Organisations sometimes suffer from high levels of ‘wastage’ – staff come and go more quickly than in other organisations. This can be expensive, as it costs money to recruit and train staff. But it can also be unsettling, as it can be difficult for other staff when their teams change rapidly. It is therefore important to check your wastage against other organisations.
But to do this you need to measure the wastage in your organisation. This is normally done through the ‘wastage rate’ – a measure of the proportion of staff who leave at a particular time. This document shows:
The first step that is usually taken when measuring the wastage rate is the calculation of the organisation-wide wastage percentage — sometimes called the global rate. The formula is:
Number of leavers x 100 (in a given period) ------------------------------------------------------------- Average staff in post (over the same period) |
|---|
The period in question is almost always a year, although shorter or longer periods can be used if appropriate. To avoid anguish, the ‘average staff in post’ can be calculated by adding together the number of staff in post at the beginning and end of the period, and dividing by two.
Unfortunately, the overall wastage rate, despite being the one most frequently quoted, has two major disadvantages.
It masks differences within the organisation. These may be biographical differences (gender, age, ethnicity) or employment differences (grade, function, department, job, length of service, location).
It includes both voluntary wastage (resignation) and involuntary wastage (retirement, end of fixed term contract, dismissal, redundancy).
This makes it important to calculate wastage for more specific groups – the “specific wastage rates”.
The first thing to do is to remove involuntary wastage – such as redundancies or dismissals - from the calculation. Involuntary wastage is obviously relevant for some purposes e.g. in workforce planning exercises, such as calculating replacement rates, but it is largely out of the organisation’s control. The voluntary resignation rate is the most relevant factor when considering the need for, and the nature of, retention strategies.
Secondly, in order to understand wastage properly, it has to be broken down into specific and more manageable chunks. The HR manager is advised to spend some time looking at wastage in different parts of the organisation, to find out what factors are and are not relevant. Some factors have been shown by research to be particularly important in predicting high or low wastage.
Age is one of these, as wastage tends to decrease with age. Length of service (which is, of course, often strongly correlated with age) is also a well-known predictor; the longer people stay, the less likely they are to leave.
The position within the organisation is also important, as different parts may have very different conditions. If the organisation is large enough, it might be worth looking into these areas.
It is very likely that several factors will be found to be relevant to explaining differences in voluntary wastage rates around the organisation. Uncovering these will take some time, but will equip the HR manager with valuable information — not only for the satisfactory purpose of de-bunking some myths, but also as the basis for deciding whether retention initiatives are worthwhile, and where they should be aimed.
You will need to exercise some caution in interpreting your wastage rates.
Low wastage is not necessarily a good thing. It might lead to promotion blockages, frustration and a lack of ‘new blood’ coming in to re-invigorate the organisation.
A high wastage rate could be the result of a relatively small number of posts turning over repeatedly, rather than a pointer to a general problem. Calculating the stability rate can help to uncover this. The stability rate, like the wastage rate, can be calculated both organisation-wide and for specific groups. It can be calculated in different ways. One formula is:
Number of staff at the end of the period with over a given length of service X 00 ----------------------------------------------------- Average staff in post over the period |
|---|
As for the wastage calculation, the period taken is usually a year. The ‘given length of service’ could also be a year, but could vary depending on the organisation and/or the type of work involved.
Normally, high wastage would be expected alongside low stability, but it is possible for both of the percentages to be high, indicating problems with a small number of high-turnover jobs.
A final note of caution is necessary. When breaking down specific wastage into small groups, you may get a high wastage rate. For example, a rate of 50 per cent may look high, but means very little if it is the result of one leaver from a department of two people!