When to Ignore Your Turnover

In a small company, look at retention by the person, rather than the percentage.

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I work for a large third-party logistics company that has some of the largest retail suppliers in the world. My site has an average of 115 hourly and management employees on the payroll per month. What is the best way to calculate turnover, hourly and management? What is the clearest formula for finding the monthly and year-to-date percentile?

Of course, if you are still reading by this point, I have to give you credit. What on earth can be more boring than turnover? (Hint: data audits)

I admit it—I have a soft spot in my heart for turnover. I do, really. I've also had some rather intense arguments on how we should calculate turnover. I've even become somewhat emotional over the subject.

But you shouldn't be calculating turnover. You should be looking at people. Your company is small enough that you should be looking at: "Why did Bob and Heidi leave?" not "We have 20 percent turnover in our finance department." The purpose of calculating turnover is to enable comparison across groups and get a big picture of what is going on. Turnover is something you calculate when you can't understand why people are leaving. With a small company, you should know why.

For instance, with 115 people, you probably have groups of five or less. If one person quits, that group has 20 percent turnover! (1/5 for how I would calculate it, but others might say 1/4 because there are four left, and others would say 1/4.5 because you would average out the number of actives over the course of a year—see, I told you it can get complicated.) Well, 20 percent turnover is something to get freaked out over. It requires meetings! And plans! And blah, blah, blah.

It makes more sense to say: "We have five people in finance. It's been a very stable group, and it's been five years since our last termination. Heidi left. Why did she go? Did we not offer promotional opportunities?" Or, "We have five people in finance. We hired three people last year and two have quit. Why are they leaving? Is the leader of the group not an effective manager? Are we not paying enough? What about work/life balance issues?"

With so few employees, you'll really get more bang for your buck if you look at turnover by the person, rather than by the group. Because really, the goal of turnover is to make sure that your company is operating effectively, and you are retaining your good employees and exiting your not-so-good employees. And looking at percentages isn't going to help you in a small company.

Suzanne Lucas has nine years of human resources experience, most of which has been in a Fortune 500-company setting. She holds a Professional in Human Resources Certificate from the Society for Human Resource Management. She blogs at Evil HR Lady.

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