The dark side of low employee turnover

by on January 11, 2013 · 0 Comment POSTED IN: HR Cafe
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Today’s guest post comes from Ben Geoghegan of HRwisdom

Though the U.S. economy continues its slow mend, job creation is barely keeping up with population growth, leaving the unemployment rate stuck at 7.8%.

One consequence is that employers still aren’t feeling much pressure when it comes to employee turnover. The Bureau of Labor Statistics’ “quit rate” – the percentage of workers who voluntarily leave their jobs – will be about 18% for 2012. That’s not much higher than the 16% level seen in the depths of the Great Recession, and well below the 25% rate of 2007, when the economy was booming.

That sounds like good news for employers, because turnover is costly. But there’s a dark side. When retention isn’t a priority, employee engagement falls off the radar. And engagement is about more than retention. In fact, the disengaged-but-still-working crowd can do far more damage to your business than disgruntled folks who up and leave.

Here’s what the hugely influential Gallup Organization had to say about employee engagement as part of their ongoing assessment in which they interviewed more than 3 million employees since 1997:

“Engaged employees are clearly more valuable to your company than disenchanted ones. Great managers and leaders know this instinctively, and The Gallup Organization’s latest research into employee engagement levels among the U.S. workforce confirms it. In fact, according to Gallup’s calculations, actively disengaged employees – the least productive – cost the American economy up to $350 billion per year in lost productivity.”

At an individual employee level, Gallup calculated that each disengaged employee costs businesses approximately $3,400 for every $10,000 paid in salary.

Many people these days are simply sticking with their jobs out of fear or insecurity, not because they love what they do. That creates a drag on productivity, but it’s often obscured by the low turnover rates. When people are running for the doors, you know you have a problem. When they aren’t, engagement falls lower on the priority list.

In fact, some short-sighted companies have seen the past few years as an opportunity to get rid of the “dead wood” — but such an approach is rarely done with longer term consequences in mind. Jack Welch became known for his tough approach to performance management and firing, but he was careful to combine this with a very strong focus on employee engagement for those who remained.

So if you’re finding it tough to make a business case for employee engagement in these times of low turnover, it may be because you’re looking in the wrong place. Retention is just the icing on the cake; the greatest value of an effective engagement program comes from enlisting the full discretionary effort of your people. That creates a sustainable advantage for any organization, regardless of the economic climate.

HRwisdomBen Geoghegan is Manager and Editor of HRwisdom, a website which provides high quality staff management advice and free resources to employers. HRwisdom is the publisher of the popular (and free) Employee Attraction & Retention Guide which features excellent tips and advice from business owners and HR experts from around the world.

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