Turnover Up . . . Safety Down?

In-n-outTruckload Carriers’ Turnover is Up

 

The annualized turnover rate for large truckload fleets rose two percentage points in the fourth quarter of 2015 to 102%, the second straight quarter it was at least 100% – the first such streak since 2012.  — ATA Chief Economist Bob Costello, April 25, 2016 Press Release.

Insurance companies are interested in an organization’s employee turnover for a number of reasons. High turnover can indicate employee dissatisfaction — never a good thing. High employee turnover can indicate lower levels of productivity and profitability. Mostly, high employee turnover can indicate potential safety issues and, therefore, more risk. Turnover is a measure of safety.

In my 40 year safety career, I’ve found that companies with the lowest turnover rates in their type of industry usually also have low accident rates and excellent safety cultures.  While there are certainly more precise and scientific measures of safety culture,  I believe that turnover rates provide the best quick, easy, and cheap “snapshot” of an organizations’ culture. — Dave Weber, a former Safety and Environmental Manager and founder of Safety Awakenings

What is Turnover?

Turnover (also known as the attrition rate or churn) is sometimes measured as . . .

the annualized number of drivers per 100, who voluntarily or involuntarily leave (terminate) employment with the employer.

Turnover is easy to calculate. If you had 100 drivers last year and 11 left their jobs or were terminated, your turnover rate was 11 percent. This was the 2015 turnover rate at less-than-truckload (LTL) carriers. The 2015 truckload (TL) turnover rate was about 93 percent, but jumped in the last two quarters to 100 percent.

Top Tip: The turnover rate should be calculated on a quarterly basis for top management review.

Employee departures will occur from time to time as part of the employment process. But when turnover percentage increases, management needs to look to identify applicable improvement opportunities to reverse the trend.

Turnover is Expensive

Direct costs of replacement hiring include:

• Recruiting (sourcing)
• Interviewing
• Hiring expenses

On-boarding costs include:

• Orientation/training of the new employee
• Acculturation to the culture and organizational expectations

Hiring costs are conservatively estimated to be 20% of annual salary for mid-range positions (earning $30,000 to $50,000 a year) or around $8,000. Part of that cost is the opportunity cost of lost revenues from having an idle vehicle.

Studies show that an organization’s efforts put into orientation/training and acculturation are sound investments that can result in greater employee longevity and higher productivity.

First Year Employee Turnover

Another turnover metric to look at is first year employee turnover.

To calculate first year employee turnover . . .

Divide the total number of employees who leave in less than one year by the total number of employees who leave in the same period (multiply by 100).

For example, if 4 of the 11 employees who left employment were first year employees, the first year employee turnover would be 4 / 11 = .3636 *100 or about 36.36 percent. Compare this number to the industry standard for turnover, or to organizations in your local area. Your state industry association may track these numbers to help you compare your findings.

Knowing your first year employee turnover rate is another tool that can help indicate to management if a review of your hiring or on-boarding process is necessary or even overdue..

Thank you for reading this.

 

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