In Personnel Management,do you think that labour turnover has any advantages to an organization? Give few potential advantages ????

In human resources context, turnover is the act of replacing an employee with a new employee. Partings between organizations and employees consist of retirements, deaths, interagency transfers, and resignations.[1] An organization’s turnover is measured as a percentage rate which is called, Turnover Rate. Turnover rate is the percentage of employees in a workforce that leave during a certain period of time. Organizations and industries as a whole measure their turnover rate during a fiscal year or calendar year.[1]

There are four types of turnovers: Voluntary, is the first type of turnover, which is when an employee self- willingly makes the decision to leave the organization. Voluntary turnover could be a result of a better job offering, staff conflict, and lack of opportunities in career advancement.[1]

The second type of turnover is Involuntary, this occurs when the employer makes the decision to discharge an employee and the employee unwillingly leaves his or her position.[1] Involuntary turnover could be a result of poor performance or staff conflict.

The third type of turnover is Functional, which occurs when a low performing employee leaves the organization.[1] Functional turnover reduces the amount of paper work a company must prepare in order to get rid of an inadequate employee. Instead of having to go through difficulty of proving the fact that an employee is useless to the organization, the company simply respects his or her own decision to leave.

The fourth type of turnover is called Dysfunctional, it is when a high performing employee leaves the organization.[1] Dysfunctional turnover can really cost an organization, and could be as a result of a better job offering or no opportunities in career advancement. Too much turnover is not only costly, but it can also give an organization a bad reputation. Although there is good turnover, and happens when an organization has found a better fit with a new employee in a certain position. Good turnover could also transpire when an employee has outgrown opportunities in a certain organization and must move on in his or her career in a new organization.[2]

 

If an employer is said to have a high turnover relative to its competitors, it means that employees of that company have a shorter average tenure than those of other companies in the same industry. High turnover may be harmful to a company's productivity if skilled workers are often leaving and the worker population contains a high percentage of novice workers. Companies also often track turnover internally across departments and divisions or other demographic groups such as turnover of women versus turnover of men. Additionally companies track turnover, voluntary turnover, more accurately by presenting existing employees with surveys which identify the specific reasons for why they chose to leave. Many organizations have discovered that turnover is reduced significantly when issues affecting employees are addressed immediately and professionally. Companies try to reduce employee turnover rates by offering benefits such as paid sick days, paid holidays and flexible schedules.[3] In the United States, the average total non-farm seasonally adjusted monthly turnover rate was3.3% for the period from December2000 to November2008.However rates vary widely when compared over different periods of time or different job sectors. For example, during the period, the annual turnover rate for all industry sectors averaged39.6% before seasonal adjustments, during the same period the Leisure and Hospitality sector experienced an average annual rate of74.6%.

Here are five benefits increasing turnover can yield: 

1. Improve Talent

The pace of technology brings new opportunities, challenges, and demands upon a workforce. Some companies have effectively implemented a culture where employees continually improve or leave. Jack Welch, former CEO of General Electric, implemented a policy of annually evaluating staff in order to "purge" and replace the bottom10 percent of performers.

While critics deem the policy as cruel, proponents argue that it is essential to effectively compete in a modern world. Whatever your conclusion, one thing is certain: GE has long been recognized for its industry and innovation leadership. According to Thomas F. O'Boyle, author of At Any Cost: Jack Welch, General Electric, and the Pursuit of Profit, Welch, during his tenure at GE, produced more money for shareholders than any other CEO, with the exception of Bill Gates at Microsoft.

And according to Dick Grote, president of Grote Consulting and author of Forced Ranking: Making Performance Management Work,60 percent of Fortune500 companies engage in some form of forced or stacked ranking, including Microsoft, Dell, Accenture and Deloitte. The process, managed by HR Departments, requires that managers rank their employees according to one of three categories:

• Top20 percent. These people are the "A" players—potential stars-in-the-making who will lead the company in the next generation. They typically receive the largest raises and stock options and the most extensive training.
• Middle70 percent. The "B" players, these employees make up the bulk of an organization's staff. They’re the “steady eddies” who perform their jobs, do what is expected of them and don't rock the boat. They typically receive smaller bonuses tied to tenure, and the bulk of management’s time is usually directed here, encouraging good employees to become great.
• Bottom10 percent. These employees contribute the least to the organization, even if they meet company expectations. They’re either given training in order to improve, encouraged to resign, or fired.

Grote believes that classifying employees in this manner is "a very good thing for any organization with10 employees or more," as it makes it easy to identify and retain the top performers.

2. Avoid Complacency

The fruit of failure is sowed in the seeds of success—there's a human tendency to think that what we did yesterday is good enough to get by today. Complacency is the enemy of every organization, fostering an environment of group-think and an aversion to risk-taking. As Edwin Land, inventor of the Polaroid Camera, said, "It's not that we need new ideas, but we need to stop having old ideas."

In hindsight, Land’s company would have been well-advised to seek out engineers such as Steven Sasson, who invented the digital camera two years after his graduation from Rensselaer Polytechnic Institute in1973. Land's company, Polaroid Corporation, failed to recognize the new direction photography was headed in and instead focused upon an expensive and obsolete technology for movie cameras. As a result, the company was forced to file for bankruptcy in2001 and is now merely an administrative shell.

3. Create Incentive

The growth of bureaucracy is an ever-present danger in any organization. It replaces innovation and initiative with stagnant hierarchies, defensive managers and formalized rules and procedures, all of which are intended to protect the status quo. A program of systematic renewal that stimulates regular turnover through promotions and terminations ("up or out") in all areas, particularly management levels, ensures an environment of constant opportunity and motivation for remaining employees.

All organizations, even those lauded for their enlightened personnel policies, such as Apple and The Container Store, evaluate individual employee performance in order to identify those worthy of promotion and salary increases and those in need improvement. Using a ranking system with a performance appraisal component adds rigor to the process by forcing reluctant managers to address performance issues.

HR professionals should be advocates for such forced rankings and ensure that the system created is fair, properly implemented in order to reinforce cultural change and includes remedial programs to allow poor performers to improve before termination.

4. Broaden Perspective

Western Union, which was founded in1851 and was one of the11 stocks in the original Dow Jones Average, dominated its competitors in the late19th century. Despite this, its management, heady with success, was unable to foresee the potential impact of the telephone. An internal memo from1876 reads: "This 'telephone' has too many shortcomings to be seriously considered as a means of communication. This device is inherently of no value to us."

The terms "groupthink" or "doublethink," which is the tendency of members of a group to reach consensus to avoid conflict, was first proposed in George Orwell's novel "1984," and subsequently detailed by organizational analyst William Whyte, Jr. Psychologist Irving Janis theorized that the more amiable the sense of group identity, the greater the tendency of a organization to resist outside ideas and censor ideas that conflict with the apparent group opinion.

New employees can bring fresh perspectives, new experiences leading to innovation and breakthrough ideas because they are neither wedded to the old ideas nor to the "way we do things" attitude of established, successful businesses. HR professionals should promote a culture that encourages employees to take risks and gives them the freedom to take creative leaps without fear or judgment.

For example, Josh Linkner, bestselling author on corporate creativity and innovation, frequently cites a software company in Boston that gives each team member two "corporate get-out-of-jail-free" cards each year to foster risk-taking.  Extended Stay America, a hotel company with more than76,000 rooms nationwide, distributes similar cards to its9,000 employees. The cards allow the holders to experiment and take risks without suffering the repercussions for mistakes associated with them. In fact, at annual reviews, managers question employees if the cards haven’t been used. 

Another well-known company with a similar forward-thinking approach is Netflix. Renowned for its creativity and productive culture, the company is driven by a simple management philosophy: Give people freedom, hold them responsible and replace the ones who can't or won't perform in that environment. "The only way to get high talent density is to get rid of the people who are out of their depth or coasting," says Adrian Cockcroft, Netflix’s director of cloud architecture.

5. Stay Competitive

According to Australian American media mogul Rupert Murdoch, “The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow." The advantage will therefore flow to those companies that can recognize industry-changing events, project consequences for their companies and quickly adapt to the new environment.

Companies with static employment will invariably fall prey to the Peter Principle: a proposition describing an organization where a significant number of employees have been promoted to a level beyond their abilities and are unable to compete effectively with more dynamic, "hungrier" competitors. Encouraging turnover for employees who are happy with the status quo, least willing to take appropriate risks, or unable to learn from their mistakes will energize your workforce and give you an edge on the competition.