What employee turnover rate is too low for a high-tech company?


1

There is a lot of focus on the cost of employee turnover in companies. I am curious to know whether there are any studies on failure-rate of high-tech companies increasing if the turnover rate is too low.

Strategy Management Human Resources

asked Mar 28 '11 at 22:22
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David
1,567 points
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  • did you mean to say when the "turnover rate is too high"? – Justin C 8 years ago
  • @Justin C. No, I did mean too low. – David 8 years ago

3 Answers


5

Too low? I've never heard of a turnover rate being considered "too low". The ideal scenario is to hire all the best people right away. A zero turnover rate is ideal, if not fully achievable.

answered Mar 28 '11 at 23:29
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Brian Karas
3,407 points
  • Hiring is by no means an easy processes. My view is the that one cannot expect to make perfect hiring and retention decisions. I know that you wrote ideal, but I do not believe that one can use that scenario when thinking about this. Given that one will always make mistakes when hiring, don't you think it is realistic that too low turnover could affect performance? – David 8 years ago
  • If you focus on meeting some base level turnover rate you risk losing an effective employee and poorly affecting team moral without reason. The better approach is to pursue policies that help to keep the productive employees and remove the unproductive ones, regardless of what the actual rate is. – Justin C 8 years ago
  • @Justin C. My idea was to fire anyone who had been employed for more than three years. ;) No, I completely agree with you. I have not thought about how to use any such finding (a correlation between low turnover and low performance), but it would be interesting if there was one. – David 8 years ago
  • @David - agreed – Justin C 8 years ago

3

I think the 'low' in the question was intentional. The implication is that you can't teach an old dog new tricks. The poster believes that a 'high-tech' company cannot stay competitive without periodically bringing in new employees.

A much better study which more closely addresses the actual problem would look at the effectiveness of high-tech companies with successful employee training programs. The best people are the best people, and developing a good corporate structure that allows them to remain at the front of their fields (indie time, developer conferences, etc.) is a much more effective way to stay competitive than worrying about whether enough of them are leaving to sustain the proper flow of new blood coming in.

answered Mar 29 '11 at 11:11
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Rsg
313 points

2

I agree with Brian, with emphasis on "hiring the best people".

I'm not sure if you actually meant high turnover, instead of low turnover rate, but it's an interesting exercise. Let's dissect it.

First a high turnover rate I think is pretty obvious that it's expensive. A newly hired will need a certain amount of time to get up to speed and be productive. Factor in also the cost of recruiting, time spent interviewing candidates, etc and they all add to a certain amount. Do if often enough, and these costs will grow quite fast. Along with it, the chance of hiring someone who is inappropriate for the job. Even more trouble.

But the more interesting scenario is the low turnoever rate. And I would argue that it can be an indication of success as well as failure, taken just on its own. More precisely indication of good or bad hiring.

Why do I say that? Well, it's a well observed fact that smart people like working with similarly smart people. If you hired smart people and they in turn hire similarly smart people, there's quite a bit of satisfaction working for your company and your turnover rate will be low. All is swell.

But there's also another side of this. Poor performers (again an observed fact) tend to not leave companies, and work there their entire life. The issue is that they're not confident enough in their own skills to take the jump, go on the open market and get a better job. They're usually the people who tend to complain all the time about their job, but never do anything about it.

So both low turnover situations are at oposite ends. One is desirable, the other not so much. You have to factor in additional criteria to understand where you are. If you're observing good employees leaving the company, constantly, it can be indicative of the second situation.

But just like every metric, try to factor in additional criteria. One metric is usually not indicative enough.

People leave companies, or stay for all sorts of reasons. Try to see it as a full picture, rather then a one variable chart.

answered Mar 29 '11 at 04:16
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Mircea Grelus
782 points

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