What is staff turnover? And what is a good expiration rate?

American retailer Zappos offers new employees at the end of their training course a bonus of one month's salary to leave the organisation. Amazon goes a step further and offers all permanent employees up to $5,000 a year to pack their belongings.1. But why?

By offering a bonus to the leaving the organization will be staff turnover among unmotivated employees encouraged. Both Zappos and Amazon are convinced that in the long run term pays off to say goodbye to relatively underperforming workers in order to have a strong team. And that idea isn't just out of the blue grabbed. Research shows that there is an optimal rate of displacement.

But what exactly is staff turnover? How can you optimize your personnel policy to achieve the right outflow rate? to pursue? And what costs play a role after staff turnover?

Staff turnover

Staff turnover definition

Under staff turnover Employees are understood to be employees who, through the dissolution of the employment contract, voluntary or forced abandonment. Staff turnover can be are divided into two categories: desirable and undesirable staff turnover. Low performance and little tangible knowledge mean of desired (functional) staff turnover. In case of high performance and a great deal of knowledge that is difficult to transfer can be said to be in the form of unwanted (dysfunctional) staff turnover2.

In the examples of Zappos and Amazon The aim is therefore to stimulate the desired turnover of personnel. In this article further explained the distinction between these types of staff turnover. In addition handles are provided to determine the ideal outflow rate.

Calculating personnel turnover

The course can be calculated by dividing the number of employees leaving by the total number of employees. workforce. This is often expressed in the form of a outflow rate. The total workforce is calculated including the departed employees. If, for example, 42 employees are involved in the organisation of the a total of 500 employees have left, this can be expressed as a outflow rate of 42/500*100 = 8.4%.

Undesirable staff turnover

The risk of the loss of good Performing employees are responsible for the necessary worries in many organisations. For example: Employee A of a sales department within any organization is very successful and knows important customers to the organization. ...bind. The salesperson has a lot of product and sales knowledge in house, is beloved, never sick, very profitable and has thus developed into a important pillar within the organization. What happens if this employee organization? In the short term there will be costs. There must be a new vacancy The Committee would point out that the Commission's proposal for a Directive on the protection of individuals with regard to the processing of personal data and on the free movement of such data is a step in the right direction, and that it should be removed from the system, replaced, and knowledge transferred, administrative handling, execution of Exit Interview, Work in progress, etc. But in the above example, the greatest pain especially in the long term. The department is under pressure and comparable results will not be achieved in the coming months. In the worst case If so, this can lead to demotivation, absenteeism due to illness and even more undesirable effects. course.

In summary: in the case of undesirable The costs can increase considerably, especially if one only has a view of the in the short term. Strategic personnel policy is therefore essential. HR departments should distinguish themselves more often in this respect by means of such systematically provide insight into staff turnover. Think about it: Where to find Risks? How can we better bind employees and keep them interested? What are the Reasons for the lapse of time? What can we do about this?

Desired staff turnover

As explained before, one loses within employees with relatively few (tacit) in case of desired staff turnover knowledge. The employee also performs (below) on average. From loss of significant assets or resources, which have significant value to the organization. so there's no question of adding. The costs within this category are therefore with The Commission's proposal is limited to the short term. In the long term, it is possible that after departure profit can be made.

Contrary to what some personnel officers think, provides knowledge about triggers that lead to The desired staff turnover has a high profit potential. Organisations that do not After all, each time you have to cough up the inflow-related costs are more effective.

Dealing with staff turnover

So there's a big difference between desired and undesired course. But what can we do with this distinction? And in to what extent can we influence staff turnover?

First of all, there is often only one outflow rate reported. No distinction is made here between desired and undesired staff turnover. Strange, because merging These categories do not really give a good picture at all. A first tip is then also to have both the numbers of desired and undesired course separately under the to take a magnifying glass. This is the only way to determine whether there is too much or not. unwanted course, or too little desired course. 

The second step is to achieve the optimal outflow percentage within your organization. In some The total outflow rate of 30 per cent is fine. In Google, for example, the average length of employment is only 1.1 years. year3. In the case of other organisations, such a high rate of outflow would are disastrous. How do you know what the correct gradient is for your organization? As with many other things, it's all about a healthy balance. Now, however, literally, in a financial sense. This balance sheet is shown below depicted4.

 

Staff turnover vs. retention costs

 

The optimal percentage is exactly at the intersection of turnover and retention costs. That sounds nice, but how can this is being calculated? What are the exact turnover costs and even more difficult, what are the are the costs of conservation?

Movement costs

A good start is the mapping of the costs that are objectively measurable. What does it cost, for example, to turn it off? of an ad? How many hours do you spend on job interviews? How much time does it take? Exitgesprekken?

Next, it is important to check how long it takes to bring a new employee up to the level of the departed employee. In the event of undesirable developments, this will be more time than desired. What are the costs of this process? And More importantly: what is the profit that is lost in the period that the is not yet at that level?

Objective retention costs

Concerns conservation costs (retention costs) it gets a little more complicated. However, here too there are certainly costs that are objectively achievable. At least step one is to understand what is important to the employee within the terms and conditions of employment at the choice of whether or not to remain in the organisation. On primary area, one can, for example, look at what it offers in terms of perspective/growth. cost. Calculate the difference between the absolute starting salary and the costs that are necessary each year to enable an employee to grow, for example, to a senior role. Salary scales often offer a solution to this problem. to make it explicit.

Subjective retention costs

The insight into subjective Motivation is more difficult. How do you find out what binds employees and what precedes them? keeps them in handcuffs? Important to find out this information is an open culture combined with a systematic feedback system. Employees need to feel the space to give feedback, and the to be able to do this.

Giving feedback is not always obvious in every organisation. When the Organisational culture If the process is closed, the step of giving feedback in, for example, an evaluation interview can be a big one. Digital, anonymous feedback solutions offer a solution. In this way, employees can offer honest and open insight into such matters. A win-win situation, because feedback solutions also contribute to the creation of an open culture.5. Unfortunately, the question is still too often whether managers are willing, daring and able to go along with this change.

Only when a solid feedback system is instead, one can really map out the full scope of motives. Only then can the retention costs also be made more concrete and with this the best outflow rate to be determined. One can thus be more effective focus on stimulating desired staff turnover and preventing unwanted staff turnover. Maybe offering a fee for the leaving the organization than not even necessary.

Would you like to gain insight based on data in reasons of departure and prevention? Then read Here more about us (EXperience) Outflow research.

Sources

  1. Umoh, R. (2018). Why Amazon pays employees $5,000 to quit. CNBC.
  2. Johnson, J. T., Griffeth, R. W.., & Griffin, M. (2000). Factors discriminating functional and dysfunctional sales force turnoverJournal of business & industrial marketing15(6), 399-415.
  3. Johnson, T. (2018). The Real Problem With Tech Professionals: High Turnover. Forbes.
  4. Abelson, M. A., & Baysinger, B. D. (1984). Optimal and dysfunctional turnover: Toward an organizational level model. Academy of Management Review9(2), 331-341.
  5. Bertot, J.C., Jaeger, P.T., & Grimes, J.M. (2010). Using ICTs to create a culture of transparency: E-government and social media as openness and anti-corruption tools for societiesGovernment information quarterly27(3), 264-271.

13 November 2019

Update: This blog first appeared on 14 April 2014 and was updated on 12 November 2019 with new information.

6 comments on "What is staff turnover? And what is a good expiration rate?"

  1. Emilie Zacho Reply

    Comparing apples with pears makes little sense. The question of what is the average staff turnover rate is therefore irrelevant. But as an organisation you do want to know how you score on turnover. As soon as organisations have calculated their staff turnover, they can compare themselves (benchmark), with other organisations in the neighbourhood, sector, region, country, etc. This way, an organisation can find out what an average staff turnover percentage is and how they score in terms of the average and you don't compare apples with pears.

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