understanding turnover[1]

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Understanding Turnover

This 'How to' guide discusses the need to understand the implications of turnover and

wastage on supply planning and risk analysis.

Another 'How to' guide looks at ways you can measure and use turnover data in planning.

Why do I need to know?

Being able to understand labour turnover and wastage is helpful for many aspects ofworkforce planning and management.

Predicting and modelling workforce supply

Labour turnover is important to the workforce planner because it is a key indicator of futuresupply from both the existing workforce and any future recruits to the organisation. Thepercentage rates of leaving and staying can both be used in workforce supply modelling,specifically in replacement demand modelling. The rates can be used to predict the rate atwhich natural wastage will happen, which is useful, for example, when planning for serviceor site reconfigurations.

Good human resource management

Of course there are many other reasons for wanting to understand turnover and wastage interms of good HR management. It is possible for managers to help to reduce the rates atwhich people leave and thus enhance future supply. Effective recruitment, induction andretention strategies should all form part of the Action Plan.

Reducing costs

Turnover is also a huge cost to an organisation. In 2002, it was estimated that the cost ofreplacing a staff nurse had reached 6000- 7000. These estimates were based on the threefactors of the separation costs, the replacement and temporary cover costs and the trainingcosts. There are also the less tangible costs of low morale and productivity, discontinuity ofpatient care and so on.

A recent HAY Group report shows that a company with 5000 employees who earn anaverage annual salary of 23,000 and turnover rates of 14% for clerical workers, 12.5% forprofessional workers and 5.5% for managers would incur turnover-related costs more than13 million annually. A company with 1000 employees would incur annual turnover costs of2.79 million. These costs do not include the 'hidden' costs. And in health it is far moreserious than just finances, because it is so difficult to find replacement staff.

Objective measurements

From all aspects, it is important to have objective measures in order to start modelling orjudging whether or not there is a problem to be addressed. As with most workforce

measures, to make the information meaningful, it will be necessary to take more than just


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an organisation-wide measure and to be able to analyse by service or staff group or lengthof service and so on.

Good and bad turnover

It is accepted that very low turnover can be bad for an organisation, as it can result in lowproductivity, resistance to changing ways of working and lack of creativity generally, sosome turnover is healthy for organisations.

However, it is more common for organisations to need to reduce levels of turnover andwastage.

What is meant by turnover and wastage?

Turnover and wastage occur when workers leave an organisation and need to bereplaced.

The main categories of reason why people leave an organisation are:

Normal retirement

This can be predicted from knowledge of the retirement policy and the age structure,although in the NHS the retirement age band can be very wide (from age 50).

Controlled by the organisation

This is wastage that is within the organisations control:

redundancy early retirement

Involuntary

This covers categories where the employee and, for the most part, the employer have nocontrol:

death ill-health dismissals

Voluntary on the part of the employee

This is when employees leave for their own reasons. It is therefore the category that needsthe greatest depth of analysis.

To support this kind of analysis, employee documentation and HR systems need to record

both reasons for leaving and destinations on leaving - to see why people leave and wherethey go. Understanding where they came from as new recruits is also important.


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The National Workforce Dataset includes 'lists of values' for these data items to help withthis. These tables have also been built into the new Electronic Staff Record (ESR) systemfor future use across the NHS. In the meantime, most HR systems will have some form of

classification that can help you analyse by the categories set out above.

Understanding the difference between turnover and wastage

The words turnover and wastage are often used interchangeably. In the health service itis useful to differentiate between those who leave healthcare entirely and those whocirculate within healthcare. In both cases, at the individual organisation level, they willneed to be replaced.

Turnover

Turnover is movement or circulation in the same market, such as nurses moving betweenhospitals in the healthcare sector or care assistants moving between learning disabilitiesunits in the health or social care sectors. Turnover can be both good and bad, but at least itis not a total waste of trained and experienced people.

Wastage

Wastage is a loss to the whole healthcare system, and thus a waste of the investmentmade in training and in experience.

Using turnover information

Information on turnover can be used for different purposes such as predicting future flowsand providing evidence to underpin supply strategies.

Predicting turnover and wastage

There is a lot of empirical data in wastage analysis which can help you understand whetherrates are typical and therefore to be expected, or untypical and therefore needing specialattention.

Occupation

Look for different patterns in different groups and compare this with the relevant labourmarket.

Length of service

Typically, the risk of leaving is high when the individual has short service. As serviceincreases, the risk of leaving falls, only rising again with long service (reflecting deaths, ill-health, early retirement).

People often leave after only a few weeks or months of their employment. This is called 'theinduction crisis'.


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Others tend to leave after a couple of years' service in order to develop their careers andspecialise, or because they have not been given a work challenge early enough, or just forvariety.

Age

When recruits come from a narrow and younger age band, age and length of service areoften synonymous. Even when length of service is discounted, there is usually a similarrelationship between wastage and age.

Gender

Women in the age band 15-30 typically have a far higher likelihood of leaving than men ofthe same age. On the other hand, women over 40 have much lower wastage rates than

men of the same age.

However, it is known that where women are given the same development opportunities asmen and support with dependants' care and leave, their stability patterns are similar. Thegender factor varies also with the surrounding economic situation in the local labour market.

Travel to work

Staff who travel longer distances to work tend to have higher wastage rates.

Location

Wastage tends to be higher if the organisation is located close to potential alternativeemployment and/or if it is some way from centres of population.

External factors

High employment or unemployment rates in the local economy will affect rates of leaving.More competitive rates of pay and benefits will also have an effect.

Of all these factors, the most reliable is probably wastage by length of service, especiallywhen combined with age. This is because you can usually predict a pattern and use this for

projecting likely losses from the workforce. If the actual picture gained by plotting thewastage rate is different from expected, this may show an important change going on in thecohort of staff you are looking at. You can then investigate the causes of this.

Analysing why people leave

In addition to the measurable factors given above, there are a number of other indicators ofleaving. These are harder to quantify and are not so useful in creating a quantitative model,but it is critical you understand them if you want to develop effective retention strategies.

Reasons behind intentions to leave and actual reasons for leaving include:

involvement in decision-making


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commitment to the organisation opportunities for development lack of challenging and varied work stress and work pressure effectiveness of the support and encouragement offered by managers contract status (full-time staff are more likely to leave) pay and reward (both actual levels and perceived fairness) development opportunities harassment (incidents of and policies to deal with) care responsibilities (part-time/sharers are often less likely to leave) relations with colleagues (co-operation and mutual trust as well as friendship) communications performance review systems role clarity

family-friendly policies and provision restructuring of the organisation (often adverse effects, with time delays as well) image of the organisation.

These reasons can be explored through the use of exit interviews, although these may notalways result in frank responses. Some organisations arrange instead for leavers tocomplete anonymous questionnaires which are then analysed for common themes.

Staff attitude surveys are also used on a regular basis to gather views of existing employeesand, by tackling problems raised, to prevent future unnecessary losses.

understanding turnover[1]

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