Staffing, Turnover Rate and Voluntary Departures

It is generally said that good recruitment and selection processes ensure that organizations have the workforce they need for their operations. These efforts are relevant and can be effective, but they also represent a great deal of cost and effort that should be avoided if possible. It is in this context that the question of turnover rates and voluntary departures is worth asking.

When a boat takes on water, you can get a more efficient pump to keep it afloat… but would it be appropriate to also seal the leaks that may occur?

As Mr. Tessier mentioned on several occasions in a nice podcast called “Time for a break… HR!” and many other places, “what you measure gets better”. Better quantifying and understanding the departures that make up an organization’s turnover rate allows us to act on the available internal workforce without necessarily increasing the staffing budget significantly. However, the question remains as to “how” to measure turnover and, in a similar way, “how” to better understand turnover and the departures that are part of it.

Gathering Relevant Information

The CHRP suggests various turnover and retention rates that do not measure the same thing but are nevertheless important ¹. This illustrates the complexity of the issue: once it has been determined that a turnover rate is a ratio of the number of departures to the total number of employees, it remains to be determined which departures are or are not considered, to which groups of employees we are interested and what period of time we wish to address. Depending on the choices made at this stage, the information collected will not be the same, which will naturally have an impact on its usefulness.

The first way to use the turnover rate is through a broad approach, where one might count the number of employees who are employed at the beginning of the year but are no longer employed at the end of the year and divide this by the number of employees who have been employed by the organization at some point during that year. Then, multiply the result by one hundred to get an overall exit percentage. Although this result can provide an overview of the number and proportion of employees who leave during a year, thereby bringing their expertise with them and potentially requiring a replacement, it can also prove to be misleading. Some departures are normal (retirements) and even planned to have the least possible impact on organizational functioning. Others are the result of layoffs or dismissals initiated by the organization itself for valid reasons and are therefore beneficial or necessary. It is normal and sometimes even considered beneficial to have a certain turnover rate, and the information that enters this rate does not generally make it possible to clearly indicate that there is a problem or that, on the contrary, everything is going well.

A second and very interesting approach is to consider only certain categories of terminations to replace “all terminations” in the previous calculation. Three specific distinctions that appear in research² on the subject can be applied to a departure to determine whether it should be considered “normal” or “problematic”. First, it can be determined if the departure is “voluntary”, i.e., decided and wanted by the employee, or if it is “involuntary”, i.e., the result of a decision by the organization to terminate the employment relationship. We can then verify whether the departure in question has been “planned” for some time or whether it is “unplanned”, i.e., it comes as a surprise to the organization, either because the employee did not plan his or her departure or because he or she did so without the employer’s knowledge. Finally, we can ask ourselves whether the employee’s departure can be considered “functional” in the sense that it will have a generally neutral or positive impact on the organization’s activities, or whether it is a “dysfunctional” departure that will create operational difficulties and a net cost for the organization.

Overall, departures that are voluntary, unplanned, and dysfunctional are likely to have a particularly negative impact on the organization and can be considered the most “problematic”. Therefore, these are the types of departures that should be given special attention when looking at turnover statistics. By operationalizing these three distinctions using specific criteria, it becomes possible to calculate departure rates that have real meaning for the organization’s activities by considering the impact they have on them.

Take a moment to consider two departures :

1. The termination of an underperforming employee that is planned and for which a replacement is ready;
2. The surprise departure of a high-performing, hard-to-replace senior employee.

Do both have the same meaning and impact? What does a number mean when these two situations are conflated? Identifying a specific retention problem can also be a good way to understand what you are dealing with. Are employees from a specific job category, department or team leaving in significant numbers? Are these departures over-represented among employees with little seniority within the organization? This information can be obtained by applying a turnover rate calculation to any subgroup of employees that might make sense for the organization. From there, it becomes possible to look deeper and ask questions to understand what is different about the subgroups in question and to respond more effectively.

Using the Information

All these indicators, while interesting on their own, are particularly insightful when they can be compared over several years or to standards that are meaningful to the organization, such as industry standards. This is where it is possible to say that a turnover rate is “not normal” or that it is a special situation. A number taken out of context has very little meaning, as the following example illustrates: What do you think of an overall annual turnover rate of 40%? Most will say, based on the context they know that this is too much and that it implies a huge cost for the organization. Others, for example in the fast-food industry, will tell you that this is an achievement that they are used to much more.³

The contextual elements associated with this question include, among many others, the cost of recruitment, the cost and duration of training/integration upon entry into the job, the level of complexity of the job, and not to mention all the human effects (stress and so on) on those who leave and on the employees whose colleagues leave. The point is that a turnover rate that is not interpreted in its specific context is not useful.

Once a retention problem has been identified, the next question on the minds of all HR stakeholders is: what are the solutions? Some approaches recommend methods that are applicable to all employees and can potentially lead to results. The fact remains that we are talking about an employment “relationship” and that these voluntary departures are the result of a decision that can often be explained by looking at the relationship and a multitude of reasons belonging to the employee concerned. Rather than engaging in prescriptive measures consisting of best practices for attracting and retaining employees, the following paragraphs propose a dynamic approach focused on understanding the individual and his or her decision-making process in relation to the environment in which he or she evolves.

Although research on the topic is still in its early stages, there are reasons to believe that two distinct intentions can lead, sometimes in combination, to the behaviour that is voluntary departure, that is, the intention to leave and the intention to stay (or rather the lack thereof). Rooted in an application of Azjen’s (1991; 2012⁴) theory of planned behaviour, there would indeed be a distinction between an employee who actively wishes to leave an environment and one who simply does not have enough desire to stay and leaves because of external pressures (such as a job offer). Although the result of voluntary departure is the same in these two cases, the justifications are very different and call for very different actions on the part of the organization that wishes to retain the services of its employee.

Psychological Contract and Intention to Leave

In the first case, it is only a question of what is happening within the organization that the employee wishes to leave. One can think of a frustration or dissatisfaction associated with a relational situation, with the manager or colleagues, for example. The employee’s needs may have changed to the point where he or she no longer considers the employment relationship to be satisfactory. It is also possible that a disappointment comes from a feeling of injustice, or the breaking of an informal commitment perceived by the employee.

In all these cases, a link can be made to the psychological contract of employment that is not being honoured. While the employment contract in the legal sense is a clear written commitment between employer and employee, the psychological contract is more composed of the real but not necessarily explicit or known expectations that an employee has of the employment relationship. Taking the examples from the previous paragraph, one might think that the following elements could be included (but are not necessarily included) in a psychological contract: having a pleasant and rewarding work environment, maintaining good relations with colleagues and one’s manager, perceiving a commitment from the organization to one’s professional development and growth, being treated fairly and equitably, etc. However, the elements of this psychological contract are all sources of potential disappointment or frustration that can lead employees to question their commitment to the organization and leave.

Studies on the subject show that there are two main types of psychological work contract, namely transactional and relational contracts ⁵. Although it should be remembered that real psychological contracts are all different and fall somewhere in between these two typologies, they nevertheless facilitate the identification of issues and interventions when needed. According to this work, the relational type of psychological contract is more in line with what was typical a few decades ago, where the employer was committed to providing job security and long-term support to its employees beyond its contractual commitments. In return, employees are expected to be committed and to go beyond the expectations of the legal employment contract, for example, by working overtime when needed or by engaging in organizational citizenship behaviours. This type of relationship is characterized by a mutual respect and commitment that translates into high expectations on both sides and a lasting employment relationship.

The transactional psychological contract, on the other hand, involves a limited commitment, which is made through a relationship that is deemed adequate in the short term. In this type of relationship, both the employer and the employee adopt a short-term cost-benefit approach in which each gives the other what they need without any real commitment. These are situations where expectations on both sides remain limited and largely oriented around the legal contract of employment, all within a relationship that is explicitly short-term. The risks of disappointment or frustration due to the non-fulfilment of the psychological contract are therefore smaller, but it is agreed that the employment relationship will only last if it is deemed to be mutually beneficial and will not exceed the agreed terms. It should also be noted that certain obvious elements are generally included in almost all psychological contracts, such as respect for rights or the employment contract.

As with any other type of relationship, the form that an employment relationship takes can vary considerably. The important thing is that all parties involved are satisfied.

The approaches in terms of attraction and selection of the workforce are among the main elements that condition the formation of the psychological contract, notably because informal commitments are made to candidates, as well as the reputation of the employer and the sector of activity. It should also be noted that while this psychological contract is not automatically known by the employer, it is not impossible to become interested in it simply by talking to the employee in question. This is an effective approach to understanding the employee’s expectations and then anticipating and avoiding disappointments and frustrations that can lead to an employee-initiated termination of employment. It becomes possible to manage expectations by clarifying the commitments made to employees and thus influence the content of the psychological contract, as well as avoid situations that would violate it. In this way, the unnecessary disappointments and frustrations mentioned above are avoided and the intention to leave is directly influenced.

Job Market and Intention to Stay

The second scenario that may lead to a voluntary departure does not necessarily imply a problem with the employment relationship, but rather involves what might be described as a lack of attachment by the employee to the organization. In fact, especially in a job market such as we are experiencing these days, employees are quite commonly subject to external opportunities. One can then imagine forces that keep each other in balance and result in a continuity of the employment relationship… or the opposite! Let’s explore these different forces at work.

On the one hand, different reasons can keep an employee within the organization. A psychological contract that is more relational than transactional is one such example, where a sense of loyalty leads the employee to perceive that he or she has extra-contractual obligations. In addition to these more intangible elements, there are all the benefits that the employee obtains from the employment relationship that he or she would lose if he or she left.

However, on the opposite side of the spectrum are all the benefits that the employee believes he or she would have if he or she went to work elsewhere, again both emotionally and materially. It is the employee’s perception, which is almost certainly imperfect and influenced by the reputation and promises of competitors, that counts in this case.

This whole balancing process takes place in a way that is not always even salient to the individual, who often only has impressions of “I should stay” or “I should go work somewhere else”. However, the organization must take this balance into account if it wishes to reduce voluntary departures. There are two main options to take. The first involves constantly reviewing the employee experience and total compensation so that it does not stray too far from what employees would have access to if they left the organization. The second approach involves putting effort into improving employee engagement and loyalty. This approach is more applicable in cases where the psychological contract is more relational than transactional and therefore must be part of a long-term strategy that involves, among other things, attracting and selecting employees who are looking and are sensitive to this type of long-term loyalty relationship. It should also be noted that this second approach does not eliminate the need to align with the job market, but rather provides additional flexibility in the form of employees who are willing to accept a greater or lesser difference in treatment between what they have and what they could have elsewhere before making the decision to leave.

In Conclusion: Target Your Approaches!

Taking steps to reduce voluntary departures is an interesting approach for those who wish to reduce their overall staffing expenses. However, it is a little more complicated than simply conducting a few exit interviews. It is important to consider that the investment of effort in staff retention may have a diminishing return as some departures are normal and inevitable. Therefore, it is necessary to think about the balance between the costs and efforts of retention and the expected benefits, which can only be estimated since it is very difficult to calculate the avoided departures.

In order to improve the effectiveness of efforts that target voluntary departures, a number of approaches were discussed. The first is to properly identify the need and target where turnover is truly problematic, characterized by voluntary, unplanned, and dysfunctional departures. Once a real need for action is identified, it is then appropriate to ask what could explain these voluntary departures. More specifically, are they caused by dissatisfaction and frustration on the part of employees who actively want to leave the organization? Or are they situations where employees believe that the grass is greener on the other side of the fence and lack reasons to stay? In both cases, the corrective measures to be taken are not the same and it is necessary to target the needs in order to intervene effectively. At the end of the day, we must remember that we are talking about an employment “relationship” that must suit the needs of both parties involved and that, like any relationship, must be maintained in order to be sustainable.