Last month I promised a description of a metric which starts to take organizations deeper into the insight they need to be successful and to show real results. True to my promise here it is:
Voluntary turnover of top quartile performers
The definition of this metric is as follows:
Employees who voluntarily left the organization and were within the top quartile of performers, as a percentage of headcount.
You calculate this metric by counting all of the people who chose to leave your organization. From this group you count those who were in the top 25% of performance ratings. This second number is then divided by the organizations headcount and expressed as a percentage.
So what does this tell us? Before we answer that, let’s look at where this metric comes from. There is a lot of great research into organizational practice and outcomes. Lots of this relates to HR practices. There is a generally accepted line of thought that says HR practices only work in clusters. Two clusters that have been identified are inducements and expectations. Inducements relate to benefits, salaries, promotion practices etc. Expectations relate to goal setting, performance and incentive practices. Researchers looked at the effect of these clusters of practices on turnover. Not surprisingly if you pay people a lot and provide great benefits more of them will stay. There is no difference in effect between good and bad performers. However more interestingly if you are tight and effective on your expectation setting practices you might see higher overall turnover but you will see lower overall turnover from your top performers. The tight expectation practices lead to poor performers selecting to leave the organization voluntarily. Something most executive leaders would like to see happen.
Hence if you have a metric that measures your performance on voluntary turnover of top quartile performers you can track how well you are doing in terms of keeping your best people and how effectively your clusters of HR practices are delivering the type of productive and focused environment good people want to work in. If you track and benchmark this overtime you can follow your trends and look to stay competitive with others who are applying this valuable research.
As we said last month when metrics start to link between qualitative practices such as incentives, goal setting etc and quantitative outcomes such as turnover they lead to a more sophisticated and evidence-based approach to HR.
Ian J. Cook, CHRP
HR Metrics Service