By Helen Luketic, CHRP

You may currently track turnover rates as a barometer of the health of your organization and workforce.  Quite simply, the metric tells you at which rate your staff is leaving the company.

Some also track churnover rates as a barometer of their workforce.  Churnover measures the volume of movement of staff within your company.  It answers the question:  “Who is moving jobs within the company?” or “How are jobs being filled in this company?”

We know why we should care about turnover or retention rates.  So, why you should care about churnover rates?  Consider this:

·         Do you how many in your organization are getting promoted?  Perhaps promotion opportunities are important to your staff.

·         Do you know if your employees are unhappy with their manager and are simply job or department hopping to get rid of them?

·         Do you know if your employees are trying to escape an issue they don’t want or can’t seem to deal with?

All these symptoms are similar to what you may see with turnover.  But, sometimes the employee wants to find a way to alleviate the issue and still stay with the company.

Churnover is based on instances of employee movement.  It’s the number of promotions, transfers, and demotions of existing employees. The employees remain with the company and do not have a break in service.  So,

Churnover = (# of Promotions + # of Transfers + # Demotions)/ Employee Headcount

You can only track a metric if you can define it.  How do you define what counts as a promotion, transfer or demotion?  Here is your magic cheat sheet:

Count internal movements for permanent employees only – for any metric you generally want to focus on this population.  That’s not to say your non-permanent staff population aren’t valuable enough to track, but for most organizations this is generally where they focus their budgets and talent management programs anyways.

Do not include the following:

·         Changes in job title

·         Any job reclassification

·         Any employee movement due to a merger or acquisition

·         Move from a temporary position to a permanent one (this movement should be considered a “new hire”)

Now you’ve got the churnover percentage and turnover.  You may be able to start telling a story about the movement of people within and out of your organization.  Unfortunately, neither metric explains to you why people are leaving the company or moving from job to job.

For turnover, your best diagnostic tool can be an exit interview or survey, perhaps your onboarding survey and even your employee satisfaction survey.  Combined, these employee surveys can give you the picture of what compels people stay or go.  For churnover, your best investigative tools may be the exact same ones.  Here are some examples:

Scenario 1:

You find out you promoted five per cent of your staff last year.  Your employees told you in the satisfaction survey that they don’t think promotion practices are fair.  You haven’t come up with the solution yet, but your diagnosis is telling you to start looking at promotion practices and research why managers are recruiting more frequently outside of the company.  Perhaps you’ll ultimately find that your staff lack the skill set required to get promoted.

Scenario 2:

You find that 20 per cent of your staff transferred jobs last year.  Looking further, you find that most of the transfers were due to changes in location, not job changes.  You start an internal exit survey and find many employees felt their manager was unsupportive and so opted to work in another location.  You’re seeing the pattern over time in employee survey responses.  Perhaps it’s time for intervention with the managers.

While tracking turnover is valuable for most organizations, tracking churnover is most valuable for larger organizations where internal movement is a common practice, there are multiple office locations or branches, or there is a cultural norm of promoting from within.

Helen Luketic, CHRP brings more than nine years of HR experience to her current role as HRIS Analyst at Vancity, where she’s assisting the organization implement new HR systems and processes. For her innovative achievements at Vancity, Helen was the recipient of BC HRMA’s 2008 Rising Star Award. In her previous role as Manager, HR Metrics & Research at BC HRMA, she combined her CHRP, B.A. in Economics, HR information systems knowledge and experience in HR metrics to develop the HR Metrics Service and related workshops, presentations and webinars to teach HR professionals about HR metrics and benchmarking.