Question

Rocky Corp. and Riley Corp. compete in a local and online consumer automotive parts market. Rocky Corp. has a turnover rate of 8, while Riley Corp. has a turnover rate of 0.5.

With just this information, what would be your educated guess as to how each business is doing relative to the other business with regards to (a) return on investment, (b) on-time deliveries, and (c) net income?

Answer 1

Turnover rate refers to the rate at which you must replace employees in your company. Human resources leaders know that keeping employee turnover low helps a company maintain productivity. Recruiting and hiring is a costly endeavor that takes time, requires training and often demands more competitive benefits packages.

Turnover rate refers to the rate at which you must replace employees in your company. Human resources leaders know that keeping employee turnover low helps a company maintain productivity. Recruiting and hiring is a costly endeavor that takes time, requires training and often demands more competitive benefits packages. Save yourself the hassle by keeping employee turnover rates low. If your company's turnover rate is high, take the time to understand why and to find a strategic solution.

1. While employee turnover rate is a term that most managers and business owners are familiar with, many smaller operations don’t actually utilize this calculation. However, employee turnover rate can actually have a massive impact on a company’s employee ROI, not to mention their bottom line.

As you’re probably already aware, ROI is a business term that stands for Return on investment. Traditionally, this term is used loosely to refer to whether or not a project or initiative was worth it. For instance, if an employee spends a week on a project that ultimately results in very little, then the ROI would be low.

Most executives assume that low employee turnover is an indication of great management. While that could be the case, there are many other reasons for low employee turnover, not all of which are good. For instance, it could indicate that talent competitors find little value in the people that comprise the organization: they simply are not desirable.

The average rate of turnover for a good business is 10% and Rocky corp. with 8% turnover rate can be a high doing company in terms of return on investment.

2. If the turnover rate is low then it may be taken that the employee are efficient and more employee are willing to work for the entity and hence the on time delivery would be maintained than the company with high turnover rate.

3. As discussed above if the turnover rate is low and maintained good in the case of a Rocky corp. with 8% can be good in on time delivery and if the on time delivery is good the revenues for the organization would grow up consistently which leads to increase in net income. Hence net income of Rocky corp. would be high than for riley corp.