Dear HR Capitalist -
We have some confusion at my company around how to calculate an annualized turnover rate. I would appreciate any help in this area.
Thoughts? - Xavier, West Coast HR
Dear Xavier -
Annualized Turnover reporting can be confusing and is often disputed in companies large and small because it flares up emotion. By calculating Annualized Turnover, you are taking actual turnover numbers for a month or multiple months and "projecting" them out to an annualized rate. In doing this, you are saying words to the effect of "you had 2 terms this month, so your annualized turnover would assume you'll have 24 terms for the year". That kind of assumption projecting is at the heart of calculating Annualized Turnover, and it can drive the managers you serve crazy, especially if their department has a rash of terms early in the year.
To run a simple spreadsheet for Annualized Turnover, create the following:
Legend - (Column Number, Title of Column, Contents of Cells in Column)
Column A - Department/Location - List the entities in your org you want to track turnover for
Column B - FTE - List the number of Full Time Equivalents (employees) in each entity
Column C - YTD Terms - List the total number of terms for year to date
Column D - YTD Voluntary Terms - List the total number of voluntary terms for year to date
Column E - YTD Involuntary Terms - List the total number of involuntary terms for for year to date
Column F - YTD Annualized Turnover - **Formula of 'C4/(number of months to date in year)*12/B4'
Column G - YTD Annualized Voluntary Turnover - **Formula of 'D4/(number of months to date in year)*12/B4'
Column H - YTD Involuntary Annualized Turnover - **Formula of 'E4/(number of months to date in year)*12/B4'
**Columns F, G and H should be formated to show percentages with two decimal points
So that's the easy formula for Annualized Turnover. As you add months, you can do some simply modifications to your spreadsheet to add those in and alter slightly the formulas in Columns F, G and H to calculate the Annualized Turnover based on the number of months in your analysis. Most importantly, remember that you can get some heat from departmental leaders with high turnover early who think this method is less than accurate since you can't predict the future regarding turnover. Counter this objection early and often in your communications by noting that while some departments may take a lot of turnover early in the year, as things stabilize the number will gradually come down and arrive at the true number for the calendar year come December. On the other hand, those that sit at 0% turnover for 9 months may get a rash of terms in the 4Q.
Annualized Turnover metrics are useful, but not a cause for panic. That's why you have to be the communicator on the front end.
If anyone wants a template to work off of, shoot me an email and I'll send you a live one....