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How Much Turnover is Too Much? How Much Too Little?

Posted on August 27, 2015

Regardless of your position on Amazon’s work environment as documented in the recent New York Times piece (and there have been no shortage of opinions), it did serve to highlight the issue of turnover in an organization. It is generally agreed - high turnover bad, low turnover good. But is this true in all cases?

To answer this question, it’s important to first establish if the Amazon story is accurate. Anecdotes like the ones cited in the piece can be illustrative but also can just as easily be mistaken for nonexistent trends. Are these complaints about Amazon outliers or indicative of a bigger problem?

Analyzing the Data

At a glance, the data seems to support the nightmarish conditions documented in the piece. According to data from Payscale, Amazon ranks #2 in highest turnover rate among Fortune 500 companies, tailing only Massmutual for shortest average employee tenure - 8 months - 1 year.

But looking at the data further yields some surprises such as highly esteemed Google having an employee tenure rate not much better than Amazon at 1.1 years. It’s tied at 4th for highest turnover rate.

However, both Amazon and Google feature some of the highest median pay rates, at $93,200 and $107,000 respectively, and the youngest workforces at 32 and 29. The model for both of these companies appears to be: hire young, pay a lot, and put them under a crushing workload until they snap.

In direct contrast to this model is the Fortune 500 company with the longest employee tenure - Eastman Kodak. The median employee age is older (50 years), well paid ($77,000), and has been with the company for 20 years. The company also is, as we wrote about previously, bankrupt. That fact alone may explain their low job satisfaction rate.

A Third Model of Employment

Given this data, it appears there are only two models for businesses to choose - a punishing workplace with rampant turnover or a creaky older one that is destined to go bankrupt.

Neither seem appealing. High turnover at fast moving companies like Amazon is an expensive and distracting cost for a business, not to mention a PR debacle for Amazon’s HR department - their acquisition of prospective employees just got a lot more difficult.

On the other hand a sleepy workforce, like the one at Kodak, that is hidebound to an outdated process is destined for an early death. Such a company cannot keep pace with industry changes to remain viable.

Is there a third way that strikes a balance? Luckily, the answer is ‘yes’ and, while specific to either type of business, it relies on empowering and listening to employees. For high turnover businesses like Amazon and Google, the answer lies in regularly taking the pulse of the organization and staying in touch with the company’s morale level.

Surveying and regularly eliciting employees’ input can leadership in the loop about employee engagement and opportunities for improving hiring and onboarding processes as well as employee career pathing and advancement possibilities. Regularly checking the morale of the organization also prevents the company being blindsided by things like the blockbuster Times article.

For low turnover, sleepier organizations like Kodak, the imperative should be on focusing employee attention on fixing urgent issues. Regularly issuing challenges to the workforce, encouraging an open exchange of ideas for improvement, and offering rewards for good suggestions can make an organization more responsive, faster moving, and profitable.

So whether your business falls into the sleepy, low-turnover and fly under the radar until retirement mentality, or the churn and burn method, it is likely time to reevaluate how you engage your team to find the happy medium. If you need help with better challenging, surveying and rewarding your people then it’s time to call Vocoli at 888.919.5300.

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