External vs Internal Turnovers: What’s the Difference?

External vs Internal Turnovers: What’s the Difference?

Turnovers are relatively common. According to the U.S. Bureau of Labor Statistics (BLS), the average employee turnover rate across all industries in 2017 was 26.03%. Based on those numbers, you can expect about one in four of your company’s employees to quit or otherwise leave their respective job in any given year.

When a turnover occurs, your company will undoubtedly incur costs associated with recruiting and training a replacement. The BLS, in fact, found that the cost of replacing an employee is typically 50% to 200% of the employee’s salary. While all turnovers are characterized by an employee’s departure from his or her job, there are different types of turnovers, including external and internal. What’s the difference between external and internal turnovers exactly?

What Is an External Turnover?

An external turnover involves an employee’s complete departure from the company for which he or she works. External turnovers can be voluntary or involuntary. With a voluntary external turnover, an employee willingly quits. With an involuntary external turnover, an employee is fired or let go. Regardless, all external turnovers occur when an employee leaves the company for which he or she works.

What Is an Internal Turnover?

An internal turnover, on the other hand, involves an employee leaving his or her job for a different job at the same company. The employee doesn’t leave the company for which he or she works. Rather, the employee stays at the same company while changing his or her job position. It’s still considered a turnover because the employee’s job position changes. With an internal turnover, you’ll have to recruit and train a replacement to fill the employee’s job position.

The Impact of External Turnovers

While both types of turnovers can impact your company’s operations, external turnovers are more significant than their internal counterparts. Whether you realize it or not, it costs money to cultivate hard-working and productive employees. If an employee leaves your company, you’ll have to start over again. This means finding and training a replacement, followed by nurturing the employee so that he or she becomes a highly productive member of your company’s workforce.

Allowing external turnovers to go unchecked can have a negative impact on the morale of your company’s existing employees. Employees will take notice when their coworkers leave. As they see their coworkers quit or otherwise leave, they’ll have a lower morale that makes them less productive.

A high number of external turnovers can be indicative of a more serious underlying problem. Employees often leave the company for which they work when they are unhappy with the culture. Maybe an employee doesn’t receive recognition for his or her work, or perhaps an employee isn’t given the right tools. Regardless, if an employee doesn’t have a satisfying and positive experience, he or she may leave your company, resulting in an external turnover.

The Impact of Internal Turnovers

Internal turnovers can still impact your company’s operations. If your company has a high internal turnover rate, certain departments may suffer from a lack of productivity. Internal turnovers are oftentimes isolated to one or more departments. Employees in those departments will quit in favor of a job in a different department. They’ll still stay at your company; they just won’t work in the same department. As a result, these departments where internal turnovers occur will lag behind your company’s other departments.

Like with external turnovers, a high internal turnover rate could be a sign of a more serious problem within your company. If few or no employees want to work in a specific department, there’s probably a reason for it. A high internal rate could mean the department has a negative culture, or it could mean the department isn’t fulfilling.

There are still costs associated with replacing employees during internal turnovers. You’ll have to train new employees to fill the voided positions. Training, of course, consumes valuable resources that manifest in the form of higher costs.

Getting Your Company’s Turnover Rate Under Control

Minimizing turnovers begins with hiring the right employees. You want to match each open position with the right employee. If an employee isn’t a good fit, he or she may leave. By taking the time to find and hire the right employees, you’ll experience fewer turnovers, both external and internal.

Fostering a positive company culture can help you control your company’s turnover rate. A positive company culture means that employees are recognized, appreciated and rewarded for their hard work. Far too many companies have a negative culture that, ultimately, discourages employees from staying. By fostering a positive culture, employees will feel a stronger desire to stay.

In Conclusion

Turnovers can be classified as external or internal. External turnovers are traditional turnovers in which an employee completely parts ways with your company, whereas internal turnovers occur when an employee leaves his or her job for a new job at your company.

Brent Hermansen