Employee turnover is a longstanding managerial concern. When an employee leaves an organization, it usually creates substantial costs. Costs to the organization may include decreased productivity, costs of hiring a new employee, increased training time and other indirect costs. Other turnover consequences relate to the smoothness and continuity of organizational operations, employee morale, and the difficulty of replacing the departed employee. As a result, organizations are concerned about monitoring turnover, determining the variables that influence it and managing turnover behavior.

Knowing the extent and cost of employee turnover is important to securing funds, resources and organizational commitment which reduce turnover. The first step in measuring turnover is to define it generally as a permanent movement out of the organization. Statistically, it is usually computed as the number of employee separations divided by the total number in the workforce and expressed as a percentage.

Thus, an organization with 20 separations (employees who leave the organization during January 1-31), and 200 employees on January 15 (midmonth), has a monthly turnover rate of 10 percent (20/200 = 10%). Turnover rates vary among industries, organizations, geographic locations, departments, occupations and by employee characteristics such as age, education and organizational tenure. For example, younger, newer, unskilled and blue-collar employees tend to have higher turnover rates than their contrasting groups. For this reason, turnover should be calculated for various categories of interest, as well as for the organization as a whole. For example, an organization may not have a severe organization-wide turnover rate, but may have a severe departmental turnover rate or a high professional-employee turnover rate, which requires appropriate action to alleviate. The turnover rates for subgroups such as these can be computed using the formula above, which is used by the U.S. Department of Labor. Once computed, the turnover rate can be compared with previous rates for the same periods, with the rates of other organizations and with the national average obtained from the U.S. Bureau of Labor Statistics. For comparisons of turnover data, the Monthly Labor Review and the Quarterly Report on Job Absence and Turnover are useful sources.

Calculating the turnover for avoidable separations is another method for computing the turnover rate. This method yields the most significant measure of the effectiveness of a human-resource program since it represents the portion of employee turnover that management has the most opportunity to control. In order to compute this type of turnover, the unavoidable separations -- those that occur for reasons over which the organization normally has no control (e.g., pregnancy, return to school, illness, death, marriage or spousal relocation) are deducted from the total separations for a given period. This remainder is divided by the total midmonth workforce to determine the avoidable separation turnover rate.

In the previous example, if 6 of the 20 separations were unavoidable, the 14 remaining separations divided by 200 employees yields a 7% avoidable turnover rate. One problem with the turnover rates already discussed is that they mask the usual higher turnover of newer employees. One approach to studying the turnover of newer employees is to compute their survivor/wastage rates. This is done by computing the proportion of new employees who stay/leave during a time period. For example, if 25 employees are hired one month and 15 of them are still employed after 3 months, their survival rate is 60% (or wastage rate of 40%).

Not only is the quantitative rate of turnover important, but the quality of personnel leaving an organization also is important. Turnover represents more than a monetary loss. Indeed, those who leave may be the company's most valued human resources. Because of the impact they have on an organization, special attention should be given to turnover among managers, professional personnel and those employees with unique skills. Replacing these employees can be expensive and time-consuming. A company turnover reduction program may include one or a combination of the following strategies:

• Realistic job previews
• Improved selection
• Good employee orientation
• Appropriate training
• Supervisory leadership
• Well-designed employee mentoring systems
• Equitable or fair pay system
• Improved working conditions
• Job enrichment
• Opportunities for career advancement

Employee Turnover Analysis
In order to apply the most appropriate turnover reduction strategies, management must first determine the cause of turnover behavior. To facilitate this, management needs to establish appropriate turnover categories. For example, turnover can be classified as involuntary or voluntary. Involuntary turnover occurs when an employee is discharged or terminated, often for just cause. Voluntary turnover occurs when an employee leaves by the employee's own choice, and can be caused by a number of factors. These may include poor job feedback, job dissatisfaction, unmet job expectations, performance problems, situational constraints, socialization difficulties, greater degrees of job stress and a lack of career advancement opportunities.

After computing appropriate turnover rates, an organization frequently can determine the reasons for employee separations by compiling and comparing the results of exit interviews by employee group, department, division, etc. Questionnaires also may be used to study turnover. Turnover factors can be listed on the questionnaire and respondents (former employees) asked to indicate how much influence each factor had on their decision to leave the organization. From this type of study, management can determine what probably caused employees to quit and whether the most influential factors are controllable to some degree. Attitude surveys also may be used to study turnover by including sections on current employees' intention to quit and on employees' future plans with the organization.

Turnover on a specific job may be explored via employee task-related self-esteem to determine whether employees leave because they perceive themselves to be incompetent. To do this, an organization can use organizational position or job description to identify activities considered critical to a given job. After a list of activities is developed, the organization can ask the respondents to rate their ability level.

Developing profiles of employees who turn over at various times during employment also can generate useful information for the organization. Employee records can be used to collect data on employees who leave the company at particular time periods. Critical characteristics of these employees (obtained by reviewing the distributions of their age, employment time, salary, and recruitment source) can be used to describe those who leave in six months versus those who leave in 12 months, 24 months or 36 months. Similar profiles can be developed for dichotomous groups of "leavers" and "stayers" in each department or division of the organization. This is especially useful if the profiles reveal characteristics or factors which significantly distinguish one group from the other. If the "stayers" in a particular job (e.g., receptionist) have higher educational levels, managers may want to reevaluate the position or its educational requirements and change the job specification.

Reprinted by permission. © 1998 Society for Human Resource Management.
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