What’s your turnover rate?

The most reliable way to use turnover rates is to compare an organization against itself over time: consultant

Turnover rates are one of the most consulted sets of statistics in the human resources world, but how useful are they? Like any set of figures, they need to be handled with care.

The most reliable way to use turnover rates is to compare an organization against itself over time, said Ken Strom, senior consultant specializing in strategic rewards at the Toronto office of Watson Wyatt Worldwide. Comparing an organization’s turnover rates against that of others is just too fraught with variables to rely upon, he said.

Take sectoral turnover figures, which many organizations use to measure against. How many organizations were surveyed? Were they evenly distributed in terms of geography, size, new versus stable firms? And are there any American firms in the mix? Turnover rates in Canada are typically half their counterparts in the United States, so one should be careful about using surveys that lump the two countries together.

If gathered across different job markets, what’s the variation in unemployment across these regions, and more to the point, what’s the job market like in the urban or regional centre where the organization is located? Of the organizations surveyed, has there been downsizing, mergers and acquisitions, major restructuring?

And whether turnover rates come from outside surveys or from within, HR professionals should ask if they distinguish good turnover from bad turnover, said David Neilly, a Toronto-based consultant at Hewitt. Some surveys separate voluntary from involuntary, but just as one can be sorry to have good employees retire (involuntary), one can also be glad to see others leave by their own accord.

Neilly suggested that within the involuntary category, organizations might want to distinguish departures caused by poor performance from those caused by restructuring. “If you know all of that, then the numbers would be a useful metric to measure yourself over time,” said Neilly.

That said, here are some turnover rates to use as very rough markers:

From Mercer Human Resource Consulting’s Policies & Practices Survey, 2003, the overall turnover rate (voluntary and involuntary) is 14.8 per cent. Broken down by industries, wholesale/retail comes in at the highest at 35.9 per cent, followed by high tech and telecom (18.6) and natural resources (16.7). Services and insurance tie at 14.2 per cent, followed by banking/finance (13.8) and durable manufacturing (10.8). The three sectors with the lowest turnover rates are not-for-profit at 10.4, manufacturing (non-durable) at 9.8 and transportation/utilities/ real estate at 6.7 per cent.

According to the Conference Board of Canada, the voluntary turnover rate across all employee groups in 234 organizations surveyed is 6.9 per cent in 2001-2002, down from 8.5 the previous year. The figures for 1999-2000 and 1998-1999 were 7.8 per cent and 7.1 per cent respectively. This includes only regular employees and does not count early retirement and employees taking severance.

By industry, the voluntary turnover rates are lowest for transportation and utilities (4.3), oil and gas (4.6), manufacturing (4.6), communications and telecommunications (5.3) and government (5.7). Closer to the middle are wholesale trade (5.8), chemical and pharmaceutical products (5.9) and natural resources (6.8). Among those with the highest turnover rates are food, beverage and tobacco products (7.6), education and health (8.8), finance, insurance and real estate (8.9), high tech (9.2) and not-for-profit (9.2). Services tops the list at 11.4 per cent.

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