Most employers live in fear of high turnover rates — and, in many respects, these fears are justified. Surveys suggest that as much as 51 percent of all employees in the U.S. are either actively seeking or open to finding new jobs. About 20 percent of full-time employees want to quit their jobs outright.
That being said, we should not allow our fear to blind us to the benefits — yes, benefits – of turnover. Not that I am in favor of unmanageable rates of turnover, but every organization needs a healthy level of turnover to thrive.
Just as they should be concerned about high turnover rates, employers should also be nervous if they have incredibly low turnover rates. If employees rarely leave, your business could suffer in a number of ways:
1. Employees May Lose Career Mobility in Your Organization
One of the best ways to keep your staff engaged and your top performers interested is the prospect — and reality — of regular career advancement opportunities. But, unless your organization is growing rapidly or undergoing a merger/restructuring, opportunities for promotion are not likely to arise until a manager or more senior worker voluntarily leaves. If nobody leaves, then your employees will rarely, if ever, get the chance to advance their careers with you.
Although turnover in your management layer may mean you lose some important leaders, without such turnover you may not be able to create enough promotion opportunities to engage and retain high-potential employees lower down in the ranks or attract new stars to your business. The career mobility that comes from a healthy amount of turnover can actually help to enhance your employer brand.
2. You May Be Collecting a Lot of Dead Wood
Low turnover rates don’t always mean that staff members are engaged, satisfied, and delivering. In fact, low turnover rates can actually be indicative of an environment in which low performers can simply coast. You could have an unhealthy environment that allows employees to stagnate in well-paid positions where they are not pushed to achieve more.
Over time, your organization could lose its hunger and competitive edge, having collected a lot of dead wood over the years. On the other hand, an environment that encourages healthy rates of turnover can ensure that jaded/unproductive workers move on and are replaced by new, more engaged, and more productive workers.
3. Your Organization May Become Afraid to Innovate
If you have an extremely low turnover rate, your organization may start to lose its ability to be creative, relevant, and innovative. Your organization may become susceptible to a phenomenon known as groupthink. This occurs when the desire for harmony in a group results in poor decision-making and the group’s thought processes start to narrow. The groups looks to reach consensus without considering alternative viewpoints by crushing dissenters. Thus, a lack of staff turnover can led to stagnancy and groupthink, to a more narrow-minded organization that is afraid to innovate.
A healthy level of turnover within an organization acts as an injection of new blood, new ideas, and fresh perspectives than can help to counter the innovation-killing aspects of groupthink.
This article argues that a healthy level of turnover is great for business, which of course raises the question: What is a healthy level of turnover? There is no simple answer to this question, and it varies according to industry. It’s about finding the level of turnover that leads to optimal productivity within your business.
If you want a guiding figure, I offer this study from the Academy of Management Journal, which found that the optimal turnover rate for retail businesses is 15 percent. Meanwhile, another study from the University of Melbourne found that the optimal turnover rate was 22 percent per year.