RESOURCING & TALENT MANAGEMENT

Chapter Fourteen Measuring and Analysing Employee Turnover

Chapter Objectives To enable learners to:

Distinguish between different types of employee turnover.

Implement different approaches to measuring and monitoring staff turnover.

Advise on sources of turnover data for benchmarking purposes. Estimate the costs associated with staff turnover in an organisation.

Defining voluntary release Not always easy to differentiate between departures initiated by employees and those initiated by employers. Departures often result from a mixture of the two. When defining voluntary turnover, a broad approach is usually used including all resignations that are not formally initiated by the employer. When analysing voluntary turnover, it is important to distinguish between resignations that might have been avoided (controllable), and those that would have occurred anyway, regardless of employer actions (uncontrollable). Important to note that there are grey areas here too.

Turnover trends A number of national surveys (CIPD, CBI, etc) are conducted each year to establish overall turnover rates.

Since the late 1990s, overall figure has been 15-20%, which is quite high by historical standards, reflecting strong economic conditions and the presence of tight labour markets.
Figures can also be obtained for turnover in specific industries, regions and occupational groups. This is more useful for employers seeking to benchmark their turnover rates against appropriate comparators.

Negative effects of turnover: The main problem concerns costs - both direct and indirect.
- Direct recruitment
- Selection - Leavers administration - Inefficiencies

- Recruitment administration
- Development - New starter administration - Overtime/temporary staff

Replacement costs have been found to equate, on average, to six months salary of the post in question, rising to two years in the case of very senior posts.

Other negative effects of turnover relate to: The impact on the remaining staff (workloads, morale). Labour market reputation. Customer opinions.

Some writers have emphasised the positive effects of turnover:

functional turnover refers to the departure of poor performers allowing better motivated and more innovative individuals (fresh blood) to be recruited in their place reduces the need for costly redundancies allows employers to establish greater control over their wage budgets.

High turnover is probably least worrying in industries employing people in relatively low-skilled occupations, that nevertheless require high levels of customer service (ie fast food outlets/telesales).

Measurement and benchmarking Generating meaningful turnover statistics is hard because it is easy to misinterpret figures.

Example: Turnover tends to be highest in the first months of employment. For this reason, units that are performing well (and thus expanding) are likely to have higher figures than those in decline.
Two most common measures of turnover are the wastage index and the stability index. Figures are often meaningless until they are put in context by comparing them with those of other departments, divisions and organisations, or those of previous years.

Measurement is important as it allows the following:

Comparing different departments. Benchmarking against competitors.

Tracking turnover intervention success over time.

Predicting future trends (using past data). Estimating costs.

The most straightforward method is calculating crude turnover rates (or wastage rates):
Total number of leavers in year to date
____________________________________________________________________________________

Total number of employees at date

X 100

Wastage rate provides a good rule of thumb, but other methods can also be considered:
modifying the formula to use an average annual figure for the total headcount stability rate analysis cohort analysis and production of a survival curve grading approach.

Crude wastage rate is still essential, especially for external benchmarking purposes.

Costing turnover Very difficult to accurately determine the costs of turnover:

many of the elements are not easily quantified
may elements are not recorded issues of functional vs dysfunctional turnover considering savings (redundancy payouts, etc) as well as costs.

Approaches can be taken however:

Focus on basic, direct costs.

Basic plus an educated estimate of indirect costs.

Detailed analysis.

Identifying costs Direct costs (departing employee, recruitment & selection, new starter).

Administrative costs and management time (leaver administration, recruitment & selection activities, new starter administration, orientation & training of new starter).
Efficiency-related costs (prior to departure, interim, whilst new starter learns the ropes). Potential lost opportunities (loss of experience, service implications of disruption).

Rudimentary approaches:
Easily measured costs only, using rough estimates of staff time, etc. per vacancy. Estimated total costs incurred over a year. Present as a not less than total. Attempt to estimate soft costs and add on. Make use of consultant web-based costing tools.

There are also a range of more sophisticated approaches.

Benchmarking against competitors can take on of two forms: Comparing the organisations performance against the figures included in the published government and industry-sponsored surveys. Company can set up or join an informal association of similar employers to enable mutual exchange of information. Resembles the long-established salary clubs.