When Turnover is a Problem… …it’s Not Your Biggest One! Dan Oakland, HR Consultant

Today’s Objectives Regarding Turnover (TO): To help you… 1.Understand and analyze TO rates 2.Identify your ‘optimal’ TO level 3.Understand business cost of TO 4.Identify causes of unwanted TO

Question? Why do we want low turnover?

Fact or Myth? The lower the turnover, the better.

Question? Which costs more, losing a high performer or losing a low performer? Which costs more, losing a low performer or keeping a low performer?

Observations! Turnover is costly, but it is not always a bad investment.

Observations! Low TO can be a sign of a healthy organization… …but low TO can also be a sign of complacency, stagnation and entitlement.

Observations! High TO can be a sign of turmoil and low productivity… …but it may also be needed to change culture and dynamics, and to improve productivity and profitability.

Observations! While the cost of TO is higher than most people realize, sometimes it is an investment work making.

Observations! Unacceptable TO levels are typically symptoms of other problems, i.e. management, culture, frustration with wages, benefits or safety, lack of opportunity, poor job fit, or life events.

Reality! What we really want… Low or no TO among high performers, and High TO among low performers.

“But boss, I’m just deep in thought!”

Understanding TO Rate # of Employee Separations Per Year Divided by Average # of Employees x 100 Equals Annual Turnover Rate Example: 22/127 =.173 x 100 = 17.3%

Understanding TO Rate MONTH# VOLUNTARY SEPARATIONS AVERAGE # EMPLOYEES TURNOVER RATE January % February % March % MONTH# INVOLUNTARY SEPARATIONS AVERAGE # EMPLOYEES TURNOVER RATE January % February % March %

Understanding TO Rate 2013 TurnoverVoluntaryTotal All Industries10.4%15.1% Banking & Finance12.8%17.2% Healthcare12.5%16.8% Hospitality18.2%29.3% Insurance6.8%10.4% Manufacturing & Distribution8.4%13.3% Non-For-Profit11.0%15.3% Services11.0%15.2% Utilities5.2%7.2% CompensationForce.com; Ann Bares, Managing Director, Altura Consulting Group, 2014

Understanding TO Rate CompensationForce.com; Ann Bares, Managing Director, Altura Consulting Group, 2014

Finding Industry Averages Department of Labor Trade Associations Internet Searches rates-by-industry.html rates-by-industry.html

Setting a Turnover Target 1.Look at Voluntary v. Involuntary TO 2.Look at Avoidable v. Unavoidable TO 3.Look at High v. Low Performance TO 4.Compare your TO to industry average 5.Compare your TO to your average 6.Compare TO to your best profit years

Setting a Turnover Target Your goal is… ____% TO among high performers? ____% TO among low performers?

Setting a Turnover Target Jack Welch created GE’s ‘rank-and-yank’ system: 20% most productive 20% most productive 70% adequate 70% adequate 10% non-producers who 10% non-producers who should be fired should be fired

Setting a Turnover Target Under Welch, GE’s market value grew from $14B to $410B and revenue multiplied fivefold to $130B.

First Goal with Low Performers: Give them an Opportunity to Improve!

Costs Associated with TO 1.Termination Costs 2.Hiring Costs (Hiring Replacement) 3.Onboarding Costs (Replacement) 4.Production Costs 5.Legal Costs

Performance Differentiation

Performance Differentiation XYZ Company: Sales $25M; FTE’s 50 $25m/50=$500,000 revenue per employee Top 150%= $750,000 Average Employee = $500,000 Low 50%= $250,000

Costs Associated with TO Estimated Turnover Cost (from averaging several turnover studies) When Salary is…Turnover Costs… Less than 50k25-50% of Annual Salary 50k to 150k100% of Annual Salary Over 150k200% of Annual Salary

Dealing with Unwanted Turnover

Causes of Unwanted TO Lack of + Relationship with Boss Lack of + Relationship with Boss Lack of + Relationships with Co-workers Lack of + Relationships with Co-workers Bored / Unchallenged by the Work Bored / Unchallenged by the Work Not Using Skills and Abilities Not Using Skills and Abilities Lack of Autonomy and Independence Lack of Autonomy and Independence Not Finding ‘Meaningfulness’ in Work Not Finding ‘Meaningfulness’ in Work Corporate Culture Corporate Culture Financial Instability Financial Instability Life Events Life Events

Causes of Unwanted TO Unwanted Turnover in First 12 Month Hiring Mistakes Hiring Mistakes Lack of Training & Support Lack of Training & Support Lack of Early Engagement Lack of Early Engagement Not ‘Clicking’ with Manager Not ‘Clicking’ with Manager

Causes of Unwanted TO Find Out Why People are Leaving You: Exit Interviews (marginally helpful) Exit Interviews (marginally helpful) Better: Call 4-6 Weeks After Termination Better: Call 4-6 Weeks After Termination Best: Talk to Current Employees Best: Talk to Current Employees

Causes of Unwanted TO “People leave managers not companies…in the end, turnover is mostly a manager issue.” Gallup, No 1 Reason People Quit Their Jobs

Your Challenge 1.Analyze Your Turnover 2.Set an ‘Optimal’ Target 3.Look at Your Cost of TO 4.ID Causes of Unwanted TO 5.Manage Your TO