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What Is Employee Churn And How Can You Reduce It?

By Preethi Jathanna

Senior Writer for HR and Remote Work

What Is Employee Churn And How Can You Reduce It?

Retaining top talent is a crucial aspect of every organization's success. No matter how well a company has done, how much money it’s banked, or how all-encompassing its brand has become, a lack of industry-leading professionals in the workspace can soon start to take a toll. And while huge companies have great track records with retention, even they can find it daunting to retain everyone.

Sooner or later, they all experience churn. Employee churn is a term that refers to the turnover rate of employees within a company. Having a high employee churn rate can negatively impact an organization in various ways, causing major problems that aren’t easy to resolve. So if you’re running a business with employees, this is something you need to take seriously.

In this blog post, we’ll further explain the nature of employee churn, expand upon its importance, and offer up several strategies to help you reduce it within your organization. Let’s get started.

1. Understanding Employee Churn

Since employee churn refers to the overall rate at which employees leave a company, it includes both voluntary and involuntary exits. Voluntary turnover includes employees who resign or retire, while involuntary turnover encompasses employees who are fired (or simply have contracts that aren’t renewed). Voluntary turnover is the biggest concern here, and there are several factors that can cause it to rise, including the following:

  • Job dissatisfaction. If people grow to dislike what they do on a daily basis, they’ll obviously want to look elsewhere.
  • Limited career growth opportunities. We all want to progress. If you don’t allow people to move up the ladder, they’ll become frustrated.
  • Poor work-life balance. Most people don’t love their jobs, and even those who do need breaks for contrast. Overwork is a huge problem.
  • Insufficient compensation and benefits. If salaries have risen in your industry but you’re not paying any more, your employees will notice.
  • Inadequate training and development programs. A good employer understands the need to invest in their employees by funding their development.
  • Company culture and leadership issues. Sometimes an employee feels out of place because the company culture doesn’t suit them.

The costs associated with employee turnover include the expenses of recruiting, hiring, and training new employees, as well as the loss of productivity and institutional knowledge when experienced employees leave. The loss of just one or two key employees can result in company damage that takes months or even years to heal.

2. The Importance of Measuring Employee Churn

To address the issue of employee churn, it's essential to accurately track and measure it within your organization. This information can provide valuable insights into areas that need improvement and help you develop targeted strategies for reducing employee turnover.

The core metrics to track are overall turnover rate, voluntary turnover rate, and involuntary turnover rate — but you can’t stop there. You also need to pay close attention to the issues that tend to lead to churn. Do you regularly ask your employees for feedback? Give them chances to comment anonymously (or at least be assured that their comments won’t be punished)? The more data you gather, the better equipped you’ll be to see what’s coming.

And if you’re wondering whether your churn rate is good or bad, look into the average rate for your industry or niche. You should be competing with yourself (trying to get your churn rate lower than it was before) and competing with your competitors: after all, if your main rivals are retaining talent very well, it won’t bode well for your future prospects.

3. Tips for Reducing Employee Churn

Sadly, there’s no one-size-fits-all solution for reducing employee churn, as each organization's situation is unique. However, there are several proven strategies that can help improve employee retention rates. Try the following:

  • Offer better compensation and benefits. Ensure that your company's compensation and benefits packages are competitive within your industry. Regularly review and adjust them as needed to retain and attract top talent — and be generous, because the value of a great employee will always be higher than you assume.
  • Make good use of automation. If people feel overwhelmed, they’ll start veering towards burnout, so you mustn’t let your employees remain in that state. We live in a time of rich automation, so take advantage of it. Implementing convenient tools to handle some of your most tedious processes (think Chargebee for billing or CharlieHR for HR) can take the strain off your team and help them feel more relaxed.
  • Create personal development plans. Employees are more likely to stay with companies that offer meaningful opportunities for career advancement and personal growth. Creating full personal development plans using employee feedback will show that you’re invested in their success and hungry for them to grow.
  • Improve your working environment. Cultivating a healthy company culture and supportive work environment can significantly impact employee satisfaction and retention. Encourage open communication and teamwork, and arrange social gatherings. If you’re typically inclined to micromanage, resist the impulse.
  • Show appreciation for your employees.  Employees who feel valued and appreciated will become loyal. In addition to implementing a recognition program to acknowledge employee accomplishments and reward them for their contributions, take the time to simply thank them one-on-one: that alone can mean a lot to them. A great choice to help you get started is Hooray Teams, a facilitated virtual team building platform that can help organize fun and engaging games and activities like virtual escape rooms and virtual murder mystery for your employees.
  • Learn from exit interviews. When employees leave (and they will leave, no matter how great your company may be), you must conduct thorough exit interviews to gain insights into the reasons for their departure. When you do so, though, be careful: it’s possible to go too far, pushing so hard for answers that you spur them to disparage you to others in your industry. Be kind and gentle, making it clear that you just want to improve. The more you can take from the interviews, the better you can do.

Wrapping up, employee churn is an issue that every organization must address to maintain a stable and productive workforce. By understanding the factors that contribute to employee turnover and implementing targeted strategies to address them, you can significantly reduce your churn rate and foster a more engaged workforce.

You’ll never be able to stop people from leaving, nor should you ever try to, but you can make your company a great place to work and ensure that professionals see it as a good place to develop. Your churn rate will fall, and your prospects will improve.

4. FAQs

4.1. What is churn vs attrition?

Churn and attrition both refer to the loss of customers or employees, but churn specifically relates to customers who stop using a service, while attrition encompasses employees leaving a company for various reasons.

4.2. How is employee churn calculated?

Employee churn rate is calculated by dividing the number of employees who leave a company within a specific time frame by the average number of total employees during that period, then multiplying by 100 to express it as a percentage.

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