Case Studies Provide Lessons to Evaluate Occupational Turnover

Turnover has been addressed based on perceptions rather than on data.

The state should identify and monitor occupations with high-risk turnover.

These case studies illustrate the importance of understanding turnover.

At present, Wyoming state government does not have a means of tracking turnover by occupation.  Consequently, turnover has been addressed more in reaction to perceptions than on the basis of criteria or systematically collected data. 

This report takes an in-depth look at the costs of and possible reasons for turnover in four occupations:  information technology staff, highway patrol officers, correctional officers, and caseworkers.  We selected the occupations because of their perceived turnover problems, relative size, and training requirements.  Chapters 2 through 5 explore turnover rates, costs, and causes for the four occupations.  Each begins with occupation-specific background information and turnover statistics, and then goes on to provide more detailed analysis of the impacts turnover has on the performance of the agency’s mission.  Each chapter ends with suggestions for changes that may reduce turnover, if policymakers decide that the level of turnover is not acceptable.  (See page 13 for summaries of turnover statistics for each of the occupations.)

In this chapter, using the four occupations as case examples, we recommend the executive branch develop a process for strategically considering high-risk turnover as it occurs in occupations across state government.  We also suggest the Legislature monitor high-risk turnover and consider the need for additional resources to increase retention in high-risk occupations.  These two comprehensive recommendations to the executive branch and Legislature can bring structure and resources to bear on the issue of high-risk turnover.

We recognize that these four occupations may not be inclusive of all turnover issues facing the state.  In fact, these four occupations may not represent the occupations with the most significant turnover problems, based on cost and criticality of function in state government.  We could not put turnover for these four occupations into a larger state context because no single agency is charged with tracking occupational turnover.  However, these case studies serve to illustrate the importance of evaluating turnover; they also provide an understanding of how turnover has an impact on the state.  Our analysis of the four occupations provides “lessons learned” that can be applied to evaluating turnover in other occupations across state government.

Limited Data on Turnover is Available

Across State Government

Managers may

not be fully aware

of the financial and qualitative impacts

of turnover.

Absent turnover information, policymakers may misdirect retention efforts.

It is important

to analyze the components of turnover.

Internal and comparative analysis of occupational turnover is limited because state agencies maintain little uniform and longitudinal data on occupation-specific turnover and its costs.  The agencies we worked with had varying degrees of information and understanding of turnover in the four occupations, although some had developed partial information.  For example, WYDOT had compiled some cost data for HP officer training. 

A&I conducts some analysis of turnover in state government, tracking  turnover at the agency level, payband level, and for state government overall.  However, this does not provide information about trends in occupations that cut across agencies, such as information technology.  Collectively, the information A&I and the agencies could provide was not adequate for us to use to determine the causes and costs of turnover for an occupation.

We found that if policymakers wish to make effective and cost-efficient management decisions regarding turnover, a more strategic method of identifying associated costs and causes is necessary.  Currently, the executive branch cannot proactively manage turnover because it lacks information about turnover at the occupational level.  Under these circumstances, managers may not be fully aware of the impact turnover has on their budgets and on their ability to effectively perform agency missions.  Additionally, policymakers may underestimate the impacts turnover is having on the state, and by focusing on rates rather than financial and qualitative costs, may misdirect their retention efforts.  This lack of information occurs because turnover costs tend to be hidden items in organizations’ budgets. 

Since the state does not track turnover by occupation, we used payroll data provided by the State Auditor’s Office to compile turnover rates in each of the occupations.  To calculate turnover rates for each occupation, we counted all employees who terminated employment with the state and divided that number by the total number of authorized positions.  To a limited extent, we were able to distinguish between various types of turnover that contribute to the overall turnover rate:  voluntary terminations, retirements, dismissals, and deaths.  However, the termination codes used in the payroll system do not provide sufficient detail to accurately analyze all of the components of turnover, and specifically the reasons for voluntary termination.  Although interagency transfers are an important type of occupational turnover, the state’s payroll system does not have the capacity to track it, so we could not include it in the overall turnover rates.

Three Categories of Reasons

for Voluntary Turnover

Perceptions form the basis on which individuals make decisions to leave an occupation.

As part of our evaluation, we conducted preliminary work into the causes of voluntary turnover in these four occupations.  For purposes of analysis, we grouped the reasons staff voluntarily leave employment with the state into three categories:  wage-related reasons and working conditions (including factors such as salary, benefit packages, and staffing levels which are within an employer’s control), and personal reasons (such as family reasons, which are beyond an employer’s control). 

Since perceptions about wages, working conditions, and personal needs form the basis on which individuals make decisions to stay or leave an occupation, we needed to gather perceptual information.  We reviewed exit interviews, conducted a survey of former employees, and held focus groups with current employees, to determine, by category, the reasons staff reported they terminated employment with the state.

Cost is Most Critical Indicator
of Turnover Problems

Turnover rates

do not indicate whether the

level of turnover

is a problem.

If replacement and training costs are low, then a high level of turnover may not be a problem.

Turnover is only a problem if the agency incurs high costs or cannot perform its mission.

Turnover has a direct impact on an organization’s bottom line.

If costs are high, even a low turnover rate can be a problem.

From the four case studies, we learned that turnover rates, in and of themselves, do not indicate whether the issue should be of concern to an organization.  Instead, it is the financial costs incurred because of turnover, plus the qualitative effects on an agency’s mission, that are the most important gauges of whether a certain level of turnover is acceptable. 

A&I officials suggest that perhaps the state should calculate and monitor turnover costs only for the occupations experiencing the highest rates of turnover.  However, as explained in Costing Human Resources, a leading source on human resource accounting, “Merely inspecting the rates of turnover could lead the organization’s analysts to conclude, falsely, that they don’t have a turnover problem.”

Considered alone, turnover rates do not necessarily indicate the presence or absence of a problem.  But, when both the rate and the costs associated with an occupation’s turnover are known, the combined information can help support strategic decision making.  The crucial issue in analyzing turnover is not how many employees are leaving, but the impacts on the agency and the public when staff leave.  

Cost comparisons for turnover in the four occupations we reviewed illustrate why understanding the costs of turnover is critical.  Highway patrol officers, for example, experienced a lower level of turnover than correctional officers and caseworkers, but WYDOT incurred the highest financial costs of turnover.  In this instance, a low rate of turnover is not linked to low turnover costs.  See Appendix A for a description of our turnover cost methodology.

Comparing Turnover Rates
Does not Illuminate Problems

Comparing turnover rates among occupations can be a limited diagnostic tool, so we compared each of the four occupations to the overall turnover rate for the employing agency and to the executive branch.  However, the comparators we used are averages, and as such, should not be interpreted as a benchmark for the level of turnover an organization ought to achieve. 

Comparing turnover rates to benchmarks only illustrates whether the turnover is above or below one or more comparators, not whether there is an intrinsic problem with turnover.  The level at which individuals are leaving an occupation becomes problematic only when an agency incurs high costs or cannot successfully perform its mission. 

Private Sector Has Recognized
the Financial Impacts of Turnover

We reviewed a large body of literature about the importance of determining how much turnover is costing an organization.  It appears that the private sector has focused on this issue to a greater degree than the public sector.  Private-sector organizations have likely focused on turnover costs because such costs have a direct impact on an organization’s bottom line.

According to human resource experts, different occupations warrant very different retention efforts.  There are some for which investments in retention do not make sense, such as easy-to-fill jobs that require little training.  In other occupations, it may be more difficult and costly to hire qualified applicants, and retention becomes more important.  If the costs of replacement and training are low, then a high level of turnover can still be functional for an organization.  However, if the costs of replacement and training are high, then even a low turnover rate can be a problem for an organization. 

For example, United Parcel Service (UPS) placed high importance on  maintaining a low turnover rate among its driver ranks.  They made this determination because of the crucial function drivers perform to deliver packages to clients on time, and because of the high costs associated with replacing and training drivers.  On the other hand, UPS determined that it was not cost-effective to implement retention strategies for package loaders because these positions have low skill requirements.  Vacancies in this area are easy to fill and the job is fairly simple for new employees to learn.

Strategic Approach Needed to

Identify Turnover Problems

A comprehensive information system is not needed to track high-risk turnover.

Occupations

that meet certain

risk factors, such

as high replacement costs, should be monitored.

The state needs meaningful and efficient ways to determine why employees leave.

Turnover can

have a significant financial impact.

We believe the executive branch needs to create a system to identify occupations incurring large turnover costs.  Developing a strategic process will produce information about turnover for other “potential problem occupations,” beyond the four we studied.  We found the financial costs of turnover were fairly significant for all four occupations.  Further, all four occupations provide either critical public safety functions or, in the case of information technology staff, vital infrastructure support for state operations. 

Better management information can help identify those occupations with potential for high quantifiable costs, and those with potentially critical intangible consequences of turnover.  This does not have to be a comprehensive cost-accounting system or human resource information system.  Instead, the state can replicate our methodology to estimate the costs of turnover and develop improved tracking mechanisms that will help determine the causes of turnover.  It can select risk factors and use them to identify additional occupations. 

We believe there are three risk factors that indicate the need to actively monitor turnover in certain occupations:  level of investment in employees, criticality of the function, and size of the occupation.  The more invested to replace and train employees, the higher the financial costs of turnover.  The importance of the occupation to the state dictates the level at which the occupation can lose its employees.  Finally, small occupations may provide critical services for the state and can also have high costs associated with turnover, but a less structured approach may be more appropriate to monitor them.

Better Information Can Promote
Active Management of Turnover

Once other potential problem occupations are identified, based on the size of the occupation, the financial costs of turnover, and the criticality of the function, tracking and monitoring of turnover in those occupations needs to occur.  To do this, the state needs meaningful and efficient ways of determining what causes employees to leave, especially related to reasons that are within the employer’s control. 

For example, administering and analyzing standard exit interviews could be helpful in determining the causes of turnover.  Currently, the state does not have a standard process for conducting exit interviews and the current instruments are difficult to analyze efficiently, since they include many open-ended questions.  Additionally, as noted earlier, the current termination codes in the state’s payroll system are vague.  The most frequently cited reasons for termination we found was “accepted other employment” and “other,” which do not provide information about why employees voluntarily terminate employment with the state.

Collecting and analyzing information about turnover in problem occupations would allow more active management of personnel resources, and could have a significant financial impact on the state’s bottom line.  Our methodology captured some costs of turnover, and we estimate that in 1999, the state incurred over $2 million in total turnover costs for these four occupations alone.  Active management of high-cost turnover can significantly reduce costs.  Salaries and benefits were the largest single budget category in the FY99-00 biennial budget, excluding grants and aid.  However, the state does not have a process to gather information about turnover and other workforce issues to better manage this costly resource.

Executive branch officials do not believe they have sufficient resources to analyze turnover

Challenges to Creating a
Strategic Approach

Under the state’s decentralized personnel structure, A&I’s HRD provides oversight to agencies as they administer state personnel rules, and gives assistance to small agencies without dedicated personnel staff.   Although W.S. 9-2-1022 (b)(ii) requires HRD to analyze hiring difficulties and turnover statistics, HRD’s focus has not been to track workforce issues in a manner that would answer questions about the costs of occupation-specific turnover.

A&I officials state that they would like to track more information on turnover and other workforce issues, but are unable to perform that task efficiently without a human resource information system.  They note that presently, the state’s payroll system does not have the capacity to perform workforce analysis.  Further, without such a system, they must survey each agency individually to compile statistics on turnover and other workforce issues. 

Several agency officials engaged for this study stated that they would like to devote more time to analyzing turnover statistics, but believe they do not have sufficient resources to dedicate to such efforts.  Although some information regarding costs of turnover is collected by agencies, the data are not maintained in a form that allows for efficient tracking and analysis of turnover costs.  This is not unique to Wyoming, as most accounting systems are not designed to provide cost data about turnover.

Recommendation:  A&I should develop a plan for identifying and managing high-risk turnover.

A&I is a logical entity to identify occupations with high-risk turnover.

The state lacks a system for compiling targeted and accurate information about workforce issues at the occupational level.  We believe a central entity in the executive branch needs to take the lead in developing such a system.  A&I, with its responsibility for administering compensation and personnel statutes, is a logical focal point for instituting an efficient method of identifying occupation-specific high-risk turnover in state government.

However, to carry out the kinds of cross-agency analysis envisioned in this report, the joint efforts of individual agencies and HRD will be needed.  Individually, agencies need latitude to develop their own strategies to deal with high-risk turnover, since different methods will probably suit different occupations.  As well, a goal should be to produce uniform data that can be used for broad-based longitudinal analysis.  Thus, there is also a role for A&I in providing guidance and in coordinating uniform data gathering. 

A&I should present a plan to the Legislature outlining how it proposes to work with the agencies to carry out this expanded responsibility.  If additional staffing, tools, or statutory authority are needed, it should also bring a request for resources to the Legislature for consideration.

Recommendation:  The Legislature may need to take actions necessary to reduce high-risk turnover.

A standing committee should monitor high-risk turnover.

Additional resources may be needed to reduce high-risk turnover.

Once A&I has developed a process to track high-risk turnover, Management Council may wish to assign responsibility for ongoing monitoring of high-risk turnover to a standing committee.  Since Joint Appropriations Committee members voiced concerns during the 2000 Budget hearings about the availability of uniform workforce data, that committee might appropriately be assigned this role.

Many of the retention strategies we suggest can be implemented by the employing agencies.  However, some strategies may require legislative involvement and additional resources to improve retention.  Such areas as agency funding, employee benefit packages, and the number of authorized positions in an agency, are areas for legislative decision making.

For example, during our research, staff in three of the occupations identified current health insurance costs as a contributing factor to turnover.  It is not surprising that highway patrol officers, caseworkers, and correctional officers identified health insurance costs as a concern, because fixed health-care costs have a proportionately higher impact on employees in lower wage brackets. 

The Legislature increased the health insurance contribution for individual premiums by $25, effective July 1, 2000.  However, considering how strongly and consistently former and current employees identified the continually rising costs of dependent health coverage as a concern, we believe there is need for further review and action.  Health insurance costs are having an impact on turnover, and since agencies cannot address such concerns individually, executive branch proposals to address such problems deserve careful consideration by the Legislature.