All Employees Are Not Created Equal: An Alternative Method of Assessing Employee Turnover

Abstract

Employee turnover and its effects on business have been the topic of many research articles and the concern of businesses in all industries. The traditional method of measuring employee turnover ratio (ETR) includes a ratio of number of employees leaving the firm compared to the total number of employees. Unfortunately, this method assumes that all employees are of equal value to the firm, and it doesn't take into consideration factors such as quality of employee performance, employee tenure, and employee knowledge base in determining the impact of employee turnover. Thus, the current method of reporting employee turnover ratio leads to spurious results in real dollar terms. The proposed method makes this correction by including various employee attributes in calculating employee turnover impact. In addition, to accommodate comparisons across units or industries, the current method reports employee turnover in terms of dollars instead of ratios. The current article presents various employee turnover percentage scenarios and relevant dollar values from a hospitality industry example.