Research Update: This is different

Voluntary turnover holds steady as involuntary turnover climbs rapidly, results from the National Staff Turnover Survey now show.

Measuring staff turnover

The Lawson Williams National Staff Turnover Survey is supported by HRNZ and is in its 12th year. It provides a measure of staff turnover and has once again produced interesting findings that help participating companies to better understand the performance of their recruitment, onboarding and retention processes.

The survey also reports on the use of the 90-day trial period, the reasons for voluntary turnover and the retention strategies being employed by New Zealand companies.

The New Zealand Staff Turnover Survey was first published in 2006. Consequently, we now have over a decade of data that covers the latest economic cycle. The survey results clearly emphasise the cyclical nature of staff turnover and its relationship to the strength of the economy.

In 2018, however, we discussed the new forces affecting the turnover of staff. First the rapid change to the composition of our workforce.

For example, millennials (those born between 1981 and 1996) currently account for 34 per cent of New Zealand's labour force, and by 2020 will be the majority. Forty-three per cent of this group plan to leave their company within two years. We know that millennials have a very different view of work from the baby boomers. Will they hunker down in their current job just because the economy is weaker?

Secondly, technology is rapidly changing the availability of new work opportunities for your employees. Big data, AI and machine learning are enabling recruitment platforms such as LinkedIn to find your staff more easily. The future will be about being found for work, not finding jobs to apply for, suggesting that with more opportunities for work being presented to your employees, we would expect greater mobility and voluntary turnover.

The question to be answered is, if the economy continues to cycle as predicted by the economists and we move into a period of lower growth, will we see the traditional climb in involuntary turnover and the corresponding fall in voluntary turnover? Will these new factors or others affect the traditional cyclical nature of staff turnover?

The results from this survey show that we haven’t seen a full repeat of 2008 yet. What we have seen is a rapid climb in involuntary turnover at an alarming and almost identical rate to the start of the Global Financial Crisis (GFC), but interestingly the size of the rise in involuntary turnover has not been matched by a fall in voluntary turnover, in fact, there has been no decrease at all.

In these unusual circumstances, what can companies do?

1. Measure your staff turnover and compare it to other companies in your industry or sector. If your voluntary turnover is higher than that of your competitors, it is a fact your business will be less competitive. If it is better than that of your competitors, you must be doing something right, so find out what it is and build on it.

2. Be proactive, identify your key talent and determine their motivators. Develop a range of retention strategies, regardless of the size of your company.

Involuntary turnover increased by 61 per cent

The average national turnover figure is calculated using the levels of voluntary and involuntary turnover. The average New Zealand staff turnover rate in 2017 was steady at 18.8 per cent. In 2018 we saw a significant increase to 20.5 per cent.

We have not returned to the levels of average staff turnover pre-GFC, which reached 23 per cent in 2007 and 22.4 per cent in 2008. However, the rapid climb in involuntary turnover to a level of 4.2 per cent from 2.6 per cent has been the contributing factor in pushing the national average staff turnover rate to 20.5 per cent.

The question becomes, if involuntary turnover has jumped to early GFC levels, why are we not seeing a similar decrease in voluntary turnover?

Several factors appear to be at play here. In addition to the new forces as previously discussed, we see a significantly slower decrease in our economic activity. The speed of the fall in growth to a predicted level of 2 per cent for the current financial year is significant but is still positive. This is very different from 2008 where the fall was sharp and took us quickly into recession with a corresponding decrease in voluntary turnover as people became cautious and were less likely to move jobs.

Secondly, we have seen some wage inflation in the past year, lifting the labour cost index, which is a measure of annual wage inflation, by 2 per cent. Higher wages directly impact voluntary turnover because people are more inclined to leave jobs for higher salaries.

Thirdly, we appear to be operating in a multispeed economy. Our survey shows that in sectors, such as accounting practices, energy and electricity, fast-food and hospitality, property and construction, there has been higher levels of involuntary turnover, indicating that these sectors are finding the current market conditions challenging, leading to restructuring and/or the laying off of staff, whereas industries such as FMCG have maintained lower levels of involuntary and correspondingly higher levels of voluntary turnover.

One in every 3.1 hires in New Zealand is failing in the first year.

Failure of hires in the first year has reached its highest level in 12 years, and 31.9 per cent of all hires in New Zealand do not last beyond 12 months. This is a further 12.3 per cent increase on the previous year’s increase of 14.5 per cent.

When we consider specific industry or sector results (these figures are given in the full survey report provided to survey participants) we know that turnover in the first 12 months varies significantly.

However, any turnover in the first 12 months should be seen as a failure of recruitment and onboarding.

From 25 years of experience in recruitment, Lawson Williams believes that turnover within the first six months of employment is typically a failure of the recruitment process and onboarding. After six months, the honeymoon period of a new job generally has worn off, and staff turnover is more affected by the lack of, or misdirected, retention strategies. Our research shows that dissatisfaction with management will more often surface at this point and becomes a significant factor in staff turnover between six to 12 months.

The National Staff Turnover Survey provides turnover data for a range of industry sectors. The real value in staff turnover measurement is to compare your company’s turnover against your competitors. Staff Turnover percentages can vary significantly from year to year.

Eighty-one per cent of our respondents reported having a formalised exit interview process. This is up from 74 per cent last year and indicates that an increasing and significant number of New Zealand employers are making proactive efforts to identify the cause of staff turnover and tackle any problem areas.

We asked organisations to identify the top three reasons for voluntary turnover. Family and personal circumstances were the biggest contributing factor for staff departures.

Many organisations also identified promotion opportunities elsewhere, an increase in salary, parental leave or lack of real development and/ or promotion opportunities as a key reason.

If you are interested in more information on staff turnover in New Zealand, a detailed summary of the report is available at www.lawsonwilliams.co.nz.

Any business can become part of the National Staff Turnover Survey. It is a free service with all participants receiving a copy of each year’s final report, which includes industry-specific turnover data. If you would like to participate, please contact John Lawson on 09 522 3921. E: john@lawsonwilliams.co.nz