15 April 2017
Does low turnover of employees always reflect peak business performance?
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Is a low turnover of employees always beneficial? Here at Peak Recruitment in Thailand we work with many different industries. Many Thai businesses come back to us on a regular basis. This often triggers the debate of whether an organisation should have a high or low turnover of employees. There will be many who believe there is no reason for debate at all. There seems to be a kind of unspoken management rule that low employee turnover necessarily reflects maximised company performance, cost effective processes and an overall happy ship.

But does it always? There is no doubt that a low turnover suggests a number of factors:

  • The employees fit into their job roles and are working at an acceptable standard.
  • The amount of compensation (in money, bonuses etc.) received by the employees is acceptable
  • The employee accepts and is happy with the work culture and all that is on offer (i.e. flexible working hours)
  • There are enough outlets for the employee to further their career.

This goes back to the adage if you look after your staff – they will look after you. It is far more effective to offer a big carrot than a big stick. Loyal, long term employees create steadfast teams and solid processes. You do not have to spend huge amounts on an interview process due the constant flow of new workers. There is no need to splash out on extra mandatory training for beginners and internal teams and systems are not disrupted. There is not likely to be a drain on the experienced talent you have trained and paid for.

So where could there be an issue with this  recruitment philosophy?

Nothing – but what is this actually saying about performance of the company. Is the organisation growing? Is it responding to changes in the market? Do the employees have the capacity or the motivation to innovate and learn new skils?  Are employees performing at their best or have they become complacent in an over indulgent work-culture?

If they are not being challenged and they are not learning new skills in this highly technological climate, it is the company which will suffer in the long run.

Also, it is important to take the economic climate into account. It can have a knock-on effect as to how management and employees behave. When the economy is suffering, it is likely there will be high unemployment. In this kind of scenario, because there is less chance of falling into a new job role, employees are more likely to stay where they are. So the idea that a low turnover is a direct reflection of how well a company is handling its workforce and performing perhaps cannot be taken for granted.

A low turnover may hide a whole host of sins at the company’s expense

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Many of us can remember the first days in a new job role: It’s inspiring, challenging and exciting because it is new, you are ambitious and you have something to prove. As you slowly get your feet under the table after completing complete necessary training, you get to know and feel comfortable in your daily routine.  But now there is a danger you could become just a little too content. You do not need to prove yourself anymore. After all, all you need to do is keep to an acceptable standard and you are safe.

But “acceptable” is not about “growth”, “innovation” and “performance”. It speaks more of stagnation.

Therefore, for some companies it is more important to filter out those employees who have just become “cogs in the wheel”. This may lead to higher recruitment costs but new blood is likely to boost performance.

And this approach is nothing new. Michael Lewis of the New Talent Times reports that some companies have created a working culture whereby the employee either improves or leaves. This is where an annual policy is implemented evaluating staff in order to replace the bottom 10 per cent of the performers. In order to make this type of performance management work, HR departments will divide workforce into three areas:

  • Top 20% (A players)
  • Middle 70% (the “Steady Eddies”)
  • Bottom 10% (those who contribute least even though they meet company expectations)

Creating that fine balance

This at first may sound heavy handed but this high turnover approach is used to enhance three area of concern:

  1. Deter feelings of complacency. Instead of a culture where the employee can reach peak performance, which is often a minimum, they are forever encouraged to strive forward. This is at once a win-win situation for the employee and the company.
  2. Creates new Incentive. Employees are offered ne incentives to go that extra mile – to grow in their own careers. The company takes advantage of the innovation that is created by the incentive which may have laid latent before.
  3. New Perspective: Perhaps most of all a constant change of staff brings new ideas, fresh perspectives on old processes.

However, it could also be argued that if you are constantly offering employees encouragement and the outlets to progress within a low turnover approach, then the system will weed out the weaker candidates naturally. A filtering policy like the one outlined above could easily turn workers against management. Again, the same question – carrot or stick? May be it’s about creating that fine balance between two extremes.

Peak Recruitment is the leading recruitment agency in Thailand. A human resource specialist, our pioneering methodology and commitment to deliver exemplary services has placed us first for executive recruitment in Bangkok. As a team, we offer a distinctive approach that you just won’t find anywhere else in Thailand.  For contact information click here