Talent Turnover Going Up ... Again

Tuesday, July 17, 2012
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After six years of declines, voluntary turnover rates among all full-time workers are on the rise again.

The findings of PricewaterhouseCoopers Saratoga's 2011/2012 US Human Capital Effectiveness Report offer further evidence that a better economy is beginning to impact the ability of companies to hold on to their workers, especially high performers.

Between 2010 and 2011, the voluntary turnover rate for all workers climbed from 7 percent to 8.2 percent, PwC Saratoga reports. Turnover of high performers, meanwhile, increased for the second year in a row -- from 3.7 percent in 2009 to 4.4 percent in 2011.

The data sends a clear message to employers of the need to be "pre-emptive now and make appropriate moves to prevent employees from leaving their organizations," said Ranjan Dutta, a director based in PwC's Tysons Corner, Va., office who discussed the report's findings during a recent webinar.

Expect these rates to continue to climb, he added.

Dutta said he finds the jump in the voluntary turnover rate for high performers particularly disturbing. "The rate in 2011 is already higher than the 2008 level, suggesting that this could be a critical issue for organizations in the next two to three years," he said.

The departure of high performers could have serious consequences for succession-planning pipelines, he said.

Despite a jump in overall turnover rates, the PwC Saratoga report finds that the quality of hires continues to improve. The data reveals a decline in first-year-of-service turnover rates each of the last five years. Between 2007 and 2011, PwC Saratoga reports, that rate declined from 31.7 percent to 21.5 percent.

Roughly one in every three new hires left in 2007. Today, that number is roughly two of every 10.

"This trend suggests that HR programs that focus on the selection and onboarding of new hires might actually be demonstrating a good return on investment," said Dutta.

The PwC Saratoga report reveals that companies have begun to make further investments in their HR capabilities and processes, after trimming investments a year earlier. In 2011, HR costs per employee were $1,610, compared to $1,495 in 2010.

Companies are spending on those activities that are adding the most value to their organizations, such as workforce planning, analytics and workforce improvement, Dutta said.

"For HR organizations to perform," Dutta said, "they not only need people with advanced skills, but also the technology that enables them to [effectively perform their jobs]." He predicts companies will continue to further invest in HR as they "move up the workforce intelligence maturity curve."

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There's a greater awareness today that "investing in HR can drive a greater return from the overall workforce, through better selection, higher retention and superior employee performance," Dutta said.

Despite companies spending more on labor -- the cost of which has growth roughly 26 percent over the past six years -- the PwC Saratoga data reveals that employee productivity declined each of the last three years.

"As the economy comes back out of the recession," Dutta said, "organizations have started to hire more and FTE numbers are starting to go up again."

The data also suggests that companies might want to address the issue of retiring baby boomers sooner rather than later. The continuing decline in the number of employees who are eligible to retire in five years should be reassuring to employers, Dutta said. But the numbers may also reflect that companies "may be in the middle of a baby-boomer retirement right now."

This could mean that senior leaders are leaving the workforce with their expertise and knowledge every single day, he said.

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