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Vitaly Sharovatov
Vitaly Sharovatov

Posted on • Originally published at qase.io

Designing a team that would produce software of good quality: turnover effect

Turnover:

turnover is the act of replacing an employee with a new employee

Since 1983 detrimental effects that companies suffer from high turnover have been studied quite a lot.

First and foremost, high turnover cost companies a fortune.

Popular sources like Gallup publish alarming articles like this one:

A trillion dollars.

That's what U.S. businesses are losing every year due to voluntary turnover. And the most astounding part is that most of this damage is self-inflicted.

The American think tank ‘The Center for American Progress’ published a more thorough meta-study where they reviewed 11 relevant research papers on the cost of employee turnover. Here’s the quote:

Very highly paid jobs ... tend to have disproportionately high turnover costs as a percentage of salary (up to 213 percent)

NB: ‘very highly paid’ they consider jobs yielding up to $200 000 per annum

So for every employee who’s gone, the overall price the company pays might be as high as twice his yearly salary.

It’s pretty easy to calculate the direct turnover costs, I suggest you do this too. Just factor in the following expenditures (taken from the study mentioned above):

  • ‘separation’ costs: exit interviews, severance pay
  • temporary cover costs
  • replacement costs: advertising, agency fees, hiring (screening / interview / selection / bg-checks / signup bonus / relocation costs)
  • training costs
  • costs incurred as the new employee learns their job, including reduced quality, errors, and waste

You will find the last cost (associated with the quality loss) quite hard to measure. Maybe you can count the number of defects increased as folks did in this study:

Despite the manufacturer’s extensive quality control efforts, including stringent testing, each percentage point increase in the weekly rate of workers quitting from an assembly line (its weekly worker turnover) is found to increase field failures by 0.74%–0.79%.

But stats like this can be collected only for cases when there’s a clear separability between the production and consumption of manufactured goods. This separability allows insulating the productive operations from many environmental disturbances.

So I would say that the detrimental effect that high turnover causes on quality should be considered an indirect turnover cost.

Moreover, software development is an industry with a high proportion of intellectual labour, and software product quality highly depends on employees’ cognitive skills and emotions.

High turnover detrimental effects on knowledge, motivation and emotions are indirect turnover costs. This study categorises these indirect turnover costs like so:

  • Lost productivity for the departing employee
  • Lost productivity due to the need to hire temporary employees
  • Coping with a vacancy or giving additional work to other employees
  • Costs incurred as the new employee learns their job, including reduced quality, errors, and waste
  • Damaged employer brand
  • Reduced morale
  • Lost clients and lost institutional knowledge

I’ve written articles on how information flow efficiency, emotions, knowledge, feedback style and interest influence quality. To me, it’s quite evident that with every person leaving the team, all these areas suffer, rendering the quality worse.

What makes things worse — there’s no way to measure precisely how much worse the quality gets, all we know: it gets worse.

So what exactly happens to a team when its member leaves?

  • team communication graph is shattered, new connections are to be established and normalised
  • team morale is shattered, and social dynamics of fear/uncertainty emerge

When an employee leaves the team, the team is destroyed and the new one is to be assembled.

In some cases, the cost of reassembling the team is low (say, when the team knew and welcomed the employee’s departure); sometimes, it’s ridiculously high (say, the informal leader of the team got sacked) and can even cause others to leave or consider leaving.

In any case, as the quality depends much on information flow efficiency, it seems obvious that the quality-focused strategy should imply serious efforts invested into retaining the team.

And as Dr. Deming said:

the most important figures that one needs for management are unknown or unknowable, but successful management must nevertheless take account of them.

References:

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