Dear Addi P.,
In the upcoming new year I'm resolved to make better use of HR data. But what data should I collect? What should my team focus on?
- Mad About Metrics
Dear Mad About Metrics,
Thanks for your letter! A new calendar year or new fiscal year is always a time of potential for HR teams. It presents an opportunity to streamline operations, and the key is knowing where to cut back and where to focus.
The short answer? Turnover should be your top priority.
To examine why turnover matters, how to measure it and what you can do to minimize its impact, let's dig into the not-so-short answer.
The Cost of Breaking Up
It's a fact of life that not every employee will stay with your organization for their entire career. Turnover is inevitable, but under ideal circumstances it can also be manageable. However, if turnover gets out of hand, your bottom line could suffer, so when you ask "What data should I collect?" - turnover data tops my list.
According to the Bureau of Labor Statistics, the total number of job separations in October 2019 was 5.6 million — virtually the same as in September. According to ADP Research Institute's® Workforce Vitality Report, the third quarter of 2019 saw a total job switching rate of just over 20% for all industries. Leisure and hospitality saw the highest turnover rate at 24.6%, while resources and mining came in at just under 11%.
Beyond the frustration of having to fill suddenly vacant positions, there's a bigger problem for HR and organizations at large: Losing staff costs money. Think about it: When employees leave, their workload doesn't go with them. That means other employees must take time from their own work to make sure critical tasks are completed, which costs your business both time and money. Hiring new staff doesn't immediately solve the problem either, as new employees can cost more than $4,000 each to onboard.
And it doesn't stop there. In addition to the hard cash costs of losing staff to turnover, organizations also have to put in effort to build new relationships during onboarding, which takes time. Client partnerships, sales funnels and reciprocal agreements may need to be reevaluted and handled by new employees.
To put it simply, breaking up is hard to do, and it's expensive.
By the Numbers
If employee turnover is the metric you need to measure and correct for, then getting the numbers right is critical. The easiest way to measure turnover is on a month-to-month basis. Opting for six-month or year-over-year check-ins could make it more difficult to see emerging trends and take advantage of opportunities for employee retention.
To calculate your turnover rate, take your head counts from each HR report during the month, add them together and divide by the number of reports. For example, if you run head counts four times in January, add those numbers and divide by four to get the average number of employees at work. Then, divide the number of separations in that month by your average head count.
Let's say your average head count in January was 99. Two employees quit during the month, and one was terminated. Divide total separations (3) by headcount (99), which gives 0.030. Multiply this number by 100 to yield a percentage value and your average turnover in January is 3%. Be sure to note employees going on medical or parental leave and any departing temporary or seasonal workers, which don't count as turnover.
Staying the Course
While every business would prefer no turnover, that's not possible. HR needs to work with C-suite executives to find a switching "sweet spot" that informs retention best practices. This sweet spot will depend on your industry, profitability, current workforce and other factors. Here, you're looking for a turnover rate that delivers minimal operational impact and provides HR teams with enough breathing room to find qualified replacement staff.
If turnover metrics aren't living up to expectations, you need strategies that help reduce overall turnover and improve your ability to handle the inevitability of separations. Some potential ideas include:
- Early screening — During the interview process, HR can help filter out candidates who may be more likely to leave an organization early. By looking at factors like previous job longevity and reasons for switching positions, teams can identify candidates who are most inclined to stay the course.
- Mentorship programs — To help defray the costs of onboarding and ensure that new employees aren't lost in the shuffle, organizations should identify experienced employees who would be willing to mentor new hires. Be sure to compensate mentors accordingly with time and/or money to avoid over-stressing your best workers and risking costly separations.
- Ongoing education — Many workers believe they're on their own when it comes to professional and career development. By providing tracks for ongoing education and career advancement, you can increase the likelihood of employees staying.
- Distributed responsibilities — Despite our best efforts, we can't stop turnover altogether. Staff may encounter life events that significantly change their circumstances or decide to pursue entirely new job tracks that don't exist in your organization. Here, you can limit the impact of turnover by redistributing key responsibilities across small teams instead of siloing them. Doing so can help your team handle the transition period when unexpected departures occur.
So there you have it. If you're in HR wondering, "What data should I collect this year to make things easier around here?" - go with turnover. Turnover is costly, it's time-consuming, and it can hinder business growth. Start by calculating your organization's monthly separation rate and turnover sweet spot. Then, deploy retention best practices to help keep your staff happy and make breaking up easier to manage.
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