You Need to Provide Your CEO With a Turnover Rate

3 Aug

Human Resources Welcoming a Top PerformerTurnover is an inevitable aspect of managing a business, but the rate at which employees arrive and depart can be minimized, thereby saving the firm vital resources. It is true that some employers make a policy of laying off the lowest performing employee in an effort to promote quality and productivity, but these practices usually end up causing more harm than good.

The fact remains that high turnover rates are almost always costly to businesses – let alone the anxiety caused by frequent layoffs. Turnover rates are also affected by resignations, which may even be more detrimental to a business’ bottom line due to their effect on momentum, team morale, productivity and the departure of critical knowledge.

In most circumstances, it costs employers between one-and-a-half to three times a worker’s annual salary to recruit, train and employ a replacement.

Turnover and succession rates only underscore the role of the human resources department in implementing a general executive strategy. Growing businesses need to be able to function at peak capacity, and payroll fluctuations contribute anything but operational efficiency. Accordingly, efforts to curb turnover rates should be weighed as part of a corporate strategy.

Accordingly, HR managers should coordinate with executives in drafting scenarios for shifts in company payroll and structure. Such models should include prospective layoffs and promotions, poor performance, career development and retention plans for top performers and succession plans in the event of unexpected departures or resignations.

Top performers in a company usually comprise about 20 percent of an average workforce but contribute some 80 percent of total work and productivity. This is natural and should even be anticipated. While poor performers should be replaced, the driving producers behind a company need to be championed and targeted for retention initiatives.

It is up to the HR team to develop plans to retain those top performers and create an environment conducive for their performance. In developing such a strategy for the CEO, HR departments need to incorporate a host of new challenges, advancement opportunities, recognition practices and compensation structures that reflect their performance.

Staffing reports for the executive team should include all relevant data and information pertaining to retention levels. Specifically, these reports need to include the company’s monthly turnover rate expressed as a percentage. These figures helps CEOs analyze and determine trends such as resignations or layoffs and work to develop their own strategies to handle challenges.

To accurately determine the company’s monthly turnover rate, divide the number of employees who left the company in a given month by the average number of employees working in that same period.

How to Calculate the Monthly Turnover Rate

For some companies, calculating the average number of employees in a given month may be too difficult or time-consuming. For these individuals, you can achieve a rough average by referencing the exact number of workers employed on the 15th day of each month over a twelve month period.

Turnover rates are merely one aspect of an overall human resources strategy that chief executives increasingly rely on to impart effective growth plans and practices. Accordingly, today’s HR executives need to have the resources at their disposal to streamline communication with the C-suite and to provide accurate, reliable information for their specific needs and resources.

Interested in learning more business metrics that can help human resources provide strategic information to the C-Suite?  Download our What the CEO Needs From Human Resources white paper now.

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