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Three Things to Keep in Mind When Examining Your Company’s Turnover Rate

Posted On02/03/2017

ContributorJoe Madigan

The employment experts at Nelson are constantly examining current employment trends. We stay up-to-date on the latest government and private employment facts and reports, and we also conduct proprietary research, such as the Workforce Trends Survey reported on in our annual Advisor and Salary Guide.

One piece of data we’re asked about often is turnover rate. Our company partners frequently seek to understand industry and location turnover rate averages to help them gauge progress on employee satisfaction. We understand how turnover rate can help companies understand employee engagement to address potential red flags before they become barriers to success. However, many companies don’t fully understand the context needed to understand the full implications of turnover rate.

Here are three things you need to keep in mind when calculating and examining the turnover rate for your company so you can better understand what turnover means for your workforce planning efforts.

  1. Average turnover rate can vary drastically between geographies, industries, and even companies.
    The Bureau of Labor and Statistics tracks some turnover rate data. Other estimates vary drastically depending on the study. For example, hospitality industry turnover estimates range from as low as 30% to more than 70%, depending on the types of businesses involved and where the study was conducted. Turnover rate can also be very sensitive to unemployment rate; in locations with lower unemployment, average turnover rate may be higher as companies routinely poach employees away from other local employers instead of relying on the pool of unemployed workers to hire.
  2. Turnover rate alone is a poor gauge of engagement or productivity.
    For example, if you have a low turnover rate of 5% but all your top producers are leaving, your low turnover rate may not reflect changes or circumstances that could have a tremendous impact on your business success, like an inadequate compensation structure or an incentive program that doesn’t appropriately reward performance. A high turnover rate in only one department could be a clear indicator of poor department leader performance or the conclusion of a large project for which workers were specifically engaged. Always make sure you’re examining differences between groups or departments and asking questions to explain differences or changes so you understand the story behind the numbers.
  3. While it can be beneficial to understand industry turnover rate averages, it can be more valuable to monitor and understand changes in your company’s own turnover rate.
    Knowing industry averages can give you a starting point to examine your own rates, but it may be more beneficial to monitor changes in your company’s rate. For example, if your industry’s average turnover rate is 25% but your turnover rate is 20%, you may think you’re doing well – until you see that your turnover rate from the previous year was only 10%. If you only considered industry average and not year-over-year data, you could entirely miss what business decisions are impacting your company.

As the economy improves and unemployment continues to drop, competition for talent increases which leads to increases in turnover. To combat increases in turnover and make sure your employees stay engaged, you need to understand the current hiring climate, workplace trends, and competitive salary ranges. The workforce experts at Nelson make this easy. Get started preparing your workforce strategies to achieve success in 2017 by requesting Nelson’s 2017 Advisor and Salary Guide.

Request Nelson’s 2017 Advisor and Salary Guide