When
Turnover is a
Problem…
…it’s Not Your
Biggest One!
Dan Oakland, HR Consultant
www.alternativehrd.com
Today’s Objectives Regarding
Turnover (TO):
To help you…
1. Understand and analyze TO rates
2. Identify your ‘optimal’ TO level
3. Understand business cost of TO
4. Identify causes of unwanted TO
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Question?
Why do we want
low turnover?
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Fact or Myth?
The lower the
turnover, the
better.
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Question?
Which costs more, losing a
high performer or losing a
low performer?
Which costs more, losing a
low performer or keeping a
low performer?
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Observations!
Turnover is costly,
but it is not always
a bad investment.
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Observations!
Low TO can be a sign of a
healthy organization…
…but low TO can also be a
sign of complacency,
stagnation and entitlement.
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Observations!
High TO can be a sign of
turmoil and low
productivity…
…but it may also be needed
to change culture and
dynamics, and to improve
productivity and profitability.
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Observations!
While the cost of TO is
higher than most people
realize, sometimes it is an
investment work making.
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Observations!
Unacceptable TO levels are
typically symptoms of other
problems, i.e. management,
culture, frustration with
wages, benefits or safety,
lack of opportunity, poor job
fit, or life events.
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Reality!
What we really want…
Low or no TO among high
performers, and
High TO among low
performers.
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“But boss, I’m just deep in thought!”
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Understanding TO Rate
# of Employee Separations Per Year
Divided by
Average # of Employees
x 100
Equals Annual Turnover Rate
Example: 22/127 = .173 x 100 = 17.3%
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Understanding TO Rate
MONTH
# VOLUNTARY
SEPARATIONS
AVERAGE #
EMPLOYEES
TURNOVER
RATE
January
3
130
2.31%
February
0
128
0.00%
March
1
129
0.78%
MONTH
# INVOLUNTARY
SEPARATIONS
AVERAGE #
EMPLOYEES
TURNOVER
RATE
January
2
130
1.54%
February
3
128
2.34%
March
1
129
0.78%
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Understanding TO Rate
2013 Turnover
Voluntary
Total
All Industries
Banking & Finance
Healthcare
Hospitality
Insurance
Manufacturing & Distribution
10.4%
12.8%
12.5%
18.2%
6.8%
8.4%
15.1%
17.2%
16.8%
29.3%
10.4%
13.3%
Non-For-Profit
Services
Utilities
11.0%
11.0%
5.2%
15.3%
15.2%
7.2%
CompensationForce.com; Ann Bares, Managing Director, Altura Consulting Group, 2014
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Understanding TO Rate
CompensationForce.com; Ann Bares, Managing Director, Altura Consulting Group, 2014
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Finding Industry Averages
Department of Labor
Trade Associations
Internet Searches
• http://www.bls.gov/jlt/
• http://www.compensationforce.com/2014/02/2013-turnoverrates-by-industry.html
• http://www.nobscot.com/about/turnover_statistics.cfm
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Setting a Turnover Target
1. Look at Voluntary v. Involuntary TO
2. Look at Avoidable v. Unavoidable TO
3. Look at High v. Low Performance TO
4. Compare your TO to industry average
5. Compare your TO to your average
6. Compare TO to your best profit years
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Setting a Turnover Target
Your goal is…
____% TO among high performers?
____% TO among low performers?
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Setting a Turnover Target
Jack Welch created GE’s
‘rank-and-yank’ system:
• 20% most productive
• 70% adequate
• 10% non-producers who
should be fired
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Setting a Turnover Target
Under Welch, GE’s
market value grew from
$14B to $410B and
revenue multiplied
fivefold to $130B.
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First Goal with Low Performers:
Give them an Opportunity to Improve!
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Costs Associated with TO
1. Termination Costs
2. Hiring Costs (Hiring
Replacement)
3. Onboarding Costs
(Replacement)
4. Production Costs
5. Legal Costs
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Performance Differentiation
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Performance Differentiation
XYZ Company: Sales $25M; FTE’s 50
$25m/50=$500,000 revenue per employee
Top Performer @ 150%
Average Employee
Low Performer @ 50%
= $750,000
= $500,000
= $250,000
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Costs Associated with TO
Estimated Turnover Cost
(from averaging several turnover studies)
When Salary is…
Turnover Costs…
Less than 50k
25-50% of Annual Salary
50k to 150k
100% of Annual Salary
Over 150k
200% of Annual Salary
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Dealing with Unwanted Turnover
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Causes of Unwanted TO
•
•
•
•
•
•
•
•
•
Lack of + Relationship with Boss
Lack of + Relationships with Co-workers
Bored / Unchallenged by the Work
Not Using Skills and Abilities
Lack of Autonomy and Independence
Not Finding ‘Meaningfulness’ in Work
Corporate Culture
Financial Instability
Life Events
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Causes of Unwanted TO
Unwanted Turnover in First 12 Month
• Hiring Mistakes
• Lack of Training & Support
• Lack of Early Engagement
• Not ‘Clicking’ with Manager
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Causes of Unwanted TO
Find Out Why People are Leaving You:
• Exit Interviews (marginally helpful)
• Better: Call 4-6 Weeks After Termination
• Best: Talk to Current Employees
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Causes of Unwanted TO
“People leave managers not
companies…in the end, turnover is
mostly a manager issue.”
Gallup, No 1 Reason People
Quit Their Jobs
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Your Challenge
1. Analyze Your Turnover
2. Set an ‘Optimal’ Target
3. Look at Your Cost of TO
4. ID Causes of Unwanted TO
5. Manage Your TO
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