The economic recovery has been a boon for business, but it comes with a rather unwelcome consequence for employers: Rising turnover rates.
Voluntary turnover rates dropped to 6.1 per cent in the aftermath of the 2008 downturn, but they’ve been slowly increasing since then, said Nicole Stewart, a research associate at the Conference Board of Canada in Ottawa.
“What we saw was pre-recession, they were creeping up to 9.7 per cent in 2008, and then we kind of saw the effects after that in 2010, where people were staying put in their jobs — turnover dipped quite a bit,” she said. “But since the economy has started to pick up a little bit, we’ve seen the numbers rising again — although they’re not back to those levels that we saw pre-recession.”
When layoffs were rampant, many were happy just to have a job, so a lot of people were staying put to see what would happen, said Stewart.
“The overall economy, the stronger it is, the more likely we are to see people moving around a little bit more.”
This trend is perhaps most dramatic in regions with hot job markets, she said. Alberta and Saskatchewan have the highest turnover rates, according to a Conference Board survey of 411 employers, with 81 per cent of organizations in those regions reporting difficulty recruiting and retaining talent, compared to 58 per cent of organizations nationally.
“They’ve got really hot markets and we also see a lot of organizations in Alberta and Saskatchewan reporting trouble with recruiting and retaining workers. So it’s not surprising to see that they would also have the highest turnover rates,” said Stewart.
The industries facing the highest turnover include retail, construction and service.
“That’s pretty common,” she said. “We usually see retail and often the accommodation, the food and the personal service sectors, and it’s just kind of the nature of the work. They’re just industries that would usually see a high degree of turnover.”
The private sector is still facing higher turnover than the public sector (8.1 per cent versus 5.1 per cent), according to the Conference Board.
But turnover rates vary greatly when it comes to performance. Organizations reported a turnover rate of just 3.8 per cent for top performers, compared to satisfactory performers (six per cent) and poor performers (10.1 per cent).
“It’s just that organizations are doing a great job of rewarding their top performers, so
organizations do identify that top talent and they make sure that they are rewarding and recognizing them appropriately,” said Stewart.
Fewer salary freezes
It can be difficult to counteract rising turnover rates when salary increases are modest at best, said Steven Osiel, vice-president of total compensation at Pal Benefits in Toronto.
But it’s critical for companies to hang on to top performers — even when compensation budgets are limited.
“Now that there are opportunities for new jobs, you’ve kept the people that you wanted to keep during those leaner times, you want to make sure that you keep those people even when jobs are being offered elsewhere,” he said.
“And that is coupled with the fact that the salary budgets haven’t gone up.”
“There’s now more of a focus on retention. The turnover is there, the money is not there to give good increases, but the concern over retention is now heightened,” said Osiel.
The response to that is fewer salary freezes, he said, citing Pal Benefits’ annual salary survey of 243 respondents.
“When you give a salary freeze, employees understand the first time — they’ll bite their lip the second time. But by the third time, they’ll somewhat give up on the hope for changes in pay. So across the entire sample size, we see that there’s a continual reduction in the number of employers doing freezes. But it doesn’t mean that they’re giving very large increases — they are giving increases, but they still might be below market.”
With limited compensation resources, employers must turn to other strategies to retain talent, said Osiel.
“You really need to think of the other programs that are available to you — perhaps not base salary, but look at your onboarding methods, look at your training and development offering, look at your vacation schedules — things where you can improve what I would consider (the) ‘stickiness’ of the company to the employee, but also for the career growth of the employee at your organization.”
Focus on individual employees
Organizations can still develop effective retention strategies in spite of limited salary increase budgets. Compensation is only part of the picture, according to Neale Harrison, Toronto-based CEO and founder of Talent Matters, an HR consulting firm.
“It’s not always about the money when people look at opportunities... Individuals need to think about a one-size-doesn’t-fit-all engagement strategy for employees. It needs to be a meaningful, ongoing process, versus being viewed as an event, a point in time.”
When he works with organizations, Harrison sees high turnover as a symptom of ineffective engagement strategies that don’t focus on the employee as an individual.
“First and foremost, do they really have a clear understanding of the career aspirations of the individual that they’re managing?” he said. “It’s about the individual — what do they want? And once there’s clarity around understanding their career aspirations, it’s how you as a manager can enable that. So what can you do to support and enable their career aspirations?”
One way is to take a strength-based approach to feedback and performance management.
“I don’t mean to say that a strength-based approach minimizes or avoids having good conversations where there’s career derailment factors at play,” said Harrison.
“But who is motivated coming out of a performance discussion when the focus has been primarily around where one’s deficiencies are?”
A strength-based approach can help improve motivation and engagement, he said.
“Where is that person achieving, where are they delivering the best value, and how can you build on that?”
Voluntary turnover rates through the years
(Average percentage of employees)
Voluntary turnover rates among specific employee groups
(Average percentage of employees for 2012-2013)
Professional – technical
Professional – non-technical
Technical and skilled trades
Service and production
Source: Conference Board of Canada