04 December 2007

Turnover: A Quick And Dirty Online Search

A quick and dirty online search confirms that there's a lot of interest for turnover and that it's very difficult to calculate its costs.

Absolute costs of turnover
Many opinions about the costs of turnover range from 25% to 250% of a position's annual salary costs.

How to measure the costs of turnover
Elements that can be included in the calculation are:
  • job ads
  • recruiting agencies
  • temporary staff
  • salary of interviewers
  • lost productivity
  • training of new hire
  • severance costs
  • ...and many more
The Internet is also full of online tools for calculating the costs of turnover. Most of these tools are developed by consultants who will sell you their services once you realize how much money you loose due to turnover.

As everything out there in the Cloud, some tools may be very good while others are probably a joke. But they can give interesting input for developing one's own list of costs elements or calculation tools.

How much turnover is too much?
Specific figures are tricky since in one situation 10% can be a lot while in another it can be absolutely acceptable. A good idea could be to find info about the industry average or the turnover rates of direct competitors. But in general, an increasing turnover rate is mostly bad.

Why isn't turnover always bad?
A bad performer may be replaced with a better one (although it's usually the good ones who leave). Or an exit could give the opportunity to promote a rising star.

And I even heard that there are still a few companies where employees stay for 20 or more years. In this case low turnover can become very costly due to continuous salary raises over a long period of time. And since new employees often bring new ideas, innovation could also suffer.

Turnover or retention rate?
Some articles recommend to measure the retention rate instead of turnover. This way you can analyze who is leaving when and after how much time instead of just measuring how many percent of your staff are leaving.

What I learned from my short virtual trip
  • turnover exists (I read about it on the Internet!)
  • it costs a lot, but nobody really knows how much
  • consultants love turnover
  • zero turnover shouldn't be the goal
  • "retention rate" sounds like something worth looking into

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