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January 13, 2020
Kate Marshall

How to measure employee turnover rate and demonstrate the value of People Ops

How do we quantify the value of human resources? As our leaders make business decisions and invest budget in the various functions of the company, why is People Ops so important to reinvest in and keep top of mind? People experts see the value in lowering their employer turnover rate and maintaining morale, but how does that impact revenue and other bottom-line goals?

While the historic functions of HR are cemented in quantifiable value—the legal liaison, the paper trail, essential people management, and the accountability toward compliance—we’ve elevated our approach to HR. We use the entire Operations department and phrases like “People Ops” or “Culture Ops” to better indicate our intentions: not only to manage people, but to motivate, mentor, and maximize their potential, too

How do we measure the value and the return on the investment in People Ops managers and tools? To start, we must calculate the impact of what happens when we don’t. 

Measuring the cost of employee turnover

When we neglect People Ops and overlook the importance of culture, we’re missing the opportunity to grow in strides while sending a message to employees that they’re low on the priority list.

Instead, we need to consider what companies become when they don’t invest in the human aspect of the business—a revolving door of vocally unhappy ex-employees and an incubator for toxicity in-house. 

Speaking of toxicity, there's a way positivity can become toxic, too. Read more.

If that visual isn’t enough to compel your leaders to center HR initiatives, the numbers will. Here’s how you can demonstrate what turnover will do to your company.

Know the turnover rate formula

To understand how your turnover is impacting the company as a whole, obviously, it’s first key to know your turnover rate. The turnover rate formula looks like this: 

Use a turnover cost calculator

Many companies find it useful to assign a quantity to the losses associated with high employee turnover - a rate by which to measure the compounding financial impact of employees that come and go.

Analyze your recruitment and onboarding investment 

One study by Employee Benefits News showed that the average employee’s exit will cost the company around ⅓ of that employee’s annual salary. This expense doesn’t include the cost to pay the previous employee and new employee, or the innumerable losses in productivity from adjacent team members or in allegiances the ex-employee built with consumers, vendors, or affiliates.

The largest and most unpredictable cost of employee turnover is in reinvesting to recruit new talent for the same role. Most of your pool from the role’s previous listing will have been scooped up and you’ll be starting over. In the period the role was filled by your previous employee, the talent pool may have shifted. Is there an action item, suggestion, word to the wise you can stick in to wrap up this paragraph?

Consider invested vs. uninvested payroll 

While the new employee’s salary cost can be considered an investment if they grow and develop with your company, the previous employee’s income becomes uninvested in the future benefit of the company as a whole. It’s always worthwhile to invest in any employee, even those who leave, but the shorter periods that your employees stay, the less your company will reap the rewards. 

Corroborate with anecdotal data 

It’s also important to understand the weight of turnover and perpetual recruitment as your employees feel it. How do the constant group interviews, resume reviews, and trainings impact your still-loyal employees now? What message do frequent employee exits send to the ones who stay?

Have the hard conversations to calculate those invisible turnover costs, too—and don’t be afraid to get candid with your team about the reality of your situation. The more genuine you are, the less likely they’ll be to feel the negative effects or feel like you’re hiding something from them.

A comprehensive approach to turnover prevention

Once it’s clear that you’ve got a turnover problem, you’ll want to look everywhere for solutions. But I want to encourage you to look inward first:

  • What do you know about how your employees react, emote, and perform?
  • What can you observe about the tension or strain in your hiring process?
  • How would the average ex-employee rate your culture, post-tenure?

Take the following steps to turn things around: 

Assess your employee and candidate experiences

Just as you probably have a map of your customer’s journey from new follower to loyal buyer, you need to chart the same path for your employees. Some things to consider:

  • What do candidates first see when they come upon your careers page or job posting?
  • How does that evolve as they graduate through your interview process?
  • Do your onboarding and training experiences exceed expectations or confuse your newbies?

Walk through it like a stranger and try to find the flukes in your flow. 

Assign accountability to key team members  

Who makes up the People Ops task force in any company? Most Operations and HR roles will overlap with your efforts to hire and retain effectively, but frequent-hirers, office management, the C-suite, and even those on your brand and reputation teams might hold stake in People Ops outcomes.

Depending on the issues or snags you find, you may assign some People Ops accountabilities to any number of leaders on your team. Make sure your people understand how they can positively impact your culture through careful hiring, management, mentorship, and collaboration. 

Determine and document your approach to employer branding

Getting it in writing is always good business advice.

Your employer brand will be quickly adopted by everyone on the team but first, it has to be shared with them. Make sure that your policies from recruitment to exit are documented for any leader or employee to review and provide feedback on. The clearest and most integrated candidate-to-employee experiences will win in the battle against turnover.


What's employer branding?

Designate a budget of time, money, and focus to People Ops 

You know that People Ops cannot be an afterthought. Propose a greater focus of time, effort, and investment into People Ops and demonstrate the forecastable value

Articulating the value of People Ops

If your HR team is tired of constantly triaging new hires and navigating the onboard and exit cycle, pause. There’s a better way.

One way to alleviate these burdens is having one core team that owns People Operations end-to-end, and multidisciplinary leaders who then co-subscribe to some core tenets to hiring, management, and mentorship. When this accountability and investment can synchronize, your organization will change from people-shufflers to people-growers, and turnover will rest. 

Some other suggestions:

Weigh turnover costs against Ops investment

Like all important business decisions, costs must be weighed here. We’ve formulated turnover costs and we can consider People Ops costs according to the required size of the team and their relative salaries in estimation. There’s a clear winner in the fight between hiring foundationally and building systems vs. hiring cyclically and treading water. 

Survey teams and garner feedback

Get your team members—recent new hires, loyal veterans, and frequent hirers especially—to weigh in on what they hope to see from advancements in People Ops. This will help you assess the costs of new roles, technology, vendors, and more. 

Here’s our advice on how to get (and use) employee feedback.

Document impact, narrow and wide

As you move along your path to more comprehensive People Ops, document your wins and losses. Where can you improve, expand, and double-down on strategies to recruit, retain, and enrich talented team members?

Look to the impact on specific team members and business functions, and on the industry at-large, as more and more companies bring People Ops to the forefront. 

People Ops, like branding, is foundational  

Greater investment into People Ops isn’t something you do to patch company culture or retentive issues. Like your consumer brand, your employer brand is a living, breathing thing that requires constant updates, reassessment, and reinvestment. If that seems like a lot of pressure, exhale. It all starts (and ends) with prioritizing the “people” in your People Ops—and bookmarking this post to keep that turnover rate formula at hand. 😉

Up next: How to think beyond incentives to promote employee retention

Zestful: recognize and reward your employees—minus the admin work.

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