Human Resources Analytics: Methods and Rationale for Measuring Staff Attrition

Staff attrition has a wide range of adverse consequences within modern organizations, such as reduced productivity and employee satisfaction. Understanding employee turnover starts with knowing which metrics to track. From there, organizations can develop the strategies and incentives they need to hold onto staff. 

Key HR metrics to track employee turnover

Here’s how to calculate employee turnover and other related HR metrics.

Employee turnover rate

Employee turnover rate is the most important and most straightforward metric to track. Typically, it’s calculated as a percentage over the course of a year.

Employee turnover rate = (# of employees who left / average # of employees) * 100 

When teams have calculated this metric, they will have a strong idea of their turnover rate. However, to get better insights into turnover, they should supplement with the following metrics.

Voluntary turnover rate = (# of voluntary exits / average # of employees) * 100

Involuntary turnover rate = (# of involuntary exits / average # of employees) * 100

By calculating the voluntary and involuntary turnover rate, HR departments can get a better understanding of the causal factors that affect staff leaving the business.

Other related metrics 

Of course, there are other related metrics that HR teams can also track.

Time to fill

Time to fill average vacancy can be calculated with the following metric.

Time to fill = (Offer acceptance data - position vacancy data) / number of positions.

This metric helps teams track how long, on average, it takes to fill positions within their organizations.

Time to productivity (TTP)

Time to productivity is a little trickier to calculate. For starters, HR teams must set KPIs to establish to determine what full productivity looks like,

Average TTP  = (# days to hit productivity KPIs / # of new hires)

Cost of turnover

Annual cost of turnover = (Costs of hiring + onboarding + L&D + unfilled time) x (# of employees x annual turnover rate) 

Why HR teams need to track the employee turnover rate

Tracking the employee turnover rate is essential for a few reasons. Firstly, measuring against industry benchmarks helps them understand if they have a problem with retention. 

High staff turnover directly impacts two core areas:

Workforce planning

Understanding turnover rate helps teams:

• Predict employee acquisition levels
• Understand which skills they need to develop in-house
• Develop succession planning strategies

Organizational health

Understanding the turnover rate also gives a crucial temperature check on the organization in the following ways:

• Which departments are most affected?
• Is employee satisfaction and morale low?
• Is compensation competitive enough to retain top talent?

The impact of high turnover

The adverse effects of having a suboptimal employee turnover rate can be split into a few categories:

Financial costs

There are several financial costs associated with employee turnover, including:

• Increased recruitment costs to post ads and interview new hires
• Reduced revenue as a direct result of unfilled positions
• Costs of onboarding and training to get new hires up to speed
• Losses occurred due to time to productivity (TTV).

Cultural costs

Excessive employee turnover also has a negative effect on company culture. Some of the costs here include:

• Overall employee morale can take a hit if employees exit at high rates
• A company’s reputation can also be negatively affected by a high turnover rate

especially in an era where people “tell-all” on social media and job sites

• Collaboration efforts can go down the drain if employees are leaving, making it hard for teams to foster tight-knit teams.

Operational costs

High turnover rates also have a direct effect on operational efficiency in the following ways:

• When experienced employees leave an organization, they take a lot of know-how with them. This scenario can lead to skills gaps and even affect client confidence
• It takes time to find the right replacement. Delays in hiring, time to productivity, and the consequence of making the wrong hire can hurt productivity
• Losing productive team members places a burden on the existing team, which can potentially lead to employee dissatisfaction and burnout
• Important projects can go by the wayside when a company loses expertise or headcount
• General workflows are disrupted when turnover is high
• Annual leave permissions can be affected when headcount is reduced, causing massive issues with morale and satisfaction.

Strategic costs

There are also several strategic costs that management teams must consider when understanding employee turnover. Some of the most common are included below:

• General customer service is compromised when experienced staff leave, headcount is reduced, and long-established client-employee relationships are severed
• When a company is overly focused on replacing existing staff, it can come at the cost of developing new strategies and other plans
• High turnover can hurt a team's competitiveness through reduced productivity. When business rivals are enjoying more stability, they can press home the advantage.

How turnover metrics influence change

HR metrics calculation helps teams in several different ways. 

Understanding there is a problem

Employee turnover rate is a simple metric. All it really does is tell you that you have a problem. However, understanding issues means you can get more granular and understand where turnover is a big issue.

• If turnover is high in particular departments, it could be a sign of toxic management
• If turnover typically happens within the first year, it might suggest onboarding issues
• If employees exit to rival organizations, it could indicate remuneration issues.

Diagnose the problem

If an organization understands where the problem exists, it can gather the necessary pieces of the puzzle. Some good options here include:

• Performing exit interviews to see why employees have left
• Run employee engagement and satisfaction to see if other staff are at risk of leaving and why
• Measuring turnover against industry benchmarks to get objective insights into overall employer performance.

Solutions

Once organizations know there is an issue and diagnose why it is happening, they can implement change. Some measures they can consider include:

• Training for problem managers
• Review the recruitment process to ensure employees are the right fit
• An overhaul of onboarding processes
• Reviews of salary and benefit packages.

Final thoughts

Understanding employee turnover is crucial for modern HR teams. By tracking these metrics, HR teams are alerted to issues within the organization. From there, they can set about developing strategies required for remediation. 

Turnover is inevitable in any organization. Staff leave for many different reasons, from pursuing greener pastures to changing personal circumstances. Many of these reasons are outside the control of HR teams. However, others are not. 

HR metrics calculation for turnover helps organizations identify when things go beyond natural attrition. By following these numbers, HR teams know it's time to intervene. This data can trigger an investigation into root causes and the development of remediation strategies that help ensure top talent stay put.