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Ask the HR Capitalist - Calculating Annualized Turnover

Quantifying Good/Bad Turnover - Good Luck!

Many folks have weighed in on Employee Turnover, and related conceptual formulas usually center around cost models - what it takes to get folks trained up and productive when hiring new associates to replace new ones that were fully trained.  While the Cost of Turnover is often cited, another buzzword is the concept of Good vs. Bad Turnover.  Can you draw the distinction between Good and Bad Turnover?  Is their a cost differential between the two? Abeautifulmind3

Practical people would agree that both Good and Bad Turnover exist, and there are cost differentials depending on the flavor or combination of factors.  Here's my cliff notes on what I know regarding Good vs. Bad Turnover:

1.  Good Turnover would include people who have been full trained but still do not "Meet" expectations from a performance standpoint after a reasonable period of time;

2.  Good Turnover would also include involuntary terms - after all, if you made an organizational decision to terminate the individual, you did that with all factors in mind and came to the conclusion your world was better without the individual;

3.  Bad Turnover includes people you have promoted who decide to leave the company.  While this person could be similar to #1 in the new role, that's rare.  You invested in them and made them special, and they walked - that can't be good.   See this study from Hewitt for the impact...

4.  Bad Turnover also includes those leaving the company (whether it be voluntary or involuntary) in scenario #1 and #2 that end up filing a third-party action (TPA) against you.  If you didn't manage performance and provide feedback to the extent you needed to and incur TPA as a result, your cost of turnover goes way up and that's generally not a good thing.

5.  Bad Turnover also includes your employees deemed as "Exceeding" expectations who have no other baggage that brings the organization down.  You loved them, told them, paid them (hopefully) - and they left you.  Time to look inward....

Here's what I don't know about Good vs. Bad Turnover:

6.   If you have a standard-issue "Meets" performer that leaves the company, is that ever a good thing?  I suspect those who lag on innovation or a "Meets" performer way up in the range established for the position might be arguments for this scenario being a good thing.  Caution - the world needs ditchdiggers too....

What I can't determine is how to assign costs to each of these models.  After all, you can give me a figure on overall Cost of Turnover, but you can't tell me the premium that each one of these scenarios commands within that equation.  With this in mind, I'll attempt to report on Good vs. Bad and leave the cost models to quants like Russell Crowe in A Beautiful Mind...

Comments

Lisa

Nice play by play. Thanks!

Xavier

We have some confusion at my company around how to calculate an annualized turnover rate. I would appreciate any help in this area.

Thanks

Victor Stoyanov

A really helpful article. Thank you. What i am interested in right now is how do we define a healthy rate of turnover. If you have an opinion on the matter or you have encountered any article i would be very apriciative to hear abot them. Thank you again.

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