Employee Turnover as a KPI: Are You Getting the Whole Truth?

160613355Key performance indicators (KPIs) are a major component of any MSP engagement, and most companies rely heavily on their KPIs to determine whether their MSP program is achieving the right return on investment. While this may be an appropriate barometer to measure the results that the MSP solution can deliver, there can often be a disconnect when companies take this approach. While KPIs are important, they don’t always measure all the right success factors, and the organization misses out on crucial information that can improve its contingent workforce management programs.

Although there are a number of KPIs that can be misleading, one of the most common issues revolves around turnover metrics. Consider how employers often focus solely on the percentage of assignments that result in a negative termination. It’s true that this metric is crucial in determining the number of contractors that leave due to poor performance, but there is actually much more to the story beyond the number itself.

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Whether voluntary or involuntary, turnover rates are important in determining both supplier performance and workplace culture. A high level of voluntary turnover can be an indicator of a poor work environment that fails to effectively engage and motivate contingent workers. It could also be a signal that wages are below market values, leading those workers to seek other higher-paying opportunities elsewhere. Conversely, low negative turnover may indicate that the skills and requirements for the company’s positions are articulated clearly and are readily available in the marketplace. While measuring the outcome of turnover is important, it is more important to understand the “what” and “why” behind the metric for a complete story. With this insight, the company and its MSP partner can continually improve the related contingent workforce strategy.

A successful MSP program is one in which the provider and the customer both support the relationship by spending the necessary time to develop KPIs that measure the critical vital signs of the workflow process. Although high-level metrics such as turnover rates are often used to judge the effectiveness of the provider and the program overall, they can provide a false sense of security. Rather, it is much more effective to look beyond the numbers and see how the company’s own culture and wages impact the turnover rate. Doing so will uncover any potential issues and areas for improvement, and ensure that the company and provider work together to continually enhance the MSP program.

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Scott Fraleigh

Scott Fraleigh
Scott Fraleigh is president of Managed Services Provider (MSP) and Payrolling and Independent Contractor Services (PICS) for Randstad Sourceright.

Scott Fraleigh

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