Not All Turnover Is Equal

Measuring and reporting turnover might seem simple, but that is because most organizations report only on aggregate turnover, a generic measure that can be very misleading. While aggregate turnover adequately shows the number of positions vacated, it does not account for some turnover being positive, some negative and some catastrophic.

Failing to recognize that some turnover is desirable and cause for celebration while other turnover is catastrophic and cause for punishment sends the wrong message to managers. Organizations that hold managers accountable for turnover based on a basic measure may be doing more harm than good by encouraging managers to resist terminating employees who no longer provide value to the organization out of fear that they may not realize their full bonus potential.

Traditional measures of turnover count every separation equally, regardless of the performance of the individual, so bottom performers leaving count the same as the loss of a superstar. This is a ridiculous notion, as most seasoned managers fully understand that a bottom performer may actually be a liability to the organization while a superstar can deliver as much as 300 times the productivity of an average employee.

Instead, try measuring and reporting “performance turnover.” This measure starts with the premise that all employees are not equal and the loss of a high performer is much more damaging than the loss of a low performer.

The first step is to determine the weight that should be assigned to losing a top performer. Start with the assumption that losing a high-performing employee is three times as bad as losing an average-performing employee. Losing a bottom performer should carry either no weight or, in extreme cases, a negative weight.

The second step involves doing the actual calculations, where the number of top-performing employees that are exiting would be multiplied by three (to increase their importance), the number of midrange employees exiting would be multiplied by one (to show their neutral importance) and the number of bottom-performing employees exiting would be multiplied by zero (to show that their leaving shouldn’t count against a manager’s turnover statistics). Below are three examples to illustrate the difference between the traditional calculation and the performance-turnover calculation.

Traditional turnover calculations, illustrated in Example 1, don’t put any weight on employee performance ratings, so turnover scores would be exactly the same as the number of employees who left.

Example 2 shows “bad” turnover, assuming three top performers left. Example 3 shows “good” turnover, assuming three bottom performers left. In all cases, three employees left, but the performance-turnover numbers tell a different story. High-performer turnover was a 9, indicating a big problem. Low-performer turnover was 0, indicating a small problem. The traditional calculation was 3, giving no indication of the magnitude of the problem. The six-point spread in the manager’s scores clearly demonstrates the difference between performance turnover and the traditional turnover calculation. The performance turnover scores would be calculated monthly and then distributed in a report to all managers that listed each manager’s performance turnover from best to worst.

Reporting performance turnover sends a much clearer message to line managers and more adequately assesses the impact of turnover to the organization. To expand on this concept, organizations that categorize positions as high-impact, mission-critical and supporting could add an additional weighting factor for the position being vacated. Whatever method you pursue, I highly recommend converting turnover into an estimated dollar impact, a measure of the damage realized by the organization that includes lost productivity and administrative costs as a result of turnover.

Workforce Management, May 21, 2007, p. 42 — Subscribe Now!