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64 Percent Turnover Good Job, Dude!

December 4, 2008
Related Topics: Retention, HR & Business Administration
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Want to see HR pros judge one another? Tell one you’ve got 64 percent turnover. Then resist the urge to slash his tires when he responds that he’s got 8 percent turnover, without any disclaimer that his situation might be different from yours. I mean that. Don’t lash out and threaten to cause bodily harm as he crinkles his nose, because he knows not of what he speaks.

    Since we’re human, it stands to reason that HR pros have been known to judge one another. Since our part of the business isn’t known for quantifiable metrics, turnover percentages in the businesses we support represent a rare opportunity to feel a little bit superior. Of course, we conveniently forget that industry, pay strategy and culture all intersect and conspire to make such comparisons ridiculous.

    It’s like some of us were born on third base and walk around talking about how we hit a triple. Sadly, many of us don’t get the business reality behind the turnover numbers. Here’s my list of pet peeves regarding HR pros and turnover:

  1. Turnover is relative, and many HR managers in organizations don’t understand that. This is especially so if they’ve never worked in a high turnover business. Retail, big-box call centers and hard-knock production environments are all examples of places where 40 percent turnover can mean you’re best in class.

  2. Many HR pros don’t understand that money and working conditions drive turnover. Do the jobs you have lead or bring up the rear of the market with turnover? If you pay $9 an hour in your call center and the market pays $10.50, budget for turnover and evaluate your business plan for talent costs at least annually. Still want to pay $9? OK, just make sure everyone knows that turnover is going to run 70 to 100 percent. It’s a business decision. Maybe not a great business decision, but a business decision nonetheless. Sue Meisinger herself couldn’t get turnover below 60 percent under those circumstances.

  3. Many HR pros really don’t have a great understanding of how to calculate turnover. I send out my turnover calculator about 20 times a month upon e-mail request, and let’s just say the method is not well known. Example: If you have 100 people in your company, and you lost two this month, and that trend continues, your annualized turnover would be 24 percent, not 2 percent. Lots of folks add up three months of turnover and report it quarterly as, say, 6 percent, and then repeat the process for the next quarter. I’m not being critical of those who haven’t been exposed to the correct way to report annual turnover. I’m just encouraging my HR colleagues not to judge those with higher numbers who are reporting their turnover accurately.

    What’s got me thinking about turnover? I picked up a recent copy of Newsweek that featured an interview with Best Buy CEO Brian Dunn, who bragged about 64 percent turnover among the camera and phone jockeys at his company. It’s all about improvement, whatever your industry and circumstances.

    Of course, I shared the article with a couple of HR friends, who promptly said things like, "That place is always screwed up when I go in there, so I’m not surprised they have a turnover problem."

    Are you like my friends? Still feeling superior about that 8 percent turnover rate you calculate and report quarterly but refuse to annualize? Still wondering why Best Buy can’t get the turnover number down, while you go temp-to-perm for the first six months of an employee’s tenure and allow the agency to deal with the turnover issue (i.e., the turnover in the first six months isn’t included in your turnover numbers)?

    Here’s my working list of hard-knock turnover situations where Dave Ulrich (or you and me) would have a hard time getting annualized turnover under 100 percent. If you think Best Buy has a turnover issue, ask for a developmental rotation into one of these shops, and you’ll come out with a new respect for the HR pros who serve there:

  1. The chicken processing plant. The pay’s low, employees routinely lose fingers, and workers come out every day smelling like dead chicken. I’ve interviewed people who ran the people function of one of these facilities, and they may be the toughest HR pros in America. Did I mention everyone comes out smelling like dead chicken?

  2. The chop-shop call center. From a recruiting standpoint, this sea of cubes (routinely 1,000 seats) featuring low-paying jobs finds its pay competition among entry-level retail and food service jobs. Added plus: The people you recruit are shackled to headsets in those cubes, receive relatively little training and then have to defend themselves and the company against screaming, irate customers. If they get tired of taking that on your behalf, there are usually 15 other call centers in your metro area that will hire them, meaning about 20 percent of the workforce ends up using the "no call, no show" method as a means to tell you to take your job and shove it.

  3. Fourth-tier supplier to a Fortune 500 manufacturer. Sure, the leaders at companies like the Big Three Detroit automakers are known for living la vida loca, but within every manufacturing chain, there’s a wheel/spoke effect going on. At the center is the Fortune 500 manufacturer, which is surrounded by suppliers who provide "just in time" parts and materials. Go to the companies who are providing parts to the primary suppliers, and you’ll find jobs that are the manufacturing equivalent in pay and working conditions to the call center and the meat processing plant.

  4. Low-end competitor to the Gap. Bad hours, low pay, no benefits and talking to self-important customers (not all, but many) who act like you’re not there. Add the fact that your employees will have to consult with customers regarding whether those low-rider jeans make them look fat, and the entrepreneurial opportunity provided by the mall’s jewelry kiosk is going to look pretty attractive. They’re gone, and you’ll be interviewing daily.

  5. Welcome to Captain D’s. The food service game is hard and riddled with turnover. Move down from the primary fast-food brands, and the turnover issue has to be even more difficult. Issues include bad hours and trying to upgrade the masses to the combo meal, for starters. Look down the drag off your interstate exit. If people don’t feel like coming to work for you, they can likely go to 10 other places within a mile and get hired. That might affect retention, don’t you think?

    All of these places present turnover challenges, meaning that 64 percent turnover isn’t bad in a lot of situations. So even if you’re embedded in a company with low annualized turnover, be kind. Your next stop may be the chicken processing plant.

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