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What is Turnover, its importance in business environments and how to calculate it

O que é Turnover, a sua importância em ambientes empresariais e como calcular

What is Turnover, its importance in business environments and how to calculate it

What is Turnover, its importance in business environments and how to calculate it 1840 1228 Marcio Takeuchi

The word turnover is one of the buzzwords best known for the Human Resources market. In summary, it is a term that defines the input and output indexes of collaborates in a given period. That is the replacement of former employees with new ones. 

This metric is measured within a period, usually 1 year, and represents a natural turnover rate for the entire company, regardless of industry or segment.  

It is worth reinforcing that turnover is natural, as it represents a greater plurality of ideas, people, and repertoires within the company. But still, it is an indicator that needs to be on the radar of HR teams, after all, are thermometers not only of how the operation is going but also of organizational climate. 

Turnover types 

There may be numerous reasons why a professional leaves a company. Not all of them are linked to dissatisfaction. It is common for countless professionals, scenarios in which new opportunities appear, desire for retirement, search for new challenges, among other occasions. 

All these reasons imply turnover, but not all should have the same diagnosis. For this to occur, it is essential to understand and categorize turnover types when building your report. 

1. Voluntary turnover: the scenarios in which the professional has some trigger to leave his post are classified as voluntary turnover. Commonly, they are initiatives for voluntary turnover: 

  • When the professional receives a job proposal in other organizations, which exceed their financial gains or meet professional and personal desires; 
  • Lack of career plan and growth opportunities; 
  • Internal conflicts that harm team life and productivity; 
  • Other personal reasons. 

2. Involuntary turnover: applies to all shutdowns in which the initiative starts from the organization, that is, whenever a company dismisses the employee. In this case, it does not matter whether the resignation is for just cause, without just cause or agreement. We can highlight how the main causes of involuntary turnover: 

  • Internal conflicts that harm team life and productivity; 
  • Financial difficulties faced by the company; 
  • Lack of cultural fit  of the employee with the company;
  • Breach of contractual clauses; 
  • Low professional performance. 

Here, there are several labor costs provided by law that can interfere in the short and medium-term in financial planning. 

3. Dysfunctional turnover: this is usually detrimental to the company. They are characterized by shutdowns of professionals with specific skills and complex substitution.  

4. Functional turnover: this type of turnover goes against dysfunctional turnover. Its impact on the organization is often low because it includes the shutdown of employees with easy-to-find and replaces, low-performance talents, or who do not position themselves with people fundamental to the operation of the organization. 

The importance of turnover indicators? 

First of all, just as we did at the beginning of this article, it is always important to remember that turnover is not a villain to be fought at any cost by the HR team. It is rather a reflection of external and internal factors. Therefore, it should be used as a source of learning for continuous improvement. 

Thus, any company that seeks to have an efficient operation should observe and apply methods that measure the real impact of measures (administrative or not) on the routine of employees. Taking care of professionals in this way it is possible to build: 

  • A more productive work environment, with higher employee satisfaction rates; 
  • A more solid image of the brand for employees and the market;
  • The desire of market professionals to integrate their teams is created; 
  • Easier to retain talented professionals; 
  • It becomes easier to diagnose and avoid task overload; 
  • Reduction of ancillary and administrative expenses, arising from the process of shutdown and hiring of new professionals. 

There are still many companies that do not measure and manage their turnover index. Paying attention to these metrics implies, in addition to financial expenses, loss of intellectual capital, intelligence, business opportunities, investments in training and training.  

Expenses generated by turnover? 

The turnover expenses we quote above can be defined in three: 

  • Primary costs: it is direct expenses to dismiss the professional. We may consider all expenses with mission examination, ancillary expenses provided for in the CLT (termination), in addition to administrative expenses with the time of the proceedings.  
  • Secondary costs: these expenses are the indirect and subjective consequences generated by the shutdown. For example, decreased team productivity, accumulation of functions, among others.  
  • Third costs: here costs are perceived only in the medium and long term. They are, for example, the demotivation of the team, loss of product quality/service, decrease in intellectual capital, loss of undocumented procedures, losses to the company’s image, loss of Networking, sales and business opportunities. 

Turnover indicators: how to calculate? 

Now that we understand the concept of turnover, we enter the stage that you might be scared, but that actually has nothing to do. And here, we can explain the calculation in a nutshell.  

For starters, let’s consider only shutdowns and admissions. To reach the indicator it is necessary to add the total number of admissions and shutdowns. Then we will divide this value by two, and then divide by the total number of professionals within the company. Then the turnover index is reached.  

This index provides an overall assessment of the turnover of any company. We remind you that a higher overall turnover does not necessarily mean that recruitment and selection processes are inefficient. But we suggest that you use this indicator as a starting point to analyze and improve your company’s environment, pay, benefits, and formats, among other things. 

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