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64 Percent Turnover... Sometimes That's Pretty Good...

Want to see a HR Pro judge another HR Pro?  Tell them you've got 64% turnover.  Resist the urge to slash tires when they respond that they've got 8% turnover.  I mean that - resist the urge to cause bodily harm as they crinkle their nose, because they know not what they speak of.

Most don't get the business behind the turnover numbers.  Here's my list of pet peeves regarding HR prosTurnover and turnover:

1.  Turnover is relative, and most HR Managers in organizations don't understand that, especially if they've never worked in a high turnover business.  Retail, big box call centers and hard knock life production environments are all examples of places where 40% turnover can mean you're best in class.

2.  HR Pros don't understand that money drives turnover.  Do the jobs you have lead or bring up the rear of the market with turnover?  If you pay $9/hour in your call center and the market says $10.50, budget for turnover and evaluate your business plan for talent costs at least annually.  Still want to pay $9?  OK, just make sure everyone knows that turnover is going to run 70-100%.  It's a business decision. Maybe not a great business decision, but a business decision, nonetheless.  Sue Messinger couldn't get turnover below 60% under those $$ circumstances.

3.  HR pros really don't have a great understanding of how to calculate turnover.  I send my turnover calculator out about 20 times a month on email request, and let's just say the fact that you need to annualize your turnover to give people an accurate understanding of how many bodies are flowing out of the building is not a well known fact.  Example - if you have 100 people in your company, and you lost 2 this month, your annualized turnover is 24%, not 2%.  You have to annualize it to understand if the trend doesn't stop, annualized turnover is the number you'll lose once the year ends.  I'm not being crtical of those who haven't been exposed to that, just don't judge those with higher numbers who report it accurately.

What's got me thinking about Turnover?  I picked up the following Newsweek interview with Brian Dunn, CEO of Best Buy.  64% turnover among camera and phone jockeys sounded pretty good to me.

NEWSWEEK: What do you recall of your first day at Best Buy?
DUNN: It was a Saturday. I hit the sales floor and proceeded to not really understand all the items I was trying to sell to the customers, and it was a series of very difficult exchanges. At the end of the day, the store manager came up to me and said, "How did it go?" I told him in very direct terms it was a lousy experience. The manager proceeded to talk to me about the Minnesota Twins, the Minnesota Vikings, fishing … He made it personal right away, and then he said, "Why don't you come in next Saturday morning and I'll teach you a little bit about how I operated on the sales floor." And it really made a difference. What stuck with me from that was that the store manager was talking to me about what I was capable of doing here, and was willing to give of himself to help.

Exactly how high is your turnover?
It's about 64 percent annually, and that's a number we're quite proud of. Four years ago it was over 100 percent, and we've been very systematically working on improving our employee experience and engaging our employees in a way that can bring those numbers down. Embedded in that big number are pretty interesting smaller numbers. Our store-manager turnover is in the teens. That's really important because the store managers are the architects of the environments they lead. Our full-time employee turnover is in the high 30 percent range, and that's a really important number because they're doing a lot of training.

Those Dunn guys always sound credible, don't they? 

Retail's a hard knock life, and 64% isn't bad.  To channel Jeff Foxworthy, "if you've ever judged a turnover statistic without first thinking about the business or department in question, you might be a non-business savvy HR administrator dressed as a HR pro".

Comments

deb owen

I don't know that all HR pros don't understand turnover numbers. I think there are a lot of them out there who just aren't honest about it. I worked in a "hard-knock production environment" that was one of the lowest paying in the area. They had all kinds of ways to get around 'real' numbers. (One way was to basically create their own internal 'temp service'....where they brought people in on a temp basis for the first 90 days at a lower rate than the full time rate, and without benefits. And none of those people, though hired internally and costing the same recruiting costs, were ever counted in the turnover numbers.)

Too often, turnover numbers get played with just to make sure HR doesn't get any blame.

All the best!
deb

chris

Regarding #3:
Never mind well known, is it even a fact that you have to "annualize" your turnover number by multiplying a one month turnover by 12? In some cases, depending on what you are actually trying to measure (i.e. what do you mean by turnover), reporting an "annualized" turnover rate may be no more informative than simply presenting the turnover for the past month.

Consider this: from a cost perspective, losing 2% of staff per month annualizes to 24% per year. But, from a retention perspective, your annual retention is not necessarily 76% (Perhaps retention does not equal 1 minus the turnover rate, but that's what I'm going with). It is, in fact, somewhere between 98% and 76%. At one extreme (the 76%), every two people per month who leave were with you at the beginning of the year, leaving only 76 people at the end of the year who started the year with you. At the other extreme (98%), the same two slots keep changing every month, and at the end of the year you still have 98 of the 100 people you started the year with.


Maybe when you’re discussing costs to hire and train, you don’t care if it’s the same two jobs that you keep having to refill, or if it’s two new ones each month. However, when you think about it from an accumulated human capital perspective, or a workforce continuity perspective, calling a 2% per month turnover “24% annualized turnover” may actually misrepresent the true picture.

Second, do HR folks make a distinction between turnover defined as the rate of jobs vacated and refilled, versus turnover defined as the number of people remaining at the end of a period who were present at the beginning of the period? As in my example above, these can be two very different numbers.

Finally, this may all boil down to the difference between an “annual” rate and an “annualized” rate, where the former is the difference between month 12 and month 0, and the latter the difference between the beginning and end of a given month, multiplied by 12.

Kris

Please send me your turnover template.
Thank you
Kris

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