27
Nov

ANALYZING EMPLOYEE TURNOVER

Escrito el 27 noviembre 2011 por Jesus Guerro en General

Today’s society is essentially driven by continuous change. Capability for planning has given way to the ability to improvise. We see this fact more clearly than ever in the world of finance and politics.
In this context, and transferring the same concept to the Human Resource field, maintaining  a low turnover rate while retaining worthy talent within a company is not  an easy task.

Appart from the issues we will comment below, we should  Never forget that Rotation is not always a terrible Disease, It is a Fact, a real Trend. Something to be embedded, even, as a natural need for both people and companies.- Projects and goals change. Refreshing also brings innovation. New challenges is part of growth,.
However, it is advisable to make certain distinctions when analyzing rigorously the employee turnover in our company. That which really hurts, that which we did not expect.
Firstly we should differentiate duo position/professional according to two main criteria:
1 .- Level of Criticity. It responds to the strategic value of the position / employee, by means of inherent responsibilities or  know-how acquired by the employee along his/her background in the business.
2 .- Demand for Replenishment. It relates the degree of difficulty to identify and seduce outsider professionals with similar skills in the market.
Therefore critical positions are those which comprisse a set of technical  and management skills coupled with the knowledge of organizational culture. The former factor can be imported, the latter  only can be built-up, it is never regenerated in the short term.
So, Critical employees are  those who, attending to their unique skills or knowledge, we face a limited supply of professionals in the market, so that substitutes are difficult and expensive to identify and attract.
Thus, we might think of an universe with 4 types of employees in our Organization:

A-      Critical Positions Hard to replace

B-      Critical Positions relatively easy to replace.

C-      Non Critical Positions Hard to replace.

D-      Non Critical Positions relatively easy to replace

Search and Replenishment  imply a high cost not only in terms of cash but also in terms of time  and effort spent and even more important, Transitional Organizational Void.

According to this approach, basically the company must focus on two major challenges:
1 .- Retaining Talent in Group A, whatever It takes.
2 .- Set Agility as primary goal on Replacement policies for the rest of groups.

Efficient Human Resources are those who lead to business success, by proactively listening and efficiently reacting to unexpected turbulences that arise, improving replacement processes, through speed and cost minimization.

Now.., how to retain Talent in the company?
As we said, It is all but easy. This essentially involves personal ad-hoc plans. Not all the employees will have the same preferences and concerns: namely, Professional Development, Training, Competitive Salary, Insurance Compensation covering the family, possibilities of internationalization, working environment and…. Flexibility, both in terms of time at work as well as ideological, workers need to contribute with their ideas, express and feel themselves useful in what they do.

So, It is important to highlight that there are not unique recipes or magic formula.

People are diverse, concerns too. Some people are motivated to change and growth, others are more attracted by salary and status, and there are those who like to remain in a stable environment where they feel safe in all respects. For some people, traveling is an incentive but for others it means a handycap … It is crucial therefore, to exactly know the motivations of each key employee in particular, to know in advance their concerns and be vigorously determined to change what is not going well for them.
In this sense it is essential for HR Department, to provide employees with a fully trusted environment. We must be certain that a disgruntled employee will come to us before seeking a solution outside even in our competitors.

Attending to the concept itsel, we can find different approaches to the Definition of Employee Turnover. Most of them, point out the percentage of incorporations and departures in relation to the total number of employees. (Incorporations + Departures)x100 / Number. of Employees
According to other theories, the index should be calculated as: (Incorporations – Departures) x100 / No. of Employees
From our point of view this latter  is even less appropriate than former to analyze Talent Retention.

If we understand Turnover Rate as Data which helps us to assess how effective our strategies to retain talent in the organization results, It must be redefined as:
                                                          (Unexpected Departures needed to be Replenished) x100 / No. of employees

So, we should keep following cases aside from this approach:
1 .- New members resulting from company’s organic growth.
2 .- Expected departures (pensions, reduction plans ..) or those attending to time-bound projects.
3 .- Positions not necessarily essential previously identified as subject to removal.
4 .- Departures promoted by the company. They must be considered also as rotation, but for other purposes.

Then, this ratio has to be crossed in turn with each of the four groups of employees that we pointed out above.
In parellel, we need to measure:

a)        Average Period for Replacement, understood as the time elapsed from the start of a new Search to full integration (not just incorporation) of candidate in the Company.

b)      Replacement Cost: Dedication of HR Department to recruiting process, cost of Headhunter recruiting services, publications…. and more importantly the cost of Organizational Void incurred by the company until the replacement is complete.

So, the company has not only to focus endeavor on retaining Class A Positions, but also to establish mechanisms to reduce replacement time to a minimum. We insist, this time is not only cost effective in monetary terms but in relation to damage on organizational efficiency.
Conclusion, and trying to respond to the debate of what is that ideal rotation rate that balances stability with renewal, my answer is Zero, since we have to separate the replenishment promoted from the suffered, the expected from the unexpected departures and then weight each case with a value of criticality, which should be irrefutably linked to an average cost of replacement.

Only then, we will know at which extent we are able to retain talent and how turnover affects quantitatively our business.

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