Beside the basic set of indicators that are used to estimate the effectiveness of the company (profitability; ROI; ROA), management can also use some specific figures to describe the processes related to production, research and development, human resources, etc. One of such figures is employee turnover and retention. Employee turnover is basically a proportion of employees who leave organization over a determined period, usually expressed as a percentage out of total workforce. Separations usually include voluntary resignations either dismissals, retirements or transfers to other branches (In Biron, 2014). On the contrary, internal movements like promotions, transfers, etc. are not included in the final number (In Biron, 2014). In detail analysis of employee turnover can help the company to cut down employee replacement costs (sourcing, interviewing, hiring expenses), on-boarding costs (establishing a training process for new employees, integration of the employee in the organization`s corporate culture), employee separation costs (compensations, exit interviews conducting).
In order to estimate the annual employee turnover manager should have a set of discrete variables (quantity of separated/working employees) – in case in depth analysis is needed, continuous variables may be used (employee age) (Triola, 2014). Probability distributions should be also taken into account as they can pin point age group, employee rank, etc. that may cause employee to leave company. In addition, Poisson probability may be used to schedule hiring seasons (probabilities show the moment when high employee retention can be expected). Probability of particular event in Poisson distribution is calculated by the following formula: where represents average number of events per interval; e – Euler`s number (Triola, 2014).
The main source of information that should be used for estimation of annual employee turnover is Annual Separation Counts.
References
In Biron, C. (2014). Creating healthy workplaces: Stress reduction, improved well-being, and organizational effectiveness.
Triola, M. F. (2014). Elementary statistics.
