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The churn rate is the measure at which either employees or customers depart from the company. It is both the most neglected and the most critical of key performance indicators, particularly in the field of warehousing.
Something is wrong when employees arrive and depart after a short stay. In our field, the churn rate among long-distance truck drivers is one that has acquired wide attention. Inability to retain talented people is a clear sign that something is wrong with leadership. Admittedly, there are conditions where a certain amount of churn is normal, such as a highly seasonal shipping operation that requires a build up for the rush season. This is a situation where staffing service workers should be used rather than hiring and laying off full-time people.
What are the things that cause employee churn? Compensation is often blamed, though it is usually an excuse rather than a cause. Pay is less important for most people than management believes it is. Poor working conditions may be a cause. People don't like to work in a dirty or disorganized environment, so churn is found in a warehouse with poor housekeeping. Abusive supervisors will cause people to leave. When the churn is concentrated in one department or work shift, supervision is a likely cause. Lack of opportunity for advancement will cause churn, and a company that never promotes from within will pay a price in diminished loyalty. It is not hard to build and maintain a KPI for employee churn. If you don't have one, you are missing a critical measurement.
The other kind of churn is a turnover of clients. The best service companies retain their clients for many years. When they lose an important customer, they always try to discover why this happened. While a small amount of client churn is inevitable, a change in this metric could be a sign of trouble.
Churn is a critical measure, both for employees and clients. If you are keeping track, it is never too late to start.
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