Results from a recent Culpepper Trends Survey on headcount and turnover reveal that over 80 percent of technology and life science companies project increases in headcount in 2008, while only seven percent project decreases.

Other Key Findings:

• Technology companies project headcount to grow 12% in 2008.

• Life Science companies project headcount to grow by 24% in 2008.

• Overall turnover rates averaged 22% in 2007, with voluntary turnover at 14%.

This report provides human capital metrics analyzing headcount growth, hiring rates, layoffs, involuntary turnover, and voluntary turnover. Breakouts are provided by company size, industry sector, and department.

Headcount Growth Rates
Headcount growth rates measure the change from both the number of employees hired during the year and those terminated.

Overall, technology and life science companies project an average headcount growth of 14% in 2008, slightly lower than 2007 (Table 1). As a group, biotechnology and pharmaceutical companies expect the slowest growth in headcount, dropping from 51% in 2007 to 25% in 2008. Medical device and equipment companies project the fastest headcount growth, rising from 16% in 2007 to 28% in 2008.

Headcount Changes
Eighty-six percent of technology and life sciences companies plan increases in headcount in 2008, compared to 70 percent of companies increasing headcounts in 2007 (Table 2). Differences emerge both by company size and industry sector.

Hiring Rates
Hiring rates measure the incoming levels of employees as a percentage of the average headcount over an annual time period. Hiring in technology and life science companies was active in 2007, with hiring rates averaging 33 percent (Figure 1).

Turnover
Turnover occurs when an employee leaves a job involuntarily or voluntarily. Involuntary turnover occurs when employees are terminated by cause or layoff. Voluntary turnover occurs when employees resign or retire. Voluntary turnover, in particular, must be closely watched and managed.

Why is turnover important to measure? It's really a two-edged sword.

If turnover is too high, it is extremely difficult for a company to maintain any semblance of efficiency and effectiveness. As soon as employees become fully productive in their jobs, they leave for other opportunities. Employee morale suffers, recruiting and training costs skyrocket, and supervisors spend more time recruiting and training than on more productive activities. If the organization is attempting to grow, losses due to termination offset growth and magnify these costs.

On the other hand, if turnover is too low, it may indicate that a company is doing some things too well. For instance, a company with a compensation plan that pays above market or a rich benefit plan will typically retain more employees and have lower turnover. However, “above market” rewards plans also increase expenses, which in turn make it more difficult to hire new employees and maintain necessary staffing levels.

Another problem that corresponds with too-low turnover is what is sometimes called “organizational arterial sclerosis.” To some degree, every organization needs new blood so that new ideas, approaches, and perspectives are continually added. Organizations with too-low turnover often have groups of employees who are “retired-in-place.” Their productivity—and that of the overall organization – is far below what it should be; yet, they remain in place.

The challenge comes down to management deciding upon an acceptable level of turnover.

Turnover Rates
In 2007, technology and life science companies averaged a 22 percent turnover rate, though layoffs and involuntary terminations were relatively low across most companies (Table 3).  

Departmental Headcount and Turnover
Company-wide headcount and turnover rates are useful, but knowing changes in each department, business unit, or division across the company is of even greater importance. If turnover at the department or business unit level is under control, the corporate rate will take care of itself.

In addition to the data tables and figure above, we provide a more comprehensive report with additional data tables showing headcount and turnover metrics for the following departments: 

Clinical & Healthcare Services
Customer Support
Finance & Accounting
Human Resources
Information Technology (Internal)
IT Professional Services (External)
Manufacturing
Marketing
Research & Development
Sales

The comprehensive version of this report with the additional data tables is available to:

• Participants in 2008 Headcount and Turnover Survey

• Subscribers of Culpepper Pay Practices and Policies Surveys

Data Source: Culpepper Pay Practices and Benefits Survey of 174 organizations.
Survey Dates: January – March 2008

Breakdown by Sector:
Technology 74%, Life Science 20%, Healthcare Services 3%, Other 3%

Breakdown by Company Size:
Up to 100 Employees 36%, 101 to 1,000 Employees 45%, Over 1,000 Employees: 19%

Breakdown by Country:
United States 94%, Canada 3%, Other 3%

Authors: Jennifer Berthiaume and Leigh Culpepper