Synonyms & Antonyms of turn over (Entry 2 of 2) 1 to give (something) over to the control or possession of another usually under duress reluctantly turned the ship over to the first mate while he went below. Also known as the “receivable turnover” or “debtors turnover” ratio, the accounts receivable turnover ratio is an efficiency ratio—specifically an activity financial ratio—used in financial statement analysis. It measures how efficiently and quickly a company converts its account receivables into cash within a given accounting period. Turnover is the net sales generated by a business, while profit is the residual earnings of a business after all expenses have been charged against net sales. Thus, turnover and profit are essentially the beginning and ending points of the income statement - the top-line revenues and the bottom-line results.
Also found in: Dictionary, Thesaurus, Medical, Acronyms, Idioms, Encyclopedia, Wikipedia.Related to turnover: turnover rate, annual turnover
Turnover
For mutual funds, a measure of trading activity during the previous year, expressed as a percentage of the average total assets of the fund. A turnover rate of 25% means that the value of trades represented one-fourth of the assets of the fund. For finance, the number of times a given asset, such as inventory, is replaced during the accounting period, usually a year. For corporate finance, the ratio of annualsales to net worth, representing the extent to which a company can grow without outside capital. For markets, the volume of sharestraded as a percent of total shares listed during a specified period, usually a day or a year. For Great Britain, total revenue. Percentage of the total number of sharesoutstanding of an issue that trades during any given period.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
Turnover
1. In accounting, the number of times or the speed at which a company replaces an asset in a given period of time. This usually refers to the amount of time it takes for the company to collect its accounts receivable or the number of times it has to procure new inventory to replace that which it has already sold. Companies desire a fast or high turnover, as this indicates financial health.
2. The number of sharestraded in a portfolio over a given period of time, expressed as a percentage of the number of shares in the portfolio. A low turnover means that the portfolio is not being very actively managed; it also means that one's broker is making less in commissions, as he/she is paid per trade. See also: Churning.
2. The number of sharestraded in a portfolio over a given period of time, expressed as a percentage of the number of shares in the portfolio. A low turnover means that the portfolio is not being very actively managed; it also means that one's broker is making less in commissions, as he/she is paid per trade. See also: Churning.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
turnover
1. The trading volume of the market or of a particular security.
2. The number of times that an asset is replaced during a given period. For example, an inventory turnover of five indicates that the firm's inventory has been turned into sales and has been replaced five times.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
turnover
see SALES REVENUE, LABOUR TURNOVER.Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson
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Turnover Recipe
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Learning Objectives
- Be able identify the difference between direct and indirect turnover costs.
- Describe some of the reasons why employees leave.
- Explain the components of a retention plan.
According to the book Keeping the People Who Keep You in Business by Leigh Branham (Branham, 2000), the cost of losing an employee can range from 25 percent to 200 percent of that employee’s salary. Some of the costs cited revolve around customer service disruption and loss of morale among other employees, burnout of other employees, and the costs of hiring someone new. Losing an employee is called turnover.
There are two types of turnover, voluntary turnover and involuntary turnover. Voluntary turnover is the type of turnover that is initiated by the employee for many different reasons. Voluntary turnover can be somewhat predicted and addressed in HR, the focus of this chapter. Involuntary turnover is where the employee has no choice in their termination—for example, employer-initiated due to nonperformance. This is discussed further in Chapter 9 “Successful Employee Communication”.
It has been suggested that replacement of an employee who is paid $8 per hour can range upwards of $4,000 (Paiement, 2009). Turnover can be calculated by
separations during the time period (month)/total number of employees midmonth × 100 = the percentage of turnover.
For example, let’s assume there were three separations during the month of August and 115 employees midmonth. We can calculate turnover in this scenario by
3/115 × 100 = 2.6% turnover rate.
This gives us the overall turnover rate for our organization. We may want to calculate turnover rates based on region or department to gather more specific data. For example, let’s say of the three separations, two were in the accounting department. We have ten people in the accounting department. We can calculate that by
accounting: 2/10 × 100 = 20% turnover rate.
The turnover rate in accounting is alarmingly high compared to our company turnover rate. There may be something happening in this department to cause unusual turnover. Some of the possible reasons are discussed in Section 7.1.1 “Reasons for Voluntary Turnover”.
Figure 7.1 United States Yearly Turnover Statistics, 2001–11
Source: Data from Bureau of Labor Statistics, “Job Openings and Labor Turnover Survey,” accessed August 11, 2011, http://www.bls.gov/jlt/#data.
In HR, we can separate the costs associated with turnover into indirect costs and direct costs. Direct turnover costs include the cost of leaving, replacement costs, and transition costs, while indirect turnover costs include the loss of production and reduced performance. The following are some examples of turnover costs (Maertz & Campion, 1998):
Turnover Rate
- Recruitment of replacements
- Administrative hiring costs
- Lost productivity associated with the time between the loss of the employee and hiring of replacement
- Lost productivity due to a new employee learning the job
- Lost productivity associated with coworkers helping the new employee
- Costs of training
- Costs associated with the employee’s lack of motivation prior to leaving
- Sometimes, the costs of trade secrets and proprietary information shared by the employee who leaves
- Public relations costs
To avoid these costs, development of retention plans is an important function of the HR strategic plan. Retention plans outline the strategies the organization will use to reduce turnover and address employee motivation.
Table 7.1 Turnover Costs
Direct | Indirect |
---|---|
Recruitment costs | Lost knowledge |
Advertising costs for new position | Loss of productivity while new employee is brought up to speed |
Orientation and training of new employee | Cost associated with lack of motivation prior to leaving |
Severance costs | Cost associated with loss of trade secrets |
Testing costs | |
Time to interview new replacements | |
Time to recruit and train new hires |
Costs of Turnover in Hospitality
This video provides an excellent illustration of how to measure the cost of employee turnover in the hospitality industry.
Reasons for Voluntary Turnover
Before we discuss specific details on retention planning, it is important to address the reasons why people choose to leave an organization to begin with. One mistake HR professionals and managers make is to assume people leave solely on the basis of their unhappiness with their compensation packages. Many factors can cause demotivated employees, which we discuss in Section 7.2.1 “Theories on Job Dissatisfaction”.
Once we find out what can cause voluntary turnover, we can develop retention strategies to reduce turnover. Some of the common reasons employees leave organizations can include the following:
- A poor match between the job and the skills of the employee. This issue is directly related to the recruitment process. When a poor match occurs, it can cause frustration for the employee and for the manager. Ensuring the recruitment phase is viable and sound is a first step to making sure the right match between job and skills occurs.
- Lack of growth. Some employees feel “stuck” in their job and don’t see a way to have upward mobility in the organization. Implementing a training plan and developing a clearly defined path to job growth is a way to combat this reason for leaving.
- Internal pay equity. Some employees, while they may not feel dissatisfied with their own pay initially, may feel dissatisfaction when comparing their pay with others. Remember the pay equity theory discussed in Chapter 6 “Compensation and Benefits”? This theory relates to one reason why people leave.
- Management. Many employees cite management as their reason for leaving. This can be attributed to overmanaging (micromanaging) people, managers not being fair or playing favorites, lack of or poor communication by managers, and unrealistic expectations of managers.
- Workload. Some employees feel their workloads are too heavy, resulting in employees being spread thin and lacking satisfaction from their jobs, and possibly, lack of work-life balance as a result.
We know that some people will move or perhaps their family situation changes. This type of turnover is normal and expected. Figure 7.2 “Common Reasons for Employee Turnover” shows other examples of why people leave organizations.
Figure 7.3
Cost of employee turnover can be high for both the bottom line and employee morale.
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As HR professionals and managers, we want to be sure we have plans in place to keep our best people. One such plan is the retention plan, which we will discuss in Section 7.2 “Retention Plans”.
Human Resource Recall
Do you feel your current or past organization did a good job of reducing turnover? Why or why not?
Key Takeaways
- Retaining employees is an important component to a healthy organization. Losing an employee is called turnover. Turnover can be very expensive to an organization, which is why it is important to develop retention plans to manage turnover.
- Voluntary turnover is turnover that is initiated by the employee, while involuntary turnover is initiated by the organization for various reasons such as nonperformance.
- Direct turnover costs and indirect turnover costs can include the costs associated with employee replacement, declining employee morale, or lost customers.
- Some of the reasons why employees leave can include a poor match between job and skills, no growth potential, pay inequity among employees, the fairness and communication style of management, and heavy workloads.
Exercise
- Perform an Internet search of average employee turnover cost and report findings from at least three different industries or companies.
Turnover Ball
References
Branham, L., Keeping the People Who Keep You in Business (New York: American Management Association, 2000), 6.
Maertz, C. P. Jr. and M. A. Campion, “25 Years of Voluntary Turnover Research: A Review and Critique,” in International Review of Industrial and Organizational Psychology, vol. 13, ed. Cary L. Cooper and Ivan T. Robertson (London: John Wiley, 1998), 49–86.
Apple Turnover Crust From Scratch
Paiement, N., “It Will Cost You $4,000 to Replace Just One $8 per Hour Employee,” Charity Village, July 13, 2009, accessed August 30, 2011, http://www.charityvillage.com/cv/research/rhr50.html.