Measuring Employee Turnover Rate: A Bogus Statistic…

Andy Porter Andy Porter, Engagement and Satisfaction, Metrics, Retention

There have been countless articles, posts, and other musings on HR metrics and how, without metrics, HR is doomed to forever be viewed as a second-class business citizen.  And through a stroke of re-branding genius HR metrics have been transformed into HR analytics, with a whole technology industry built up to help us HR types sort our analytics out.  Admittedly, I’ve been a little old school when it comes to HR metrics – think traditional baseball statistics (i.e., wins, homeruns, RBIs) to sabermetrics (on base percentage + slugging percentage).  In fact, for years now, I’ve been proudly flaunting our low turnover rate as the only proof needed to prove how successful our people programs have been.  Well, recently my thinking was challenged by a colleague, leaving me feeling like I’ve been peddling the HR statistical equivalent of Dave Kingman.  As it turns out, focusing on turnover rate is like focusing only on homeruns – important, but misleading.  A low turnover rate could really be telling you:

1.  You’ve got a “comfortable” culture.  You go to work, do your thing and go home.  There’s not a lot of pressure, no one really pushes you to do or learn more, you’ve got a lot of friends at work and you’re compensated well.  Why would you leave?  Oh, that’s right, you wouldn’t!

2.  People really want to leave but can’tYup, the ol’ economy thing gets in the way here.  These folks aren’t bad workers, it’s just that it’s time for a change or their heart isn’t in it anymore.  They’re out there trying their best to move on, but it just ain’t happening.  And depending on where in the country you live, this could be even more pronounced.

3.  People really want to leave but don’tSame as above except these guys are too lazy to mount a serious job search.

4.  Unintended consequences.  You’re a manager in a company that focuses so much on turnover rate that even though you’ve got a poor performer on your team, you don’t take action because you don’t want to be an outlier.  So you tolerate underperformers.

You get the point.  While turnover rate can be a helpful input to understanding what’s happening in your organization, we should be a little more skeptical of drawing too many conclusions.  So what should we measure?  Taking a page from the sabermetrics book, I propose we adapt the Wins Above Replacement Player (WARP) for our organizations.  Simply, what is the performance level of our team members compared to “replacement” talent available on the open market?  We can call it Performance Above Replacement Employee (PARE).

Using a 1-5 scale:

Performance of current employee

Divided by

Expected performance of replacement employee

A score of 1 or higher is good.  Do everything you can to retain that employee.  A score lower than 1 isn’t good and you should take the necessary steps to improve.  From a retention perspective, I’d want to know what percentage of employees with a score of 1 and above are we retaining?  Now, I can hear those out there saying, “isn’t this just another way of saying retain high performers?”  No.  Most performance measurement is comparing an employee to internal talent or the subjective assessment of a manager.  The PARE system looks external so you may have a “high” performer in your system but turns out they’re only average when compared to the market.

Would love to hear your thoughts and reactions!