If you are a Director or an Owner, you have probably been asked the question – “What is your turnover rate?” And you have probably answered with a number – 10% (yeah, right!), 20%, 30%, 40% or even higher. However, the answer to that question should not be a number. It should be “well, it depends.” Turnover is not as simple a concept as one might think. Most people assume that turnover is bad – not true! There is good turnover and bad turnover and every organization needs to determine what percentage of their turnover is good and what percentage is bad. When people ask about “turnover” they are usually asking about overall staff turnover – which is a number relevant only in certain, limited contexts. For a Director, or Owner, the overall staff turnover rate does not provide any guidance about how to improve HR recruitment processes and methods and decrease turnover. So, let’s create some useful definitions.
People leave for various reasons and a great employee who quits because their spouse got a job in another state does not have the same implications as an employee who quits because she was about to be fired for poor performance. There are two major types of turnover – Involuntary and Voluntary. Involuntary is when the organization makes the decision that the employee should leave (because of poor performance, violating policy, downsizing, etc.) and Voluntary is when the employee makes the decision to leave. Voluntary Turnover is further divided into two types, functional and dysfunctional. Voluntary-Functional refers to employees who leave on their own but benefit the organization (e.g. poor performers, or attrition that suits the organization’s needs). Voluntary-dysfunctional refers to employees who leave on their own and compromise the organization (e.g. high performers, employees with difficult to replace skills, etc.). Lastly, within Voluntary-Dysfunctional there are two subcategories, Avoidable and Unavoidable. Voluntary-Dysfunctional-Avoidable indicates a situation where the high performer leaves due to reasons under the organization’s control (e.g. negative culture, bad boss, etc.), whereas Voluntary-Dysfunctional-Unavoidable refers to situations where a desirable employee leaves due to reasons not under the organization’s control (e.g. spouse gets job in another state, winning the lottery, etc.). Once the definitions of these four subcategories are understood (Involuntary, Voluntary-Functional, Voluntary-Dysfunctional-Avoidable, and Voluntary-Dysfunctional-Unavoidable), the implications of “turnover” are easier to understand. Let’s analyze each category briefly.
Involuntary: Other than downsizing and other rare circumstances, most involuntary turnover is good. Such turnover occurs because the employee is a poor performer, or has violated policies, and needs to be removed. This gives the organization an opportunity to find a better fit. However, there could be the possibility that “poor fit” employees are being hired because of deficiencies in recruitment methods. Thus, if the involuntary turnover rate is relatively high, then the Center should look at how people are being recruited. Are they being interviewed properly? Have they been tested using a working interview? Is there more than one person who is talking to them?
Voluntary-Functional: This is perhaps the easiest category to think about because it is not under the organization’s control and is also, mostly, beneficial. If someone wishes to leave voluntarily, and is a poor performer, then it is hard to see how that could be a problem.
Voluntary-Dysfunctional-Avoidable: This is, arguably, the most challenging and there are multiple reasons why desirable employees might leave. These may include job dissatisfaction (whereas job satisfaction can always be improved by the organization, there are nevertheless a few people out there who can never be satisfied), poor supervision (or “bad boss”), inadequate growth opportunities, negative organizational culture, favoritism by the Director, and many others. This is where properly conducted exit interviews become important, and may shed light on what the employee’s reason is for leaving. Beware, though, a lot of times exit interviews may not be reliable, as the employee may simply say what he/she thinks the interviewer wants to hear. In this category, it could be very useful if the organization knew where the employee goes. Some possibilities in include retirement, disability, alternative job, nonwork option, career change, etc. So, for example, if they leave for a similar organization, then either work conditions or pay (or both) might be the reasons. This gives the organization an area to focus on and improve.
Voluntary-Dysfunctional-Unavoidable: This category is also easy to comprehend and think about because the reasons for a high performer leaving are not under the organization’s control. These reasons include events like family/personal issues that force the employee to quit or move, spouse getting a great job in another state, etc. In these cases, the organization can only manage the transition as well as possible and hope to find a replacement quickly.
Dividing turnover into these categories is not the end but the beginning. It is critical that each organization calculate the cost of employee turnover (by creating a formula – see articles) for different positions, or at least for the critical ones. In this industry, there are only a few positions (teacher assistant/aide, teacher, assistant director, director, regional director), so the task is not so daunting. Savvy organizations will have these formulas and will account for direct costs and indirect costs, as well as potential benefits. Remember, though, formulas are not perfect, but they are a very good start (to read more about calculating costs of turnover, please see the article titles “How to Calculate the Cost of Turnover”).
Turnover also affects organizational culture, perhaps the most important aspect of an organization. It is tremendously difficult to maintain a desired organizational culture with a high turnover rate (if the rate is 25%/year all employees have changed in four years), and that is a significant challenge in this industry. But make no mistake – maintaining the desired and positive organizational culture is critical to the organization’s success.
In summary then, all four categories discussed above have implications for the organization – some good, some bad, some controllable, and some not. We have tried to distill a complex topic into simple concepts and would refer the reader for more details to the reference below. For now, though, it is important for the organization to understand the implications of the reason why a given employee leaves. To accomplish that, we must move the early learning and child care industry towards evidence-based management, in other words, collection of data! For turnover numbers to be useful, additional data such as reasons why an employee left, where they are going, whether the organization could have done anything to prevent it, and costs and benefits of turnover to the organization should be measured and analyzed. And remember, not all turnover is harmful!
Allen, DG, Bryant, P. Managing Employee Turnover – Dispelling Myths and Fostering Evidence-based Retention Strategies. 2012. Business Expert Press, LLC.
Groysberg, B., Lee, J., Price, J., Cheng,J.Y. The Leader’s Guide to Corporate Culture. Harvard Business Review. Jan-Feb 2018.