Turnover is a common HR metric, useful in measuring a key aspect of labor performance. But things get fuzzy when we talk about the cost of turnover.
The usual calculation is simply to add the costs of recruiting and training, the objective costs of replacing employees. This calculation probably worked well when HR and accounting organizations focused mainly on the uniform and reliable quantities of employees needed for supply, manufacturing, and product distribution. Today, however, we have more to consider.
The “more” part is less tangible than the simple breakdown of replacing hourly labor on the shop floor. Now we have to consider the skills, knowledge, experience, and motivation of individuals and groups. These broader and deeper attributes are harder to quantify. For example, is it enough to know that a person can read Mandarin, or might it also be important to know that he can’t speak English and has a fear of flying?
In a business world trending away from matrixed organizations, where the direction is toward contingent, project-based work teams, we need new ways to identify, share, and manage both costs and opportunities.
Take, for example, the cost of turnover in high-performing work teams. Even if we had a reliable method of defining and understanding the value of an individual, how might we identify the impact of losing an integral member of a high-performing team? Often, such teams have a shared past, present, and future that go beyond what’s in the system. Today, we define many groups as “teams,” which may or may not be high-performing. High-performing teams, like people networks in general, don’t necessarily follow the organizational chart or the top-down strategic plan.
You may have a high-performing sales department, for example. Chances are, not everyone in that department is a high performer. Some members appear to be productive, but they’re really not. Others are on the phone with one another other every day, fully engaged, collaborative, and probably having a lot of fun along the way.
The best teams usually take time to develop. People who have created and shared mutually productive relationships often continue networking and performing together well beyond the positions they once occupied. High-quality engagement experiences have that effect on people.
We are innovating and implementing HR and accounting systems at an amazing rate. As we evolve, we need to keep discussing and thinking through the professional concepts, definitions, and metrics that we commonly use and share. “Cost of turnover” might need some work. Even if your business is still manufacturing railroad spikes, you need to be prepared for the future.
Paul Kaptein has led over 300 successful HCM and ERP software selection and implementation projects across North America. He has won numerous awards as a business consultant, researcher, and published professional writer, and is now completing a graduate degree in business management.