Why Turnover Is Key To Your Business Strategy

Why Turnover Is Key To Your Business Strategy

Do you think about turnover as a strategic variable? As something to be manipulated to achieve your business goals?

We typically counsel businesses on how to reduce turnover rates and costs, but some degree of turnover is inevitable and even desirable.

Of course, how much turnover is desirable depends on your business model.


Why turnover is key to your business strategy


High Turnover In High Performance Businesses

Netflix is a prime example of an organization that encourages a high rate of turnover. Their HR policy dictates that if you’re just doing your job, you’re gone. 

That’s a mandate for high turnover, but there’s a business case for it. The intent is to drive innovation by keeping only top performers and opening up other positions for more promising employees.

While Netflix takes it to an extreme, culling the best while letting disengaged or unproductive employees go is just common sense. It’s good for the company and it’s good for employees who might be happier elsewhere.

High Turnover In Cost-Focused Businesses

There are also cases where lower operational costs outweigh higher turnover costs. Think about call centers, fast food restaurants, or budget grocery stores, for example.

Should you improve your company culture, implement performance management tactics and offer opportunities for growth to reduce turnover? Obvious ethical issues aside, you can see how the expense might override the benefits.

High Turnover for the Rest of Us

Of course, high turnover is a costly proposition. Separation, replacement and training can all be expensive and time-consuming, but turnover also negatively impacts customer service and employee commitment.

Most companies can’t afford to continually replace staff or lose business from poor performance. For most of us, keeping turnover as low as possible is essential to staying cost-effective and competitive.

No matter which boat you’re in, you should explicitly consider turnover in your business strategy. What do you do to influence it?

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