[IPAC-List] calculating turnover
Kevin Stanek
stane040 at umn.edu
Mon Oct 9 20:21:29 EDT 2017
Hi Megan,
You're right that the typical turnover rate is an approximation and
therefore it's interpretation is muddy (i.e., it's not the proportion of
employees you had that left). I'd suggest an approach closer to survival
analysis: number of termination events divided by the total number of
termination opportunities employees had (i.e., days each person was
employed during the period). Building on your example:
If an organization has 100 employees present for 200 days, and
50 of those employees present for 100 more days (assuming for simplicity's
sake the other 50 terminate all on day 200), and
50 new hires all made on day 300 and who stayed for 65 more days, then
the turnover rate for the year would be 50 terms/(100*200+50*100+50*65)=0.2%
As you can see, this new metric is not directly comparable to a
typical/approximated turnover rate, which makes it hard to externally
benchmark (you probably shouldn't trust external benchmarks too much
anyways since there are many variations on the turnover rate calculation,
such as excluding employees on LOA, using just the year-end headcount
instead of the average, including interns or fixed term employees, etc.).
On the other hand, the above-proposed method is more accurate, because it
reflects exactly *how many opportunities to terminate were taken
(numerator) compared to how many opportunities to terminate occurred
(denominator)*.
Another alternative that is more comparable to (but also more accurate
than) the typical 'average headcount' method is to look at the daily
turnover rates and sum those across all the days in your time period of
interest. For example, on January 1 if 2 employees terminate and the
headcount that day was 100 employees (i.e., 100 could have terminated) the
daily turnover rate would be 2%, on January 2 if 4 employees terminate and
the headcount that day was 120 the daily turnover rate would be 3.3%, etc.
You then sum these daily turnover rates across the time period you're
interested in (e.g., 365 days to get an annual turnover rate). This rate
only differs from the typical 'average headcount' method if you have
significant fluctuations in headcount within-month (and it has problems
similar to the typical 'average headcount' method, such as sometimes
providing turnover rates > 100%). This method only differs from the method
described above because it essentially averages the daily headcount in the
denominator, whereas the method above sums the daily headcounts (since each
employee each day has an opportunity to terminate).
Hope this helps,
Kevin
On Sun, Oct 8, 2017 at 2:51 PM, Lance Seberhagen <sebe at erols.com> wrote:
> The most common way to calculate turnover is to use the average number of
> employees in the denominator. Thus, an organization (or job) could have a
> turnover rate of more than 100% per year.
>
>
> Another approach is to track new hires (in a job or work unit) over time
> and then calculate the percentage who left within 30 days of hire, 90 days
> of hire, 180 days of hire, etc. This is most commonly used to evaluate the
> employee selection process or to compare the new vs old selection process.
>
> Lance Seberhagen, Ph.D.
>
> Seberhagen & Associates
>
> 9021 Trailridge Court
>
> Vienna, VA 22182
>
> 703-790-0796 <(703)%20790-0796>
>
> www.seberhagen.com
>
>
>
> On 10/8/2017 5:22 PM, Megan Paul wrote:
>
> I'm exploring different ways of calculating turnover and I'm puzzled by
> the typical approaches to defining the denominator. I'm starting with the
> assumption that turnover is about what proportion of employees have left
> the organization (or job, region, etc.). To arrive at that, it seems to me
> that you need to know the number of employees that left the organization in
> a given period of time, which should then be compared to the number of
> employees who *could have left the organization in that same time period.*
> Almost every recommendation or practice out there, however, includes a
> denominator that is a) some form of headcounts and b) for a point in time
> or multiple points in time. The most common is to create an average of the
> number of employees at the beginning of the period and the number of
> employees at the end of the period. I see two limitations to this typical
> approach: 1) counting the number of employees only gets at the number of
> filled positions, regardless of who occupies them and b) data for a point
> in time shouldn't substitute for data for a time period. Static headcounts
> don't represent the total number of people that could have left in a time
> period. If you have 100 employees at the beginning of the year and 100 at
> the end of the year, the typical formula says the denominator is 100. If 50
> left, the turnover rate is 50%. But if 50 left and have been replaced, then
> the total number that could have left is actually 150 (the 100 that started
> and the 50 more that were hired and are still there), which is really just
> a turnover rate of 30%. The only number that seems like a truly accurate
> denominator would be the number of employees at the beginning of the time
> period plus any new hires in the time period. The only challenge I see with
> this approach is that there is a ceiling of 100%, which makes sense on the
> one hand (you shouldn't have more people leaving than there are people) but
> can be misleading on the other, since an annual rate of 100% turnover could
> have been reached in the first quarter. To me, the solution is to qualify
> the number just like that--say the time period within which 100% is
> reached.
>
> So, given the divide between the common practice and my logic, can folks
> help me bridge the gap? What am I missing?
>
> Thanks in advance,
> Megan Paul
>
>
> Megan E. Paul, Ph.D.
> Research Assistant Professor
> University of Nebraska–Lincoln
> Center on Children, Families, and the Law
> 206 S. 13th Street, Suite 1000
> Lincoln, NE 68588-0227
>
> (402) 472-9812 Office
>
> (402) 472-8412 Fax
>
>
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