Can you have too little staff turnover?

Last week, I spoke to CIPD’s West of England policy group about job turnover.  I took them through the findings of last year’s Megatrends research report ‘Has job turnover slowed down?’ and we then discussed the implications for HR practitioners (and the CIPD).

The impetus for this research was data from the Labour Force Survey which showed that labour turnover – measured here by the percentage of people leaving their employer over a 3 month period – nearly halved between 1998 and 2012 (see the graph below).  The fall is mainly due to less people leaving voluntarily (resignations, retirements etc.).

This seems counter-intuitive. Most contemporary discussions of the labour market use words such as- take your pick from the following – flexible, fluid, volatile, insecure, precarious and capricious. Stable isn’t a word that comes to mind very often. But that is what these data imply. We are moving employers less often and staying with employers for longer.  And this finding is supported by CIPD’s surveys of employers as well as by data on how long people spend in their jobs.  Furthermore, the same appears to be happening in some other countries too, including the USA.  A straw poll of practitioners at the event voted 11-3 that turnover in their organisations had, indeed, gone down.

Of course, these data are averages.  Some people change jobs a lot and some people hardly ever change jobs. In particular, young people tend to change employers the most and the over 55s change employers the least.

So why has turnover fallen?  Clearly, the recession and its aftermath is part of the explanation.  Many employers implemented full or partial recruitment freezes.  Employees will have been reluctant to take a chance on moving jobs given the state of the market, preferring to sit tight.  But turnover started falling well before the recession.  Changes to employment legislation may have played a part.  The National Minimum Wage may have led to fewer employees in low-paid industries hopping from one job to another to get a few pence more per hour.  Improved maternity benefits may mean that fewer women feel forced to give up work or change employers when they return to work after maternity leave.  More employees have occupational pensions nowadays and these discourage movement, especially if you’re in a defined benefit scheme as virtually all such schemes in the private sector are no longer open to new recruits.  In addition, the evidence reviewed in the report shows that discontented and disengaged employees are most likely to be looking for another job.  Perhaps there are less bad managers around now than there used to be?

Looking ahead, economic growth and more confidence about the future might cause some increase in turnover.  However, the demographics point the other way: the youth cohort is now starting to fall in size while the over 50 age group is more likely to be in employment.

Now less turnover and a more stable workforce sounds like good news.  It means less time and money spent on recruitment and a more experienced workforce.  Isn’t retention supposed to be one of the main business case arguments for flexible working?

However, our discussion also identified some of the other practical issues associated with a low turnover environment.  Succession planning can become more difficult where low turnover is the result of people choosing to work past their retirement dates – since it means more uncertainty about when people will leave.  A practical consideration for many – especially in the public sector – is that previous rules of thumb about unfilled vacancies, used to translate staffing budgets into headcount, may need to be revisited.  The practical consequences might be different for large and small employers.

Turnover also provides some useful functions.  It creates openings that can be used to advance talent within the organisation.  It brings in new people with new skills and new ideas.  And not everybody who leaves – even voluntarily – is a loss.

So there might be more cases where employers look to initiate an exit and this means having policies robust enough to support this and line managers capable of delivering them fairly.  Internal mobility might need to be encouraged where there is low external mobility.  Ways of doing this include secondments, job swaps and more cross-functional team working.

So, yes, you can have too little job turnover - although I wouldn’t say that to a football manager.   

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  • What an interesting discussion and data.   Yes it is possible to have too little staff turnover.    Turnover can be good because it keeps organisations from becoming stale and stagnant, If the turnover is for positive reasons such as individuals moving location, change in personal circumstances, new job etc it may present opportunities for existing staff or for the company to bring in new employees with fresh ideas.    It can change the culture or the organisation.    If staff leave because the company terminates their employment due to poor performance it can send a message to other employees that a.  they won't be 'carrying' the workload of the poor performer and b.  the disciplinary process works and will be used.

  • Thanks Lyndon, I think this was the position we reached in Bristol discussing the report - every workplace needs a change of faces from time to time.

  • I have just completed training for a Company in Kuwait. There issue is that no one is leaving their call center as they are one of the best payers in the country. The problem is that after 18 months in the role, enthusiasm and engagement drop and they do enough to get by without getting dismissed. The other issue is that most staff are Kuwaiti and they are very difficult to dismiss. The company wanted advice on how to re-motivate the staff but with having no opportunity to progress upwards as no one in management ever leaves. The company would love some staff retention issues as attraction of candidates is not an issue either as they have a strong EVP.

  • A really interesting insight, it would be fascinating to be able to explore the detail and comparisons between different sizes and types of business. There is plenty of data indicating that new recruits often leave within 18 months, this probably reflects a bias towards the younger more mobile and adaptable segment of the workforce. I would be keen to find out more about the positive and negative impacts of employee turnover for different sizes of business, does anyone know of any studies or research?

  • doing my thesis on benefits of high turnover in some organisations. Your article has been very helpful & insightful.