The downside of a stable team

A consistently low labour turnover is often recognised as an achievement in today’s corporate world. After all, retaining nearly all of your employees year on year is a sure sign that you’re a great employer, right? Not necessarily.

In Spain we have suffered from a deep recession in recent years and, to coin a Spanish phrase, many workers have been “holding onto their chairs”. Their time served in a current company has provided them with financial and contractual security, whereas a new project would involve a much higher risk. So I have seen many companies that are staffed with unmotivated workers who stay for the wrong reasons. This can lead to stagnation, poor working atmosphere and damaging levels of productivity.

This isn’t to say that long-serving employees don’t have their advantages, they have many. The office veterans are an indispensable source of expertise and wisdom. The relationships and knowledge that they have built up over the years can’t be easily replicated by that of new recruits, no matter their ability. What you should be aiming for is a fine balance of both new and old. By combining those well acquainted with the business with those who are fresh, energetic and enthusiastic, your business will benefit from both wisdom and ambition.

There’s no such thing as a perfect labour turnover rate

A degree of turnover is always desirable

There’s no ideal figure by which all businesses can measure their labour turnover against. Average global employee turnover rates are predicted to rise to 23.4 per cent by 2018, but there’s little use using this figure as a yardstick for your own business. Labour turnover in my company in Spain, where unemployment is steadily improving but still remains above 20 per cent, will be very different to that of a business in the United Kingdom, where unemployment currently resides at around 5 per cent.

Higher unemployment will usually equate to low labour turnover as people are less confident of finding another job, and vice versa. A degree of labour turnover is always desirable as it enables your business to remain competitive; however it varies largely depending on your industry, geographic location and the economic environment.

Different sectors show a wide variety of both staff turnover and desired levels of retention. Professional services companies often need a high proportion of junior staff, who earn very useful experience before many of them opt to work in end-client environments, while relatively few of them achieve a long career within the same organisation.

Ambition is the fuel of a great business

Achieving the right balance involves rejecting the thoughtless worship of low labour turnover. Sure, you will have saved yourself some significant costs by not having to recruit replacements for them, but at the same time you could well be costing yourself in the long term.

Maintaining a very low level of labour turnover can be indicative of low ambition

Maintaining a very low level of labour turnover can often be indicative of low ambition. If all the higher management positions have been filled for some time then what prospects do the less senior employees have of advancing their career? The outcome is stagnation. If an employee can’t see their boss progressing then they’re likely, and correct, to think that there’s no career advancement available to them.

Higher turnover demonstrates to employees that there is real path for progress in your business, giving them something to aspire to. After all, it’s ambitious, forward-thinking employees who are often the driving force behind successful businesses. Growth is the key to most companies’ strategies, not maintenance; you simply cannot afford to have a large proportion of your workforce willing to rest in a comfort zone.

Stagnation soon leads to deterioration

A workforce who is wilfully static can be a toxic thing for your business. Without a steady income of fresh ideas, perspectives and competitive intelligence your business will likely become complacent and old-fashioned, soon lagging behind your competitors. Introducing a new employee into a familiar team often provokes a higher level of productivity and performance.

This new arrival will usually inject a quantity of energy into the team, raising the bar and forcing everyone else to keep up with them. They introduce a sense of healthy competition, whilst also helping to refocus and progress objectives. Without occasional refreshment you risk your team becoming complacent and lackadaisical.

How good are they really?

Without occasional refreshment you risk your team becoming complacent

You may think that your workforce are talented and innovative, and that it’s because of a generous salary package and convivial environment that they stick around. However, it could be the case that other competitors and talent scouts have simply decided that your employees are too insufficiently skilled to poach.

You need to be able to take off your blinkers and assess whether, against the market, your employees are hard-working and gifted or whether you’ve just become too insular thinking. If you decide that your ‘top performers’ aren’t actually that ‘top’ then don’t be afraid to usher them out of the business.

It’s critical that you are willing to bet on your ability to gain a return on investment from new employees. Whilst they will be less productive than your current staff in the short-term – as they will need an on-boarding and adaptation period – they should, if you’ve recruited well, push the business further and faster in the medium and long term.

It’s a balancing act

Whilst a degree of labour turnover is always healthy, there’s no ideal labour turnover figure which you should be working towards. The fact is that it varies from one industry to another, from one business to another. What might be considered a low turnover rate in a call centre in India may be deemed to be incredibly high for a law firm in the United Kingdom.

What is important is that you achieve a balance of new against old, of fresh and enthusiastic against experienced and wise. Combine these two groups and you’re creating the perfect climate for success, too much of one and too little of the other and you risk jeopardising your business.

If you enjoyed this blog then you might also enjoy some of the following:

• 4 ways to grow yourself global
• Training at the top
• Prioritising personality in your hiring process
• Are you a ‘global citizen’?
• Establishing an effective middle management tier
• How to lead from afar
• Successful people create their own luck

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