According to a recent ADP Research Institute® (ADPRI) report, on average 5 % of U.S. employees leave their job every month, and 60% of this turnover is voluntary.
This should concern companies, as employee turnover is known to be expensive. Employee Benefit News (EBN) reports that it costs companies 33% of the employee’s annual salary to hire a replacement after the employee leaves. Other studies suggest the costs of employee turnover are even higher: According to a study from the Center for America Progress, employee turnover can cost anywhere from 16% of their salary for hourly, unsalaried employees, to 213% of the salary for a highly trained position.
In order to address the problem of high employee turnover, a good first step is to look at the common causes why employees leave companies. A Gallup poll of more 1 million employed U.S. workers concluded that the No. 1 reason people quit their jobs is a bad boss or immediate supervisor. 75% of workers who voluntarily left their jobs did so because of their bosses and not the position itself.
While most companies measure employee turnover at company, division or department level, not many companies track employee turnover at team level in an effective manner. This leads People Managers to de-prioritize talent retention and focus on operational metrics like cycle time or volume, resulting in lack of leadership accountability for poor talent retention results.
Measuring employee turnover at team level is essential to create an environment where People Managers are incentivized to retain their employees, but this exercise is more complex than it seems at first sight.
On the one hand, team size needs to be taken into consideration when measuring employee turnover: the smaller the team, the easier to get a high turnover ratio. For a People Manager with a span of control of 5 employees, it only takes 1 employee leaving to have a 20% turnover ratio, while a People Manager with a span of control of 30 employees needs 6 employees to leave before reaching the same figure. In this context, when visualizing employee turnover results it is useful to sort the teams by size in descending order. This way teams with similar sizes are compared with each other and the largest teams can be prioritized.
On the other hand, it is important to establish a common criteria when calculating employee turnover ratios at team level, as rotation in Managerial roles can create noise in the data. Data mining techniques can be used to prevent recently appointed People Managers from “inhering” the results of their predecessors.
In order for companies to be able to articulate effective talent retention strategies, they must gain a better understanding on how employee turnover is distributed across their organizations, creating a framework in which People Managers’ ability to retain talent is assessed in an objective, data-driven manner. If employee turnover metrics are not effectively integrated into People Managers’ performance assessments, it will be difficult for companies to increase talent retention in a sustainable manner.