Employee Churn Issues for Midmarket Companies

Employee Churn Issues for Midmarket Companies

This article was updated on Sept. 5, 2018.

A high employee churn rate can be devastating for your organization's morale and bottom line. Midmarket companies, in particular, need to watch out for churn because it can easily sneak up on them, with workforces large enough that employee problems go unnoticed and more limited HR resources than larger businesses. Here's how to determine whether you have a turnover issue and, if so, ways to navigate through it.

Review Your Turnover Ratio

You can analyze your employee churn by calculating your turnover ratio. Divide the number of employees who left your organization in one year by your total workforce. For example, let's say eight employees left in 2015 and you have a total of 100 employees: 8/100 = .08, or 8 percent.

According to polling data from CompData Surveys, the average turnover ratio was 15.7 percent in 2014. However, this changes by industry. In the utilities field, the ratio was only 8.6 percent, while it was as high as 27.6 percent in the hospitality industry. Comparing your ratio to the industry average gives you an idea of whether you have a churn problem.

Consider Who Is Leaving

Some employees are much harder to replace than others. If you are losing high-level employees with years of experience, you're facing a more serious problem even if your overall turnover ratio is low.

At the same time, if you lose weak or underperforming employees every year, it might actually benefit your business in the long run because you can upgrade your workforce. This is why you should look beyond your turnover ratio and see who is actually leaving to determine whether you have a serious churn issue.

Perform Exit Interviews

Any time an employee leaves your organization, you or your HR manager should perform an exit interview. This is your chance to receive feedback to see if there is something your company could improve, or explore ways to help retain good employees. Is the employee pursuing a higher salary? Were there problems with a supervisor? Is he/she leaving for personal reasons, such as family or medical issues? Consider exploring potential job accommodations that may be required by law.

Track this information to observe if a pattern develops over time. Give yourself the opportunity to notice and fix common problems that can create churn, such as a manager with poor communication skills who is driving people away.

Use It as an Opportunity

When an employee leaves, though sometimes a problem, it can also be a chance to assign new responsibilities to other employees or offer a promotion. One of the top reasons people leave jobs is lack of opportunities to advance professionally, according to a study conducted by Ernst & Young. In a medium-sized business, it can be a challenge to offer growth opportunities if you don't have enough positions. When someone leaves the organization, look for ways to elevate someone else on your staff.

Don't let employee churn issues sneak up on you. Track your turnover stats and use each employee departure as a learning opportunity. With the right tools, you can make your workforce as productive as possible.