A Turn For The Better

Employee turnover may be good for your business.

Turnover is bad, has long been a cherished management mantra. There's just one problem: It's not true.

"There are definite upsides to people leaving your business," says Julie Davis Salisbury, president of Julie Davis Associates, an Atlanta public relations agency. "I've had some cases where employees quit and it's been the right thing for our business. I've also had to fire a few people, and when I've done it, the business has benefited."

Lately, researchers, too, have begun to see turnover in much the same positive light. "For years, research said turnover was purely a negative, but we've taken a new look, and the fact is, turnover is not always bad," says Ralph Katerberg, an associate professor at the University of Cincinnati College of Business Administration. "Sometimes it really benefits a business."

Salisbury offers an example: "When I started this agency 10 years ago, we had five people on board. One was very talented and creative--but full of doom and gloom. That negative perspective was not what we needed when we were young and hungry. Terminating her was hard for me, but making that decision was very good. It was like a dark cloud lifting from the office."

A resignation, too, can be a boon to the business--as Salisbury knows. "I just had a very ambitious vice president resign. It came to the point where she wasn't happy having no opportunity to be Number One. This became a source of frustration for her, and that started to impact the morale of our employees. When she resigned, I knew it was the right thing--for her and for me."

Sound familiar? In his or her heart, every boss knows that what Salisbury says is on the mark. Who hasn't wanted to party after a troublesome worker announced his resignation? Who hasn't sensed relief wash through the business when a nonperforming or bad-seed employee is let go?

Then, too, the inarguable fact about turnover is that it's unavoidable: "You will have turnover. It's a given," says Roger Herman, a Greensboro, North Carolina, management consultant and author of Keeping Good People (Oakhill Press).

Employee loyalty toward employers has sharply dwindled. "When I've surveyed graduating students, almost none anticipate a long career with any one employer," says Ray Hilgert, a management professor at the Washington University Olin School of Business in St. Louis. "People expect to change jobs often."

At the same time, "jobs are getting more complicated and demanding. Some workers cannot keep up with the new requirements; others don't want to," says Herman. The upshot is that some employees will be terminated, and others will quit. "Turnover is simply part of today's labor market," adds Herman.

That's why it's good news indeed to know turnover can bring big benefits. Such as?


  • Boosting morale: Some employees just aren't liked by co-workers. Maybe they are negative; maybe they are mean-spirited. Remove them from the payroll, and morale will go up, as Salisbury discovered. A big warning, though: Those workers who challenge a business's prevailing practices may not be popular--but they can be essential in keeping the organization competitive. Don't hasten this breed of nonconformist's departure just to get more tranquillity in the company.


  • Clearing out deadwood: "Some employees have quit in everything but name. They still draw a paycheck, but their minds are elsewhere," says Katerberg. Most businesses have a few workers who fit this description. Either you haven't noticed their nonperformance (though you can bet their co-workers have), or you haven't wanted to cut the cord. But these workers need to be let go, pronto. "Too many employees like this on your payroll can bring down a business. It sets a low behavioral norm for other workers, whose productivity starts to sag." Fire the nonperformer (they'll rarely quit). Not only will a productive newcomer work harder, but the elimination of deadwood also sends a message to all employees that individual output is crucial.


  • Opening rungs on the career ladder: "Turnover creates opportunities for the remaining employees, particularly when senior people leave," says Ron Riggio, a professor at the Kravis Leadership Institute at Claremont McKenna College in Claremont, California. A fast way to drive away higher performers is to provide no upward mobility. Even when the newly empty job is comparatively low on the organizational chart, if the vacancy means lower-level employees can move up, that's good.


  • Stirring the pot: Promote from within--but not always, because bringing in an outsider can shake up a stagnating business. "When too many employees have stayed in place too long, you get status-quo thinking. Resistance to innovation develops," says Hilgert. "Bringing in new people means the culture is constantly churning, always exposed to new ideas."


  • Reshaping the team: The big mistake is to just fill the vacancy. Instead, especially when a higher-level employee departs, use the vacancy to take a fresh look at the organization's structure, urges Herman. Will a reorganization better fill the business's needs in the coming years? An opening can be the prod that lets you do a hard rethink of what needs doing, by whom. Says Herman, "You may decide to bring in an entirely different kind of person from the one who left."
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This article was originally published in the March 1997 print edition of Entrepreneur with the headline: A Turn For The Better.

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