Low Turnover Is a Sign of a Healthy Organization

It may be.
 
But it very probably isn’t.
 
At least not without considering some additional factors.
 
During a recent conversation, a CEO proudly told me that they are doing much better than their competition, when it comes to turnover.
 
People stay long-term, and very few have left, even in today’s labor market.

𝙒𝙝𝙚𝙧𝙚, 𝙖𝙘𝙘𝙤𝙧𝙙𝙞𝙣𝙜 𝙩𝙤 𝙖 𝙧𝙚𝙘𝙚𝙣𝙩 𝙈𝙘𝙆𝙞𝙣𝙨𝙚𝙮 𝙖𝙣𝙙 𝘾𝙤. 𝙧𝙚𝙥𝙤𝙧𝙩, 𝙖𝙥𝙥𝙧𝙤𝙭𝙞𝙢𝙖𝙩𝙚𝙡𝙮 40% 𝙤𝙛 𝙤𝙫𝙚𝙧 6,000 𝙐𝙎 𝙚𝙢𝙥𝙡𝙤𝙮𝙚𝙚𝙨 𝙨𝙪𝙧𝙫𝙚𝙮𝙚𝙙, 𝙖𝙧𝙚 𝙘𝙤𝙣𝙨𝙞𝙙𝙚𝙧𝙞𝙣𝙜 𝙦𝙪𝙞𝙩𝙩𝙞𝙣𝙜 𝙩𝙝𝙚𝙞𝙧 𝙘𝙪𝙧𝙧𝙚𝙣𝙩 𝙟𝙤𝙗𝙨 𝙞𝙣 𝙩𝙝𝙚 𝙣𝙚𝙭𝙩 3-𝙩𝙤-6 𝙢𝙤𝙣𝙩𝙝𝙨.
 
Upon further discussion, it emerged that this organization’s turnover is indeed very low.
 
But its financial performance is worse than its competitors’ and declining as time passes.
 
✅ Because the truth is that a focus on this one number, without considering other factors, is an all too frequent problem.
 
For example, part of the issue is that there is no automatic, magic number when it comes to turnover.
 
𝘽𝙪𝙩, 𝙖𝙘𝙘𝙤𝙧𝙙𝙞𝙣𝙜 𝙩𝙤 𝙂𝙖𝙡𝙡𝙪𝙥, 10% 𝙞𝙨 𝙝𝙚𝙖𝙡𝙩𝙝𝙮, 𝙖𝙡𝙩𝙝𝙤𝙪𝙜𝙝 𝙚𝙫𝙚𝙧𝙮 𝙞𝙣𝙙𝙪𝙨𝙩𝙧𝙮 𝙖𝙣𝙙 𝙤𝙧𝙜𝙖𝙣𝙞𝙯𝙖𝙩𝙞𝙤𝙣 𝙞𝙨 𝙙𝙞𝙛𝙛𝙚𝙧𝙚𝙣𝙩.
 
Lending credence to the fact that there is absolute truth in the old cliché that “some turnover is good.”
 
💠 Since fresh talent brings new ideas not yet considered, and sees old problems not yet noticed.
 
Therefore, whatever any particular industry’s number, low or no turnover potentially points to some problems.
 
Often indicating a stagnant organization, with disengaged employees, who are coasting.
 
And managers who are not holding their employees accountable, with recruiting mistakes that are not being remedied.
 
📌 Since no-one is perfect at hiring, and slip-ups happen, meaning the wrong person is occasionally hired.
 
Most of the turnover here is likely 𝒅𝒚𝒔𝒇𝒖𝒏𝒄𝒕𝒊𝒐𝒏𝒂𝒍, where top performers leave, and low performers stay.
 
𝙊𝙣 𝙩𝙝𝙚 𝙤𝙩𝙝𝙚𝙧 𝙝𝙖𝙣𝙙, 𝙨𝙩𝙧𝙤𝙣𝙜 𝙘𝙤𝙢𝙥𝙖𝙣𝙞𝙚𝙨 𝙝𝙖𝙫𝙚 “𝙜𝙤𝙤𝙙 𝙩𝙪𝙧𝙣𝙤𝙫𝙚𝙧”, 𝙗𝙚𝙘𝙖𝙪𝙨𝙚 𝙩𝙝𝙚𝙮 𝙝𝙤𝙡𝙙 𝙣𝙤𝙣-𝙥𝙚𝙧𝙛𝙤𝙧𝙢𝙚𝙧𝙨 𝙖𝙘𝙘𝙤𝙪𝙣𝙩𝙖𝙗𝙡𝙚.
 
And let them go, if necessary, while retaining those who are effective.
 
So, 𝒇𝒖𝒏𝒄𝒕𝒊𝒐𝒏𝒂𝒍 turnover, where low performers leave, and top performers stay.
 
Therefore, businesses focused on this one number with no additional considerations, do themselves a disservice.
 
And should not aim for the lowest turnover number possible, then think that this alone indicates strong performance.
 
Instead, ensure leaders are trained to effectively manage and engage their teams, know their industry’s turnover rate, and embrace the idea that some turnover is healthy.