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Tracking Employee Turnover - An Insufficient Metric - and Some Alternatives
In our current climate of low unemployment, boomers leaving the job scene and the shift from labor-intensive to knowledge-intensive jobs, talent retention and hiring success based on job-fit practices has moved up on the corporate priorities list. How can we measure the effects of our current hiring and retention practices?
In hiring a new employee, most of the direct costs are front-loaded, occurring before or in the first few days of employment. Most of the indirect costs are post-hire, adding up over time of training, acclimation and acculturation. At some point, usually long after the date of hire, the employee reaches the break-even point and begins to contribute to the company's profitability.
Accurately measuring those costs is a difficult and time-consuming exercise but one that should become a priority for any enterprise interested in a strategic approach to HR. For the limited focus of this article, we will simply assume that hiring a new or replacement employee is extremely costly, and measurement of our level of success in the process is critical to our mission.
What to measure then? Given the front-loaded costs of the process and the observed fact that most companies' raw turnover scores mask a critical dichotomy (a group of relatively stable, long-term employees and a second group of short tenure, constantly churning with turnover), early hire failure is a crucial concern. Track cumulative new-hire failure rates at 30, 60, 90, 180 and 365 days from hire, and you will begin to build a measure of your hiring process and its relative success or failure. Your raw turnover rate may be something you're proud of, and happy to mention to the Board of Directors, but can you say the same about the probability that a new hire will still be around to celebrate the six-month or one-year anniversary of the hire? Try to find benchmarks for your industry or other companies similar to yours. The failure rates for new hires in most call centers would make the HR manager in the average three-star hotel slightly ill and give the HR manager of most medium-sized cities cardiac failure. Take heart, though: No matter how high or low your numbers are, you can change them in a positive direction by changing your process, incorporating best practice assessments in selection, improving the skills of your line managers and other things you really do know how to do but haven't found the time and resources to accomplish-yet.
Another opportunity, often unmeasured, is success of initial training as measured by post-training performance. Are you training new hires in a manner that is actually producing success when they begin their real jobs? In one client's operations we found that the characteristics (as measured by the ProfileXT TM ) necessary for success in their training program were very different from those required for success on the job. The results were devastating. They lost people in training who could well have been successful on the job and invested weeks in training people who had little chance of long-term job success! Without the measurements offered by the assessments, all they really knew was that a lot of their new hires failed, either in training or on the job, before they began to pay off as employees. With the assessments, they were able to modify the training programs, increasing the percentage of employees who excelled in both processes - being trained and actually doing the jobs. Another crucial dimension to measure: Promotion success - at the same time intervals. If you are routinely promoting people (who, we assume, were doing a good job before promotion) and then losing them to failure at the new job, you're experiencing one of the most expensive types of failure. Not only do you lose them and their prior productivity, but your competitors are the most likely beneficiaries of your error! Using job-fit measures before offering a promotion can be one of the most cost-effective parts of the process. An ounce of prevention is, indeed, worth a pound of cure.
What about sudden spikes in turnover? Often, when a sudden flurry of departures hits the HR department, and the demands of quickly hiring more people than usual cause "Chicken Little" syndrome in management, little time is devoted to finding out just who left and why. Sometimes, especially in a fast-changing business, the flurry is the departure of the "old guard," unwilling or unable to change with the business. Is this turnover negative? Probably not - inconvenient, perhaps, but not necessarily bad. If you have a standard exit survey in place, you might be able to detect the root causes of the spike in departures. With the metrics in place, a careful analysis of the results may help you make changes - or assure you no change is necessary, and eventually, the crisis will pass.
The tasks of deciding which metrics to use, putting the data collection process in place, periodically analyzing the results and making changes based on data may seem overwhelming. Can you afford to do less?
About the Author: Price Reese Consulting helps businesses of any size incerease employee retention and improve productivity. Our solutions include pre and post hire assessments.
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