Measurements of employee turnover need to be useful as management tools.

Given the continuing news about job losses and unemployment rates, many of us may be surprised by recent survey reports on employee turnover. Business owners and managers may be particularly surprised, since the costs of turnover (up to three times an employee’s annualized pay) have been well-documented.

The Job Openings and Labor Turnover Survey (JOLTS), released each month by the U.S. Bureau of Labor Statistics, reported that 54 percent of employment separations recorded in August were voluntary. That was up from July, and nearly 11 percent higher than the number of job quitters recorded in August 2012.

These findings support those described in recent human resources benchmarking reports, indicating that voluntary turnover has been increasing since a 2010 high level (and subsequent dip), while employee job satisfaction has decreased since that year. A recent online poll by Right Management found that 83 percent of workers who participated say they intend to actively seek a new position in 2014.

Despite reports that would seem to direct attention to the issue and expense of employee turnover, results of a recent survey by AMA Enterprise reveal:

• Only 42 percent of 977 organizations surveyed have a formal process for measuring employee turnover;
• Twelve percent don’t track turnover; and
• Nearly one third of responding managers didn’t know their organization’s turnover target.

What employer wants to be left watching as high-performing employees see opportunities to switch jobs… and take their skills and relationships with them? What can business leaders do?

What’s Measured and What’s Important
First, know what’s measured. There is at least one common measure of turnover:

[(Total # of separations during the period) ÷ (Average # of employees during the period)] X 100

Typical variations include measuring voluntary vs. involuntary turnover.
Next, identify and understand what’s important. Knowing the overall turnover rate for your organization and how it compares with data within your industry, company size, geography, etc. may be interesting, but may not be useful management information. More informative may be to measure and understand turnover (overall, voluntary and involuntary) within your organization over time. Talk with and learn from departing employees; identify trends, needs and opportunities.

It may also be informative to measure turnover within a key job or group of jobs—or within a location or department. Is there a particular key job from which employees are leaving? Is there a particular location or department that calls for attention? How can the measurement(s), combined with employee comments, lead to savings in recruiting/hiring dollars, focus employee retention efforts and build engagement? The value of managing turnover lies in your ability to respond to these questions.

A Working Example
Consider this example. In a geographically dispersed organization, site managers lead teams of approximately 20 to 30 employees working at each of six sites. Employee groups at each site include multiple site supervisors who report directly to a site manager. Because supervisors have historically been promoted into manager roles, both the site supervisor and site manager positions are identified as key roles to meet the organization’s strategic goals. Based on routine internal measurement and reporting organization-wide, voluntary and involuntary turnover rates are at or below industry and area market benchmarks. Yet business leaders are frustrated and share a growing concern about whether site managers can meet company performance expectations.

What opportunities does this situation provide for collaboration among business leaders?

Calculation of turnover within the site supervisor job alone (a key job) reveals that voluntary turnover is significantly higher than organization-wide turnover. Further, supervisor turnover has been increasing in the last year at a rate higher than organization-wide turnover.

Measuring these internal trends leads the leadership team to explore further to identify and address what is happening within the organization that impacts turnover in the site supervisor job:

• What are departing employees saying (in exit interviews) about their reasons for leaving?
• Is there important information to be learned from current site supervisors, from direct reports or from site managers?
• What ideas can be generated to improve selection of site supervisors, better engage them on the job, retain their skills, and lead to strong succession into available manager roles?

This approach and collaboration among leaders (executives, operations and human resources) will lead to improved responses to the needs of the organization. Turnover measurements will move from broad-based data in periodic reports to useful management tools that help address business needs.

Like other organizational changes, this approach requires collaborative understanding of business strategy and goals, potentially introducing new ways of managing some key employment practices.

Raylana Anderson, CEBS, SPHR, MBA of Anderson Consulting is an experienced HR partner who has collaborated with executives in for-profit and not-for-profit organizations of all sizes. iBi