Turnover

Employee retention has been and remains a key focus in organizations. The economic impact of turnover can be quite substantial, as the cost of replacing an employee has been estimated at nearly 100 percent of the annual salary of the position. In addition to financial concerns, high rates of turnover can negatively impact organizations in other ways as well. High turnover rates can lead to a loss of organizational memory necessary for continuity in operations and can create a situation where new employees lack seasoned mentors necessary for adequate socialization into the organization. Over time, a culture of turnover may also develop, where employees see the organization as a stopover or stepping-stone where one gains experience, with the assumption that they will be moving on in the near future.

Even when voluntary turnover rates drop because of unfavorable labor markets associated with economic downturns, the retention of valued employees remains important. Research suggests that high unemployment rates do little to stifle the mobility of high-performing employees or those with rare skill sets. Other research shows that large-scale layoffs associated with economic downturns serve to accelerate voluntary departures, as survivors separate because of a feeling of lost loyalty from the organization or to seek the certainty and stability of employment with an organization in a stronger financial position. Even among employees with more standard skill sets, managing retention remains important. A 2009 survey by the employment firm Adecco found that 54 percent of working adults, including 71 percent of those under 30, would seek new jobs once economic conditions improve. Substantial pent-up turnover may exist as workers [Page 891]wait for labor market conditions to improve. As such, managing turnover and retention remains an important focus in organizations despite the global economic downturn.