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Two companies can have the exact same employee turnover rate and have completely different problems.
Let’s say both lose 10% of their people this year.
We look at the number and assume they’re basically in the same position.
But what if one company lost people who weren’t performing and probably needed to leave anyway?
And the other lost its best people?
Same number.
Very different business.
That’s why I think we make a mistake when we treat employee turnover as an HR number instead of a commercial one.
Because every time someone walks out the door, something walks out with them.
Knowledge.
Client relationships.
Part of the culture they’ve helped build.
And all the time and money we’ve already invested in recruiting them, onboarding them, and developing them.
So the question can’t just be, “What’s our turnover rate?”
We need to ask a better question.
Some Employee Turnover Is Actually Healthy
We tend to assume lower turnover is always better.
I’m not sure that’s true.
A certain amount of employee turnover can be healthy. New people bring different perspectives into the business. People moving on can create opportunities for others to step up. And sometimes someone leaving is exactly what needed to happen.
Trying to get turnover to zero can actually hide another problem.
We can become so focused on retention that we start retaining people we shouldn’t be retaining.
That’s not the goal.
The goal is to understand which departures hurt the business and which ones don’t.
Because those are two completely different things.
Regretted Turnover Is the Number I Care About
The distinction I think matters most is between regretted and unregretted turnover.
Regretted turnover is when someone leaves and we genuinely wish they hadn’t.
A high performer gets a better opportunity somewhere else. Someone leaves for better compensation. They find an environment that is more stimulating for them.
Those departures should get our attention.
Because now we have something worth investigating.
Why did they leave?
And maybe more importantly, is this a one-off event or are we starting to see a pattern?
If one great person leaves, that may tell us something.
If great people keep leaving for similar reasons, we have a retention problem.
That’s a very different issue from simply having a high employee turnover percentage.
Unregretted Turnover Can Be Good for the Business
Then there’s the other side.
Sometimes people should leave.
Maybe the company facilitated the departure through a managed process. Maybe keeping that person wasn’t actually good for the business.
That’s unregretted turnover.
And I wouldn’t automatically classify that as a failure.
In some cases, it’s evidence that we’re actually managing performance rather than avoiding difficult decisions.
This is where the headline turnover number starts to become almost useless on its own.
Imagine a company with 20% employee turnover.
That sounds terrible.
But 18% of it is unregretted and only 2% is regretted.
Now compare that with another company with just 10% turnover.
Sounds much healthier.
Except 8% of that turnover is regretted.
Which business would you rather own?
The company with the “worse” turnover number may actually have the healthier performance culture.
Meanwhile, the company proudly reporting 10% turnover may be watching the exact people it wants to keep walk out the door.
Your Employee Turnover Rate Can Hide the Real Problem
This is why averages can get us into trouble.
We like clean numbers because they’re easy to track.
Revenue grew 12%.
Margins are 18%.
Employee turnover is 10%.
Fine.
But the number only becomes useful when we understand what’s underneath it.
If we combine every departure into one employee turnover metric, we’re treating the departure of a high performer exactly the same as the departure of someone we wanted to leave.
Commercially, those aren’t remotely the same event.
One may improve the business.
The other can cost us knowledge, relationships, culture, and the entire investment we’ve made in developing that person.
Yet they both show up as “one employee left.”
That’s the problem.
Retention Is Bigger Than HR
I think this is the shift we need to make.
Employee turnover shouldn’t live in an HR silo where we look at the percentage once a quarter and decide whether it’s high or low.
We need to look at it as owners.
What did we actually lose?
What did this person know?
Which relationships did they hold?
What had we invested in getting them to this point?
And when the people we most want to keep are leaving, what is that trying to tell us?
Because we can have a relatively low turnover rate and still have a serious retention problem.
Or we can have a higher turnover rate while building a healthier performance culture.
The headline number doesn’t tell us which one we have.
The people behind it do.
And if we’re serious about building a business that lasts beyond the people sitting in the seats today, we can’t just track how many people leave.
We need to know whether the business is losing people it can afford to lose…
or watching the people it can’t afford to lose walk out the door.
Justin D Maxwell provides family office and investment bank services to the lower midmarket to founders who want 8 or 9 figure net worths. You can learn more here: www.justindmaxwell.com or take our free assessment here: https://fielding.global/articles/diagnostic.html