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Turnover: The Indicator of Excellence

Turnover: The Indicator of Excellence

  • Vicente Sitóe • Manager | People Advisory Services - Consulting EY

“What cannot be measured, cannot be managed” is a principle that has long entered the field of Human Resource Management. Because it is so relevant that we use data to better manage, we share our view on one of the indicators of success in people management: turnover.

The Human Resource Management area produces a valuable set of statistics that indicate the level of health of companies and the effectiveness of their recruitment and selection processes. In addition to the Organisational Climate indicator, one of the most requested by company Managers from the Human Resources Department is Turnover, the turnover of employees in the Organisation over a certain period of time.

This indicator provides visibility on the health of the recruitment and selection processes, the levels of employee engagement with the company’s mission, the status of internal relations, including relations between managers and their teams, provides relevant information on pay benchmarking and, equally important, shows the level of competitiveness of employees in the labour market.  It is for this reason that we recommend that Turnover should be closely monitored by Human Resources Managers, on a continuous basis, allowing them to take real advantage of this close look. Monitoring this indicator is fundamental, as it is one of the indicators that measure the success of the Human Resources area.

To calculate the Turnover of their companies, Human Resource Managers often need to “scour” the information in different sources and media to identify not only hirings and firings, but also retirements, transfers, fatalities, among other forms of temporary or permanent disengagement of employees. In other words, they dedicate hours, if not days, to searching for information to ensure a reliable and rigorous analysis

While the discussion about the ideal Turnover index continues, we recommend that Human Resources Managers seek to know the average value of companies in the same sector of activity and located in the same market. A 7% Turnover in a bank in Mozambique would not have the same impact and interpretation if this same bank were in Portugal. In a market with high unemployment rates, with little job supply for specific sectors, Turnover tends to be lower. In Mozambique, this 7% figure may mean good levels of employee retention, but also stagnation in recruitment processes, greater longevity and controlled turnover. In Portugal, on the other hand, it may mean an “avalanche” of departures that HR teams cannot replace in time. Hence the need to contextualise the indicator.

One thing that Turnover does not measure, but that should be taken into account, is the number of employees willing to leave their respective companies, but without success. For this purpose, our team suggests that the interpretation of Turnover data should be accompanied by Organizational Climate data, produced by independent entities. If this data is produced in-house, then it would be advisable that it be subject to an external audit for confirmation.

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In the current times, impacted by the Covid-19 pandemic, Turnover should always be analysed with care and attention for two reasons: On the one hand, the implementation of Lay-Off measures, which may distort the indicator; on the other hand, the justified mass dismissals caused by the reduction in activity. Companies may have entered into a structured and intentional process of lay-offs, reduction in the number of working hours or other precautionary measures to move away and ensure that only the essential people for the business are kept, i.e. the Talents. It is therefore important to read the Turnover indicator in the light of the context that is experienced in the market.

To conclude, we would like to emphasise that it is important to resort to specialists who have the skills and experience to support companies not only in defining the monitoring process of this and other indicators, but also in implementing IT solutions that make the collection, interpretation and availability of data about people in organisations more reliable and simplified. After all, by measuring in the most appropriate way we will be able to manage even better!

Our team has the skills and experience to support companies not only in defining the monitoring process of this and other indicators, but also in implementing IT solutions that make the collection, interpretation and availability of data about people in organisations more reliable and simplified.

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