By Chris Wright, Ph.D.

Most companies report turnover as a simple percentage within a job, department, and division or across the entire company.  However, HR must realize that providing only a simple percentage provides little information regarding the impact of turnover throughout the company. Turnover affects your bottom line, is expensive and has multiple impacts. As Bill Gates once said, “When Microsoft loses a top engineer to a key competitor; it costs Microsoft over $1Billion over the course of that engineer’s career.” (Human Capital Institute, 2009)

Throughout my work with clients struggling with turnover issues, I have recommended several metrics to measure turnover that provide much more useful information and help drive the action necessary to reduce turnover and improve recruiting efforts.    A comprehensive “turnover dashboard” is the best method for reporting turnover within your company.

Some of the critical turnover metrics I would recommend measuring and reporting include:  

• Critical Position Turnover:  This means measuring turnover that occurs specifically within the most important jobs, as identified by executive leadership.

• Weighted Performance Turnover: This involves weighting voluntary turnover using the latest performance ratings for employees.

• High-Performer Turnover: These means tracking turnover among the number of well-known employees who are considered high-performers.

• Turnover by Manager: Exit interviews data shows that managers have the biggest impact on turnover.  Because turnover issues may be localized to a few managers, it can be important to identify exactly which managers in the company have the highest turnover.  The company should also examine employee engagement and company climate scores by manager.

• Turnover by Division, Department or Functional Area:  Because turnover in high-profit, high-growth units may have a bigger impact on company performance, it is critical to identify benchmark turnover across these key units. For example, are you experiencing turnover in key roles and business critical areas that depend on specific people to contribute to the next product launch or process that impacts your strategy?

• Competitor Turnover: Although sometimes more difficult to measure, turnover rates for both average performers and top-performing competitors in your industry should be reported to put your company’s turnover rates in perspective.

• Internal “Cross-Lines” Turnover:  Even though employees may not be leaving the company, high or low internal transfers between departments, divisions or functional areas can indicate serious problems with individual managers or the requisition system within the company. 

In addition to the critical measures listed above, additional turnover metrics that are beneficial to monitor include:

• The correlation between turnover rates and company profitability
(division, business unit, etc.)

• The hard-costs associated with losing an average performer

• The hard-costs associated with losing a high performer in a key position

• What companies or competitors your company is losing key employees to

• Exit interview data should be collected from voluntary terminations in order to identify any internal management or company issues

• Employee engagement or company climate survey data should be regularly correlated with turnover data by manager, department, division, company, etc.

By tracking and understanding these metrics, your HR department will not only be more effective, but will be seen as more strategic by senior leadership.  You will also help your recruiters by better understanding the type of candidate that is more likely to be successful within your company. 

Dr. Wright is the founder, President and CEO of Reliant (www.reliantlive.com). He led the development of Reliant’s end-to-end Talent Management solutions and assessments. Over 1000 companies globally utilize one of Reliant’s talent management solutions.