In the previous part of the article, we were talking about a turnover KPI that is the most popular HR KPI. Now let me show you how companies from the Fortune 500 list actually use this KPI.
Turnover in Apple, a talent filter and magnet
Let’s take the Apple company as an example. In the article “Apple’s Employees Have A Hell Of A Ride”  Steve Denning, Forbe’s contributor explains Apple strategy about managing turnover. As long as Apple is considered as a “cool” place to work, company vote for investing more in hiring and training than in keeping turnover low.
According to Pay Scale research  among Fortune 500 list companies, the lowest turnover rate has Eastman Kodak Company. Their median employee tenure is 20 years; compare it to Apple’s 36th place with 2 years median employee tenure. What’s the trick?
- Why do you take pictures with an iPhone instead of using some camera designed by Kodak?
I would say that turnover is important, but by itself it doesn’t give you much valuable information. Align it to your strategy and you’ll have much more ideas for improvement.
Measure turnover among high-performance employees
The next trap is whether high/low turnover rate is good or bad? If your best performing expert left your company then it is bad. While if you fired someone who was under-performing, then the higher turnover has a positive effect on your business.
Companies still use (copy from others) “Turnover rate” KPI, when it is wiser to use two KPIs:
- High-Performance Turnover, %
- Poor-Performance Turnover, %
When we were talking about Apple, I believe they have mastered both types of turnover. On average it might look like a company has a bad turnover KPI, but with more details it appears that Apple works as a talent filter and magnet, keeping high-performance turnover lower and poor-performance turnover high.
Do you still want to use “Turnover” KPI? Or you want to use something more aligned with strategic goal of any company, I mean keeping high-performance talents and finding a replacement for employees that have poor results?
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Align a turnover rate with strategy objective
KPI is just a measurement. When it is not aligned with a strategy objective it won’t change anything in your company. That’s why it is really dangerous just to copy 3rd party KPIs and benchmarks and use them.
Now, I’ll do an inverse analysis. We all agree that having “High-Performance Turnover” should be as low as possible, as we want to keep talented people.
Here it is! Our strategy objective is to “Keep high-performing employees” in the company. Well, this is not the best example, as in the future we will need more of them, so the better goal is to “Have a positive flow of high-performing employees.” Here we face 3 challenges:
- We need to measure a performance of an employee
- We need to know drivers of high/low turnover
- We need to learn how to ensure a positive flow of high-performance employees
In the next part of the article I’ll share my thoughts on how company can address these challenges.