Save Millions by Reducing Your Turnover by 1%!
The average turnover rate in the U.S. is about 12% to 15% annually, according to the U.S. Bureau of Statistics. According to LinkedIn, an average annual worldwide employee turnover rate is 10.9%. However, some industries over the last few years have consistently seen higher turnover rates such as tech, retail, and hospitality, have above the average turnover rates. Tech companies (software, not hardware) had the most turnover over in 2017 with a 13.2% rate. Retail follows closely behind at 13.0%, while media/entertainment (11.4%), professional services (11.4%), and government/education/nonprofit (11.2%) round out the top five. According to SHRM’s 2017 Human Capital Benchmarking Report, the average overall turnover rate in 2016 was 18 percent.
If you are an HR manager, you might look at that number and compare it to your company’s rate and make a simple calculation: if your number is lower, you’re doing great, but if it’s higher, you need to do some work.
Unfortunately, calculating employee turnover and retention just isn’t that simple. The ideal turnover rate (the number of employees who have left your company during a certain time period) and retention rate (the number of employees who have stayed at your company for a certain amount of time) for your organization aren’t necessarily the average rates listed on national surveys — they’re going to depend on factors such as your industry, your historical turnover rate, and internal promotion rate. And if you don’t take the time to consider each of these factors, you might not end up with an accurate view of how your company is handling its turnover and retention. Here are three things to consider as you establish turnover and retention rate guidelines for your organization
Measure the Right Metrics
First, start tracking the data you need in order to measure turnover and retention year after year. We’re not just talking about positions lost and positions filled — you also want to collect data around specific kinds of turnover. For example, in the 2017 Human Capital Benchmarking report, the overall turnover rate is 18 percent, but that number drops to 13 percent when considering only voluntary turnover, six percent when considering involuntary turnover and just three percent when looking at only high-performers. Furthermore, you’ll also want to account for turnover related to employees who left a position but did not leave the company, such as in the case of a promotion or inter-departmental transfer. Or you might have a situation where you’ve listed two openings, filled them both, and then had to fill them again. In this case, you’ll want to make sure you’re tracking turnover and retention separately and not simply assuming these numbers are inversely related to each other.
To make sure you have as accurate a view of what’s happening within your company, start tracking the following metrics now: Average employee tenure Positions opened and positions filled Overall turnover rate (Broken down into three categories: Voluntary, Involuntary, and employees noted as High-Performers) Average turnover due to promotions or transfers Then use established formulas from SHRM and SAMHSA to monitor your turnover and retention rates over time
Consider the Context of Your Industry
Next, make sure you’re considering your turnover and retention rates within the context of your industry. After all, different industries maintain different standards for turnover because they face unique challenges associated with attracting and recruiting talent with the skills needed to perform the job. For example, the retail and restaurant industries are notorious for poor turnover rates, running as high as 65 percent for retail and 73 percent in restaurants in the past few years. Comparing your IT startup’s turnover rates to those numbers might make you less worried about your turnover rate, but it won’t give you an accurate idea of whether or not your company is performing with its industry standards. Use resources from the Bureau of Labor Statistics and consulting leaders like Deloitte and PwC to monitor your industry’s average retention and turnover rates
You can capture all the data in the world, but it won’t help you improve retention and turnover within your organization unless you take action. So while the first step of managing employee retention and turnover is tracking it, the real work begins when you assess your rates in the context of your industry and identify whether or not your company needs to improve its retention strategies. If you find your retention rates are on the low side and your turnover rates are on the high side, there’s a lot you can do to improve them. Not only will your efforts drive short-term benefits like lower recruiting and onboarding costs, but you’ll also allow your company to reap the rewards of healthier company culture, including higher productivity and profitability. Focusing on company initiatives like increased transparency, flexibility and recognition can all help you improve your retention rates.
Don’t be daunted by how many different ways you can calculate, track and analyze turnover and retention. Decide how you’ll track these rates within your organization, then use them to stay informed about how employees join and leave your company so that you can make powerful, strategic changes to how your company manages its human resources.
The cost of employee turnover Some studies predict that every time a business replaces a salaried employee, it costs 6 to 9 months’ salary on average. For a manager making $60,000 a year, that’s $30,000 to $45,000 in recruiting and training expenses. Turnover seems to vary by wage and role of employee.
The cost of turnover is the cost associated with turning over one position. This calculation includes the cost of hiring for that position, training the new employee, any severance or bonus packages, and managing the role when it is not filled. Every company will experience some turnover.
FIT’s (Fit-in-Test) Talent Acquisition and Talent Management Solutions are specially designed to work with your team. Using our proven Learning Management System (LMS) for onboarding and new hire training, test customization that curates curricula to your organization’s essential talent question strategy, and FIT’s robust talent acquisition engine, FIT easily integrates into your organization. In conjunction with our robust data reporting tools, FIT can create, launch, and manage an unparalleled hiring solution for your team.
FIT combines all our performance hiring tools to provide you with a best-in-class workflow to fit your retention strategy. Contact us now for a free consultation today!
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