Calculating employee turnover is not a matter of simple mathematical methods. It is necessary to take into account the root of the problem by going back to the hiring stage. Harish Bhattiprolu, Director of Sales at Kenexa Technologies, points out that most organizations do not evolve robust measurements for calculating the cost of labor turnover or a bad hire. The details of information required and the measurement metrics are not common formulas but have to be designed in keeping with the nature of the business and different job functions. "As a result, most organizations do not intend to mislead by disclosing statistics which may not be true; it is just that perhaps they believe those to be true. It is imperative to evolve the science of measurement before the measure itself," he asserts.
Using these formulae, organizations will learn what their real attrition figures are, believes Noronha. "Like with most data, attrition too can be interpreted in different ways, and it is up to each organization to decide how and what they wish to share. Companies are generally more concerned about regretted voluntary attrition. These are people who leave of their own will and those whom the organization would have loved to retain. Similarly, organizations measure managed attrition. These are people made redundant, laid off, or exited. Though managed attrition is non-regretted by the organization, the trend of managed attrition, if on the higher side, may show the company in a poor light and does have an impact on its health."
Attrition does not only reflect the hiring policies of an organization but also induction/retention strategies, training methodologies, work culture, and many other factors. Munje reminds that it costs the company valuable time, money, and often credibility (especially where employees develop relationships with customers). "Some companies just look at the employee turnover in terms of the cost (based on the PwC Saratoga Institute theory) involved in the hiring and training of individuals. Others look at the opportunity lost and its cost. Sometimes, companies also use the figure between 50 percent and 200 percent of the annualized salary."
Organizations aim to reduce voluntary attrition of productive employees and encourage unproductive staff to leave its fold. "It makes way for career progression, new thinking, and innovation. However, what that number should be again differs from industry to industry and from country to country as economies vary. The demand vs supply of talent/resources plays a critical role too. What is considered a healthy attrition number in an industry in India may not be so in a more stagnant economy where no new jobs are being created," explains Noronha. Nevertheless, zero attrition is unimaginable and unhealthy for any organization.
Som (Info from Sources)