Performance Turnover

The Cost of Turnover may be higher than you think

Performance Turnover

Try using “Performance Turnover”, a measure I developed in our retention work, in lieu of the traditional turnover calculation. We have used it in a variety of configurations but it works something like this.

  • Start with the assumption that losing a “Hi-Per’s” (High Performing Employees) is three times as bad as losing a “Lo-per” (LoPerformer).
  • Split your range of the “normal” performance appraisal scores your employees normally receive into three divisions (Top 25%, Middle 50%, and Bottom 25%). For example, performance appraisal scores of 90-100 are in the top 25%; 70-89 middle 50%; and below 70 in the bottom 25%.
  • Now assuming that losing a top performer is three times worse than losing a bottom performer do this calculation.

Cost of Turnover
Sample Calculations

An Excel 97 workbook is available that includes the Performance Turnover calculations.
Click here to request the Business Costs and Impacts of Turnover workbook.

TP = Top Performer
MP = Middle Performer
BP = Bottom Performer

Example 1: 1 Middle Performer plus 3 Bottom Performers left.

1 – Top Performers

PA Score = PA = 100
Weighting Factor = WF = 1.5
Number Who Left = NWL = 0
TP Total Score = PA x WF x NWL
TP Total Score = 100 x 1.5 x 0
TP Total Score = 0

2 – Middle Performers

PA Score = PA = 80
Weighting Factor = WF = 1.0
Number Who Left = NWL = 1
MP Total Score = PA x WF x NWL = 80 x 1.0 x 1
MP Total Score = 80

3 – Bottom Performers

PA Score = PA = 60
Weighting Factor = WF = 0.5
Number Who Left = NWL = 3
BP Total Score = PA x WF x NWL = 60 x 0.5 x 3
BP Total Score = 90

Total Example 1 = TP + MP + BP = 0 + 80 + 90 = 170
(High numbers are bad; 3 Lo-Per Employees out of a total of four who left

Example 2: 3 Top Performers plus 1 Middle Performer left.

1 – Top Performers

PA Score = PA = 100
Weighting Factor = WF = 1.5
Number Who Left = NWL = 3
TP Total Score = PA x WF x NWL = 100 x 1.5 x 3
TP Total Score = 450

2 – Middle Performers

PA Score = PA = 80
Weighting Factor = WF = 1.0
Number Who Left = MPWL = 1
MP Total Score = PA x MPWF x NWL
MP Total Score = 80 x 1.0 x 1
MP Total Score = 80

3 – Bottom Performers

PA Score = PA = 60
Weighting Factor = WF = 0.5
Number Who Left = NWL = 0
BP Total Score = PA x WF x NWL =60 x 0.5 x 0
BP Total Score = 0

Total Example 2 = 450 + 80 + 0 = 530
(High numbers are bad; 3 Hi-Per Employees out of a total of four who left

The results are calculated monthly and compared to previous months and years.

In this example where 4 employees left in both cases the score when 3 Hi-Per’s left was 530 compared to 170 when 3 Lo-Per’s left. The point difference differentiates the difference between Performance Turnover and the traditional turnover calculation (where the score would have been 320)

Hi-Per turnover = 530

Lo-Per turnover = 170

Traditional calculation = 320 (Where a high number is bad)

Well, I hope you can see how a CEO would appreciate knowing that the performance of those that left was factored into the calculation. If you believe, as Bill Gates does, that Superstars perform at a rate 100 times that of the average employee a weighted turnover calculation is essential!

A similar calculation “Performance Hire” can also be done for new hires.

I hope this makes everyone at least think about a better way of doing turnover calculations.

by Dr. John Sullivan

As seen on Gately Consulting in 2005.

About Dr John Sullivan

Dr John Sullivan is an internationally known HR thought-leader from the Silicon Valley who specializes in providing bold and high business impact; strategic Talent Management solutions to large corporations.

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