Low turnover means a company has a relatively small number of employees leave during a given period relative to the employees hired or employed at the start of that period. Typically calculated as a percentage of total employees on an annual basis, company turnover data offers a glimpse at recruiting and retention success.
Achieving low employee turnover is a common long-term goal for a company and its human resource system. High turnover is expensive and contributes to many disadvantages for an organization. Low turnover typically evolves from a company effectively recruiting and hiring employees that are a good fit for the organization, and offering a motivational work environment that causes good employees to stick around, versus leaving for other similar companies.
The primary advantage of having low turnover is that it saves a company a great deal on human resource expenses. Costs of exit interviews with outgoing employees, costs to hire temporary help before a new hire, costs to attract and retain new employees, and costs to train new employees are all common with turnover. A company that maintains low turnover is able to significantly reduce the amount of times it has to reinvest in the same position. This can save thousands of dollars per job.
Low turnover has more than just cost benefits. Employees with longevity in an organization get more familiar with the company, its products, and its customers over time. This knowledge base helps them perform better. Additionally, customers appreciate the familiarity of seeing the same faces when they interact with an organization. Longer-tenured employees tend to make fewer mistakes, some of which are costly. Less time dealing with replacing and training employees also enables managers to focus more on strategy and developing existing employees.
Low turnover often results when companies have strategic, proactive human resource processes that view employees as primary assets. In its February 2011 list of "100 Best Companies to Work For," CNN Money identified 25 companies on its list with annual turnover in the previous 12-month period of just 3 percent or less. This included its No. 1 best company to work for, SAS, with a 2 percent turnover. While such low turnover typically exemplifies an employee-friendly work environment, some turnover is generally regarded as necessary to replace bad hires or under-performing employees.
Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.