For close to two decades, IT Services companies have been reporting employee turnover as part of the quarterly results. This is HR and so no one formula is commonly used for arriving at the figure, while on the business side everyone uses same definitions. However, turnover reporting has not changed in all this time. It is either Last twelve months or quarterly annualized.
Recently I came across some reports in the textile industry. A factory can manufacture many counts; A 30 count or a 40 count or a 80 count. Higher the count, finer the yarn quality and lighter it is. A factory may manufacture several counts. So how do you consolidate all that? They have a simple measure called 40s count normalized. Essentially each count consumes a certain amount of material; Convert all that into equivalent of 40s count and share.
This kind of thinking is possible in HR too. Often the HR heads say that our attrition is 14% but our high performer attrition is far less. Or, we are losing people in the 3-5 year category. How do we quantify it ?
- Use performance premium
Assign a certain weightage to performance distribution. Idea is that the turnover should be far less when the performance is much better. Let us say, we have a 1000 headcount company, which has a distribution of 20%/75% and 5%. Then, let us assign 10 points to the top performers, 5 points to the middle performers and 2 points to the bottom performers. For this company, the weighted distribution will be (200*10+750*5+50*2)=5850. Per person score is 5.8. If a company is doing normal, then the weighted per person score should be equal to this. If they are doing much better, then the score should be low. Suppose the company has a turnover of 10% and lost 100 people. However, this 100, has 10 top performers, 85 middle and 5 bottom performers. Then the performance score of the exiting people = (10*10+85*5+5*2)= 535/100= 5.35.
The turnover quality ratio = 5.35/5.8= 92%. So, the company is losing less high performers and it can be quantitatively shared.
2. Use billing rates and utilization
Are we losing people on bench? Are we losing in premium skills? This can also be quantified.
Let us start with the utilization. The companies have utilization in the 80s. So, we can compare the utilization levels of exiting employees with that of the retained ones. Let us say that our company mentioned above, has a utilization of 83%. And say that of the 100 people who quit, 67 were active. Then, their utilization is 67%. Utilization quality ratio = 67/83 = 80%. This indicates that more people who left were on the bench.
Billing rate can be an even more effective way of calculating the quality of turnover. Suppose $32 is the offshore billing rate of the existing software engineers. We calculate the average billing rate of the employees who are leaving and then arrive at a similar measure. Are we losing people from a higher billing rate or a lower billing rate?
Tenure of attrition
Companies do calculate the average tenure of existing employees. We can do a similar thing for leaving employees and create a ratio. This will say whether we are losing experience at a faster rate or not.
These are some thoughts. If companies can take their existing measures of workforce and create ratios, then it would be good to draw insights in the long run. Or as analysts say, ” Add color” 🙂
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