HR and Recruiting

Why low company turnover isn’t always a good thing

Written by Kate Lopaze

Whether your organization is huge and sprawling or a lean, mean mom-and-pop operation, you know that turnover brings headaches. There’s the time (and resources) associated with hiring and recruiting to fill roles. There’s also the lost time and manpower as a new employee gets up to speed. So chances are, if you’re reviewing your turnover rate for this past year and you see a low rate, you’re pretty happy. But a low turnover rate may not tell the whole story of your company’s health.

Low turnover shows the status quo, not growth

If you have a low turnover rate, you’re not hemorrhaging employees, and that’s a net positive. But it also means that things aren’t necessarily changing in an upward direction. Is it possible that your employee pool is stagnating a bit? Are people coasting along in their jobs, with the same old perspectives? Are you innovating, or just maintaining?

Turnover often happens as a result of an organization growing and changing its strategy or culture. If it’s not people leaving because they’re unhappy or frustrated, but rather because they don’t see themselves fitting in with the new landscape, that can be a type of “good” turnover. It means your strategies are reshaping your workforce to meet your updated needs. Low turnover may mean that this natural shedding isn’t happening, and your organization just might not be shifting and adapting the way it should be.

Your employer brand might be faltering

You might think employer brand mostly factors into your own recruiting and hiring, but the fact is that it affects how the outside world views your organization—and its employees. Obviously, you’d prefer that your best and brightest not be poached by other companies, but if you’re seeing low turnover, it could be that your workforce just isn’t in high demand elsewhere.

Hesitation and inertia might be at fault

Turnover is a tricky metric when it comes to performance management. It’s tough to see if people are staying because they feel invested and engaged and want to stay, or because your organization is weak or lenient when it comes to letting poor performers go or instituting rigorous standards.

When reviewing your turnover, it’s important to look at why. Are managers identifying and handling performance issues through your standard processes? How are low performers managed? Are managers afraid to refer their low-performing reports for termination because it touches off a too-long, complicated process?

Low turnover limits opportunities for employees

Going back to the status quo aspect of low turnover, keeping people in the same roles can limit their own growth and development opportunities. With so many open positions filled by internal hires, a lack of openings means your current employees may not be moving up. Your turnover rate might not seem bad now, but what happens in a year or two years from now as those same employees grow restless and decide to take their talent elsewhere?

Who’s leaving, and who’s staying?

The other big component of turnover is evaluating who’s coming and going. Did your overall rate stay low while you lost a small number of high performers? If your turnover rate was spread across the company (old and young, experienced and entry-level, high performers and low), there may not be an underlying problem. But if you’re starting to see an exodus among some of your stars, that could be a troubling trend for the future—even if it’s only a handful now.

Knowing who’s leaving and why gives you the perspective you’ll need to take this year’s stats and lessons into next year, and spot trends before they become problems for your employee retention.

Low turnover may not be a bad omen for things to come—it could just be a picture of a thriving organization that’s humming along. But taking the time to look more closely at it and understand why the picture looks as it does will help you keep those rates low, or make adjustments as necessary to improve things.

About the author

Kate Lopaze

Kate Lopaze is a writer, editor, and digital publishing professional based in New York City. A graduate of the University of Connecticut and Emerson College with degrees in English and publishing, she is passionate about books, baseball, and pop culture (though not necessarily in that order), and lives in Brooklyn with her dog.