin, managing director of culture solutions at the culture management company CultureIQ.
“In many organizations with long-tenured employees, the status quo of ‘good enough’ can become the comfortable enemy of ‘getting better,'” he says. “Your employee value proposition risks being downgraded to a steady paycheck that doesn’t require too much effort.”
This can result in employees who are physically there but mentally disengaged. That means turnover type, not turnover rate, is actually a better indicator.
When turnover is bad
If your high-performing or high-potential employees are leaving, that should trigger alarm bells for any manager. Turnover is often due to internal culture.
“At its core, it’s the most fundamental purpose of an organization and the way people treat one another,” says Shanklin. “It’s said that people don’t leave companies; they leave managers. How leaders treat employees and direct reports and the depth of relationships formed is a huge component to turnover.”
Turnover can also be tied to purpose—or lack thereof. Employees are more likely to stay at an organization if they feel they’re making a difference and if they have shared values; it’s a quest for meaningful work, according to the Society of Human Resource Management.
“The best way an organization can create culture around values is talking first internally not just about them but specific examples of the way they see them come alive in the organization,” says Shanklin. “That can give an employee a sense if they see themselves living a value alignment.”
If turnover is being caused by poor management or lack of meaning—especially if high performers or high potential employees are the ones leaving—exit interviews can be a way of monitoring and collecting data. Once you know why they’re leaving, you can determine how to address it, says Shanklin.
When turnover is good
Turnover can also happen when an organization implements new large strategies or cultural shifts. In the face of change, it’s possible that some people are no longer a fit going forward. They can become disenchanted with the new way of doing business and leave of their own accord.
“Clients invest a lot of time and energy to go through a culture shift, and when they start seeing people leave, they’re confused,” says Shanklin. “If there are groups of employees that aren’t interested in adapting to new ways of working and don’t want to be part of the future vision of the company, this type of turnover can be healthy because it offers the opportunity to bring new people in who better align to new expectations and perhaps even new skill sets.”
If high performers are leaving, it’s not always cause for alarm, in this case.
“After a strategic shift, an organization has to deliver something different for their customers,” says Shanklin. “The high performer of yesterday may not be the high performer of tomorrow. It’s important to understand who is the best fit going forward.”
Any number in a vacuum isn’t informative, including turnover rate, says Shanklin. “Companies need to know two things: what is driving your turnover rate and who is leaving,” he says.