It's one idea for the topic of turnover in human captial, human resources and workforce planning, but it's a good one if it applies.  

I was sitting with a client on Thursday talking about employee turnover.  I mentioned that if they have a traditional budget process, one way he could guarantee that line executives really pay attention to employee turnover was to investigate what's known as the "Turnover Factor" in the budget model used by his company.

What's a "Turnover Factor' when it comes to budgets?  A turnover factor projects the amount of turnover a company/division/department is going to have during the budget year, then automatically reduces payroll by the appropriate amount.  The logic used when putting a turnover factor in the budget is that those funds should be unavailable in the budget since there won't actually be PEOPLE in those jobs (for that time period).

The effect of the Turnover Factor?  Your compensation budget gets a lot tighter, and you'll have a lot more variances to explain month to month.  And that kind of stinks... But it's actually the right way to do it from a business perspective...

Additionally, the Turnover Factor puts a LOT of pressure on the pay-for-performance system.  Have a lot of managers who have a hard time telling low-performing employees they're not doing that hot with no raise or a limited increase?  A turnover factor means you are dealing with a truly zero-sum game.  For every dollar your manager gives to a low performer, he won't be able to give that dollar to the star. 

Especially if you have a Turnover Factor - because there's no built in slush fund.  Budget 4% for increases?  With a Turnover Factor in play, that's exactly what you have - with your active employees.  Without the TF in play, you've got some wiggle room from a budget perspective.

No turnover factor means less attention to turnover - it might actually be welcomed because of the wiggle room it allows for the operator if they're missing revenue targets.

However - put a turnover factor in place each year and only allow it to be adjusted based on annual results - and I bet you'd see a lot more attention to turnover from your operators.