Turning off the turnover tap

There is no running away from the fact that organisations continue to feel the heat from the turnover enigma. But how can HR play an instrumental role in fixing this issue? HRM investigates.

Although Finian Toh, Associate Director - HR Practice, Kerry Consulting, acknowledges that the Ministry of Manpower’s Labour Market Second Quarter 2015 report showed that turnover has remained low this year, as evidenced by the low average monthly recruitment and resignation figures, he stresses that high turnover is not a thing of the past.

“Organisations operating in the emerging economies, such as in China, India and Southeast Asia have to cope with high staff turnover,” he says.

Indeed, according to the Investing into Asia’s reform landscape: Asia Business Outlook Survey 2015 report, proportions of staff turnover seem to be rising across the region.

The report cited that organisations operating in the fastest-growing economies, particularly China, India and Southeast Asia, are dealing with double-digit staff turnover rates (see: boxout).

Staff turnover is termed by the report as “the percentage of workers that must be replaced each year”.

“Competition for talent is even more acute due to the lack of qualified talent, rising salaries, and hence, this has pushed up turnover rates in such markets.”

Toh says turnover rates are indicative of the unique labour market dynamics of different industries.

“For example, the retail and food and beverage industries typically have higher turnover rates because of their heavy reliance on contractors to cope with fluctuations in demand,” he states.

The Labour Market Second Quarter 2015 report deduced that labour turnover in Singapore stayed largely at five-year lows in the second quarter of 2015. The seasonally adjusted recruitment rate remained unchanged at 2.4% while the resignation rate rose marginally over the quarter to 1.9%.

According to Toh, the turnover rate in Singapore for the remaining 2015 is expected to remain rather subdued, due to uncertain global market conditions and cautious hiring expectations.

“A recent survey revealed that 82% of participants expressed uncertainty about the job market in 2015. But it is interesting to note that an overwhelming majority (80%) are still considering changing jobs in 2015,” he says.

Nevertheless, Toh’s sentiment that turnover is still very much at the forefront of companies’ thoughts is also echoed by Bruno Marchand, Manager - HR and Business Support, Robert Walters Singapore, and Jaya Dass, Country Director, Randstad Singapore.

“High turnover is still not a thing of the past despite the fact that we have seen more companies strengthening their employee wellbeing and retention programme strategies,” highlights Marchand.

Dass meanwhile, argues that high turnover is also not quite a past notion as Singapore is still a robust market globally and continues to see movement of talent.

“In the 2015 Randstad Award findings, 30% of the polled population stated that they were looking to change employers in the next 12 months. This will only likely slow down if the economy goes into a recession,” she explains.

Threats of turnover

According to Marchand, high turnover poses a number of significant potential perils for businesses.

Firstly, he cites the aspects of financial and time investments.

“Companies spend a good amount of time interviewing and hiring employees or replacement staff. There is additional money spent in the recruitment process via agencies or other recruitment tools,” he elaborates.

Interestingly, the 2015 Michael Page Singapore Employee Intentions Report reveals that “a high volume of interviewing activity among jobseekers is expected to translate into high staff turnover for employers”.

Marchand says the time spent training the new hire and the period of time before the new employee gets up to speed with the business and becomes efficient also impacts productivity.

Thirdly, he says high turnover is also likely to lower the morale of other employees seeing their colleagues leaving.

“It is inevitable that some may perceive a problem in the company and start a new job search too,” he adds.

From Dass’ perspective, with a two per cent unemployment rate in Singapore, she says there is a constant talent crunch and a chronic shortage of talent locally.

“Turnover is always a serious issue for employers in Singapore. According to findings from our 2015 Randstad Awards, 29% of those surveyed left their jobs due to a lack of career growth opportunities, 26% due to poor leadership and 24% resigned as a result of low compensation,” explains Dass.

“This means employers need to be mindful of their organisational climate and understand the key push factors that are spurring candidates to move. The cost of hiring and retraining a new employee (both in terms of time and resources) will almost always be higher than retaining top quality talent.”

She stresses that this is why firms should adopt a greater focus on retaining their high performing staff, which will enhance their productivity over the long term.

Her counterpart Toh says regardless of the size of companies, high turnover will undermine productivity, quality and profitability.

“Generally, reducing employee turnover has a direct impact on the bottom line as resources saved from not having to recruit and train replacement employees can be directed to other needs,” he explains.

“Each employee who resigns is costly. This is because all the resources spent in training and developing the individual walk out the door with that employee. Additionally, high turnover rates are disruptive to the continuity of service to clients.”

Toh says it is especially challenging in industries that rely heavily on client relationships.

“Consistent relationships with clients help to foster strong loyalty to the company as a consistent and high-quality level of service can be provided by competent staff that don’t change often,” he says.

Employees keeping tabs as well

In The 2015 SHRM/Globoforce Employee Recognition Report, a significant 40% of HR professionals listed ‘employee retention and turnover’ as their top organisation challenge in 2015.

However, Toh reveals that high turnover concerns are not solely restricted to employers only.

“Candidates do take into consideration an organisaton’s turnover when deciding to take up the job offer from that particular organisation,” he explains.

“This is because high turnover is a tell-tale sign of an organisation’s culture, workplace dynamics, environment, and management practices.”

Dass says employees are definitely aware of the negative impact job hopping can have on their careers.

“They are selective about moving to the next opportunity and see value in only moving for the right reasons,” she remarks.

Marchand also agrees that employees are turning their thoughts towards the notion of turnover.

“It can lower productivity as there are new employees who have to be trained and the remaining employees have to fill the gaps and work extensive hours in some cases with increased workload and more pressure. This will also impact employer branding,” he says.

HR leading the fight

So, how can HR position itself as a weapon to combat high turnover?

Marchand reinforces his view that the role of HR is imperative to fighting high turnover, and through several different strategies.

Firstly, he says HR should track turnover rate and analyse the reasons for departures through exit interviews.

“They can then identify the key push factors behind employees leaving, analyse trends, and make strategic organisational changes. Problems can stem from a top-down management approach or the lack of benefits in the company,” he elaborates.

Secondly, he advocates the enhancement of training and on-boarding processes such as providing new recruits with an individual mentor, a proper welcome on the first day, as well as a formal review of internal policies and procedures.

Marchand also urges HR to conduct a strong follow up on new recruit’s performance levels and check on how they are coping in the company to quickly identify any potential issues.

He also advises HR to boost employee engagement by suggesting new projects to keep employees motivated and engaged.

Compensation and benefits is another aspect HR should look into to curb high turnover.

Marchand says employees who are appreciated will have a higher level of job satisfaction and will feel more valued by the company.

Lastly, he also encourages HR to focus on career progression.

“We have seen companies roll out and implement listed tools and measures,” he adds.

“However not every industry or organisation has the same practices. Permitting flexible working hours or working from home are other examples to assist employees in having a good work-life balance.”

Dass also concurs that “HR’s role is critical in addressing turnover”.

“It is a function that is all encompassing, from compensation and benefits, to training and development, and from employee engagement to organisational development,” she explains.

“Attracting the right talent, grooming and nurturing them, and providing them with opportunities for growth are functions of HR to ensure that turnover is contained and managed at the right levels.”

According to Dass, employee engagement, looking at an employee’s life cycle within the organisation, workforce planning, improved hiring practices, and on-boarding have increasingly become key areas of focus for HR practitioners.

“HR practices have evolved to cope with changing generational needs and employee sentiments,” says Dass.

“With four generations in the workforce, HR is more aware of designing policies and schemes that address the varying needs and look at their people and talent development issues proactively rather than retrospectively.”

Toh also reaffirms the proactive stance that HR must adopt to tackle high turnover.

“Examples of what HR can do is to develop proactive employee retention strategies which includes improving employee communication and engagement, and increasing learning and development opportunities,” he says.

“Organisations that have strong employee development practices enjoy higher employee satisfaction, which leads to lower turnover. Evidently, employees will have little reason to look for external opportunities where each employee has a well-structured development plan that is regularly reviewed and contains a variety of growth opportunities.”

In addition, Toh stresses that employee communication needs to be pervasive and consistent.

He says it is insufficient to have a monthly staff newsletter or town hall meetings.

“Communication needs to take many different forms and be a constant priority for all management levels,” he explains.

“HR professionals who are effective in reducing turnover do better by ensuring that they are hiring people of the right ‘fit’ as opposed to simply hiring people quickly just to fill headcount. Hence, a lot more thought needs to be devoted to having a tight interview and selection process.”

Employee turnover in 2016

Respondents in Singapore were asked how likely they were to consider switching jobs over the next 12 months. They responded:

  • Very likely: 41%
  • Quite likely: 26%
  • Not likely: 20%
  • Unsure: 13%

Source: The 2015 Michael Page Singapore Employee Intentions Report

 

Annual staff turnover in 2014

China: 12.9%

India: 11.9%

Southeast Asia: 11.5%

Australia/New Zealand: 8.5%

South Korea: 6.5%

Japan: 4.8%

 

Revealed: HR challenges

According to The 2015 SHRM/Globoforce Employee Recognition Report, the top three challenges faced by HR organisations today are turnover, employee engagement, and succession planning.

The top organisational challenges cited by HR professionals in 2015 included:

  • Employee retention/turnover (40%)
  • Employee engagement (39%)
  • Succession planning (35%)
  • Recruitment (29%)
  • Culture management (24%)

 

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