When Turnover is a Problem…

transcript

When When Turnover is a Turnover is a

Problem…Problem…

……it’s Not Your it’s Not Your Biggest One!Biggest One!Dan Oakland, HR ConsultantDan Oakland, HR Consultant

www.alternativewww.alternativehrdhrd.com.com

Today’s Objectives Today’s Objectives Regarding Turnover (TO): Regarding Turnover (TO):

To help you…To help you…1.1.Understand and analyze TO ratesUnderstand and analyze TO rates2.2.Identify your ‘optimal’ TO levelIdentify your ‘optimal’ TO level3.3.Understand business cost of TOUnderstand business cost of TO4.4.Identify causes of unwanted TOIdentify causes of unwanted TO

Question? Question?

Why do we want Why do we want low turnover?low turnover?

Fact or Myth?Fact or Myth?

The lower the The lower the turnover, the turnover, the better.better.

Question?Question?Which costs more, losing Which costs more, losing a high performer or a high performer or losing a low performer?losing a low performer?

Which costs more, losing Which costs more, losing a low performer or a low performer or keeping a low keeping a low performer?performer?

Observations!Observations!Turnover is Turnover is costly, but it is costly, but it is not always a bad not always a bad investment. investment.

Observations!Observations!Low TO can be a sign of Low TO can be a sign of a healthy organization…a healthy organization…

……but low TO can also be but low TO can also be a sign of complacency, a sign of complacency, stagnation and stagnation and entitlement.entitlement.

Observations!Observations!High TO can be a sign of High TO can be a sign of turmoil and low turmoil and low productivity…productivity…

……but it may also be but it may also be needed to change needed to change culture and dynamics, culture and dynamics, and to improve and to improve productivity and productivity and profitability.profitability.

Observations!Observations!While the cost of TO is While the cost of TO is higher than most people higher than most people realize, sometimes it is realize, sometimes it is an investment work an investment work making.making.

Observations!Observations!Unacceptable TO levels Unacceptable TO levels are typically symptoms are typically symptoms of other problems, i.e. of other problems, i.e. management, culture, management, culture, frustration with wages, frustration with wages, benefits or safety, lack benefits or safety, lack of opportunity, poor job of opportunity, poor job fit, or life events.fit, or life events.

Reality!Reality!

What we really want…What we really want…

Low or no TO among Low or no TO among high performers, andhigh performers, and

High TO among low High TO among low performers. performers.

““But boss, I’m just deep in But boss, I’m just deep in thought!”thought!”

Understanding TO RateUnderstanding TO Rate# of Employee Separations Per Year# of Employee Separations Per Year

Divided byDivided by Average # of EmployeesAverage # of Employees

x 100x 100

Equals Annual Turnover RateEquals Annual Turnover Rate

Example: 22/127 = .173 x 100 = Example: 22/127 = .173 x 100 = 17.3%17.3%

Understanding TO RateUnderstanding TO RateMONTH # VOLUNTARY

SEPARATIONSAVERAGE # EMPLOYEES

TURNOVER RATE

January 3 130 2.31%

February 0 128 0.00%

March 1 129 0.78%

MONTH # INVOLUNTARY SEPARATIONS

AVERAGE # EMPLOYEES

TURNOVER RATE

January 2 130 1.54%

February 3 128 2.34%

March 1 129 0.78%

Understanding TO RateUnderstanding TO Rate

2013 Turnover Voluntary Total

All Industries 10.4% 15.1%Banking & Finance 12.8% 17.2%Healthcare 12.5% 16.8%Hospitality 18.2% 29.3%Insurance 6.8% 10.4%Manufacturing & Distribution

8.4% 13.3%

Non-For-Profit 11.0% 15.3%Services 11.0% 15.2%Utilities 5.2% 7.2%

CompensationForce.com; Ann Bares, Managing Director, Altura Consulting Group, 2014

Understanding TO RateUnderstanding TO Rate

CompensationForce.com; Ann Bares, Managing Director, Altura Consulting Group, 2014

Finding Industry AveragesFinding Industry Averages

Department of Labor

Trade Associations

Internet Searches

•http://www.bls.gov/jlt/

•http://www.compensationforce.com/2014/02/2013-turn

over-rates-by-industry.html

•http://www.nobscot.com/about/turnover_statistics.cfm

Setting a Turnover TargetSetting a Turnover Target1.1.Look at Voluntary v. Involuntary TOLook at Voluntary v. Involuntary TO2.2.Look at Avoidable v. Unavoidable TOLook at Avoidable v. Unavoidable TO3.3.Look at High v. Low Performance Look at High v. Low Performance TOTO4.4.Compare your TO to industry Compare your TO to industry averageaverage5.5.Compare your TO to your Compare your TO to your averageaverage6.6.Compare TO to your best profit Compare TO to your best profit yearsyears

Setting a Turnover TargetSetting a Turnover Target

Your goal is…Your goal is…

____% TO among high performers?____% TO among high performers?

____% TO among low performers?____% TO among low performers?

Setting a Turnover TargetSetting a Turnover TargetJack Welch created Jack Welch created GE’s ‘rank-and-yank’ GE’s ‘rank-and-yank’ system:system:

•20% most productive20% most productive•70% adequate70% adequate•10% non-producers 10% non-producers who who should be firedshould be fired

Setting a Turnover TargetSetting a Turnover TargetUnder Welch, GE’s Under Welch, GE’s market value grew market value grew from $14B to $410B from $14B to $410B and revenue and revenue multiplied fivefold to multiplied fivefold to $130B.$130B.

First Goal with Low Performers: First Goal with Low Performers: Give them an Opportunity to Give them an Opportunity to

Improve!Improve!

Costs Associated with TOCosts Associated with TO

1.1.TerminationTermination Costs Costs2.2.HiringHiring Costs (Hiring Costs (Hiring Replacement)Replacement)3.3.OnboardingOnboarding Costs Costs (Replacement)(Replacement)4.4.ProductionProduction Costs Costs5.5.LegalLegal Costs Costs

Performance Performance DifferentiationDifferentiation

XYZ Company: Sales $25M; FTE’s 50XYZ Company: Sales $25M; FTE’s 50

$25m/50=$500,000 revenue per $25m/50=$500,000 revenue per employeeemployee

Top Performer @ 150%Top Performer @ 150% = $750,000= $750,000Average Employee Average Employee = $500,000= $500,000Low Performer @ 50%Low Performer @ 50% = $250,000= $250,000

Costs Associated with TOCosts Associated with TOEstimated Turnover Cost Estimated Turnover Cost (from averaging several turnover (from averaging several turnover studies)studies)

When Salary is… Turnover Costs…

Less than 50k 25-50% of Annual Salary

50k to 150k 100% of Annual Salary

Over 150k 200% of Annual Salary

Dealing with Unwanted Dealing with Unwanted TurnoverTurnover

Causes of Unwanted TOCauses of Unwanted TO

•Lack of + Relationship with BossLack of + Relationship with Boss•Lack of + Relationships with Co-workersLack of + Relationships with Co-workers•Bored / Unchallenged by the WorkBored / Unchallenged by the Work•Not Using Skills and AbilitiesNot Using Skills and Abilities•Lack of Autonomy and IndependenceLack of Autonomy and Independence•Not Finding ‘Meaningfulness’ in WorkNot Finding ‘Meaningfulness’ in Work•Corporate CultureCorporate Culture•Financial InstabilityFinancial Instability•Life EventsLife Events

Unwanted Turnover in First 12 MonthUnwanted Turnover in First 12 Month

•Hiring MistakesHiring Mistakes

•Lack of Training & SupportLack of Training & Support

•Lack of Early EngagementLack of Early Engagement

•Not ‘Clicking’ with ManagerNot ‘Clicking’ with Manager

Find Out Why People are Leaving You:Find Out Why People are Leaving You:

•Exit Interviews (marginally helpful)Exit Interviews (marginally helpful)

•Better: Call 4-6 Weeks After TerminationBetter: Call 4-6 Weeks After Termination

•Best: Talk to Current EmployeesBest: Talk to Current Employees

““People leave managers not People leave managers not

companies…in the end, turnover companies…in the end, turnover

is mostly a manager issue.” is mostly a manager issue.” Gallup, No 1 Reason PeopleGallup, No 1 Reason People

Quit Their JobsQuit Their Jobs

Your ChallengeYour Challenge

1.1.Analyze Your TurnoverAnalyze Your Turnover2.2.Set an ‘Optimal’ TargetSet an ‘Optimal’ Target3.3.Look at Your Cost of TOLook at Your Cost of TO4.4.ID Causes of Unwanted ID Causes of Unwanted TOTO5.5.Manage Your TOManage Your TO

When Turnover is a Problem…

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