Your People Experts

Analyzing & Calculating Turnover

WHY DID YOU LEAVE ME?

LEARN CALCULATING, COSTING, AND REDUCING TURNOVER &

RECRUITING STRATEGIES FOR RETENTION

Reducing turnover is a challenge that Human Resources (HR) has faced for decades.  Why people leave and why people stay continues to mystify many employers. Removing the mystique will help HR finally get its arms around the turnover challenge.

Analyzing Turnover

The first step to managing turnover is to understand how to calculate it.  The formula is:

 

Turnover can be calculated on a monthly, quarterly, or annual basis – or any other timeframe you deem appropriate.

Using this formula, the analysis can be broken down by department or division and should also be used to evaluate voluntary v. involuntary separations.

Once turnover is calculated, the next step is to determine why employees are leaving.  Conducting exit interviews can identify if there is a problem with a supervisor, if pay or benefits aren’t competitive, or if there are other working conditions that make it difficult for employees to remain with the organization.

When employees are fired from the company, the employer should take time to reflect why this person didn’t succeed. Did this person have the right skill set to perform the job? Were the right questions asked during the interview to determine if the individual was a cultural fit for the organization?

One of the most important questions a company can ask itself is why people stay with us?  What are the attributes of those who have been with the organization for a period of time?

Cost of Turnover

Once turnover has been analyzed, the costs associated with it need to be determined. Determining the costs associated with turnover will support HR’s recommended changes to reduce turnover when presenting those ideas to the executive team and to other managers.

COST OF TURNOVER WORKSHEET

EXPENSE

COST

Employment Advertising – All recruitment advertising & related costs $
Employment Agency and Search Fees – fees to employment agencies, search firms, and recruitment consultants $
Employment Agency and Search Fees – fees to employment agencies, search firms, and recruitment consultants $
Internal Referrals – costs for bonuses, fees, gifts, etc., awarded

to employees participating in a company-sponsored referral program

$
Applicant Expenses – travel and subsistence costs Relocation Expenses – moving expenses and all other costs associated with relocation $
Employment Staff Compensation – all salaries, benefits, and bonuses of the employment staff involved in recruiting, interviewing, hiring, and training new employees $
Other Employment Expenses – all other related expenses, such as the cost of facilities, telephone, consultants, etc. $
Orientation and Training – include management time, trainer fees, materials, and other costs for training new employees. $
Estimated Total Costs: $$$
Total Number of New Employees ###
 

Solve the formula to find your average cost of turnover per employee.

 

CALCULATE ESTIMATED REDUCTION IN TURNOVER

Use the data collected from employees who have quit from the organization to evaluate why people are leaving.
Once the reasons for leaving are determined, deduce how many of these individuals probably would not have left had various policies/programs been in place that may have reduced the turnover.

Solve the formula to find your estimated reduced turnover.

CALCULATE EXPECTED SAVINGS IN TURNOVER COSTS

Solve the formula to find your expected savings in turnover costs.

 

Reducing Turnover

Understanding why we have turnover allows us to develop strategies to reduce it.

  • Accurate job descriptions help the HR or hiring manager to identify the skills needed to perform the job and gives the applicant a better idea of what the job entails.
  • What are your competitors doing? Comparing your pay and benefits to your industry or community allows you to understand whether or not you may need to enhance compensation to attract more candidates.
  • Hire right the first time. Assessing the job candidate for skills related to your job as well as for cultural fit contributes to success in selected an employee who will remain with you for a linger period of time. For example, if you’re hiring a custmer service represenatative, you want someone who is comfortable talking on the phone all day and who is comfortable dealing with difficult customers. Adopting a behavioral interviewing approach to talking with applicants can help determine whether or not they have the necessary skills.
  • Training. Once the individual is hired, a key factor to success is to insure they are properly trained on your specific job.  While many jobs are common across industries, all companies have their specific method for how they want things done.  Also, when hiring for entry level positions, more training may be needed because the new hire may be unfamiliar with exactly how to perform a specific job.  Even for jobs that require some level of experience, a period of training is always advisable in order to make them successful in your job.
  • Right Equipment. How many times have you heard complaints from employees that they don’t have the proper equipment to either learn the job or do the job?  Before bringing someone on board, make sure their equipment is working properly and that all of the tools they need to perform the job are ready and waiting for them on their first day of employment.  Develop a procedure for existing employees to request new or additional equipment as theirs ages.
  • Recognition. Employees want to know that you value what they’re doing for you.  Recognition doesn’t have to be complicated or expensive.  It can be a simple “thank you” at the end of the day or a box of donuts or pizza for lunch at the end of a long, trying week.
  • Coaching employees properly when their performance is not up to our standards is critical. You’ve already invested money in hiring this individual and it will cost you even more if you have to let them go. Coaching them and retraining them on specific aspects of their job can help a marginal performer become a good performer.  However, it does require time and patience.  Make the time.  In the long run, teaching someone how to do something properly is a lot quicker than hiring and training someone to replace them.
  • Improve working conditions. Evaluate all work areas to determine if there is something the company can do to improve working conditions.  Are all work stations set up to be ergonomically functional?  Do we have certain positions that could be allowed to work from home?  Are there jobs that we can allow employees to flex their scheduled work hours?

Recruiting the Long-Term Employee

Employing individuals who will stay with us for more than a few months begins at the recruitment stage.  Use technology to source candidates and consider implementing video interviews to help save time for both the hiring manager and the applicant.

Change up where you place your job ads and how you recruit.  For example, consider:

  • Social Media Recruiting
  • Recruiting College Students
  • Perpetual Recruiting for jobs that tend to turn over frequently
  • Employee Referrals
  • Open House
  • Job Fairs
  • Hiring recruiters that specialize in your industry or in the job area you’re trying to fill
  • “Now Hiring” business cards. Place “Now Hiring” and the web address for the job postings page on your website on the back of your business cards.
  • Install a television or video monitor in your lobby advertising your job openings to anyone visiting your workplace.

Establishing your employer brand is also important.  Your brand speaks to your company’s values to entice people to work for you.  For example, in a healthcare environment, it might mean talking about how you’ve helped people or even saved their lives.

Today, applicants, especially applicants who are of the milllenial generation, value organizations that are socially responsible and give back to their communities.

Controlling turnover begins with recruiting and continues through the entire employment life cycle through training, recognition, and establishing the best working conditions we possibly can.

 

All equations used in this article can be found here:

 

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Disclaimer

EAF provides information about current developments in labor and employment law. This information is intended for educational purposes only and should not be considered legal advice. Questions requiring legal advice should be addressed to the attorney of your choice. EAF members may be able to obtain a legal interpretation through our FREE Legal Hotline.