Despite a weak economy, most technology and life science companies remain optimistic that the job market will begin to recover in 2009. Results from a 2009 Culpepper Trends Survey on hiring, headcount, and turnover reveal that 62 percent of companies plan on increasing their headcount in 2009 (Figure 1).

Other Key Findings:

• Technology companies project headcount to grow 1.6 percent in 2009.

• Life Science companies project headcount to grow by 8.1% in 2009.

• Turnover rates averaged 19.7 percent in 2008, with voluntary turnover at 11.0 percent and layoffs at 5.2 percent.

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

Overall, companies project an average headcount growth of 2.5 percent in 2009, less than half the rate of 5.5 percent in 2008 (Table 1).

It is worth noting that headcount growth has dropped significantly since October 2008. From 2004 through September 2008, average headcount growth for technology and life science companies exceeded 10 percent. In response to the economic crisis that erupted near the end of 2008, many companies eliminated jobs added earlier in the year from acquisitions and organic growth, bringing the headcount growth rate down to 5.5 percent.

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 2008, the overall average annual turnover rate (20 percent) was slightly lower than overall turnover levels in 2007 (22 percent). While overall turnover was lower in 2008, a weakened job market in 2008 was accompanied by a decline in voluntarily turnover and rise in involuntary turnover through layoffs
(Table 2).

It is worth noting that many companies waited until 2009 to begin layoffs. Thus, the overall turnover rates, involuntary turnover rates, and layoff rates reported below are probably much higher since the beginning of the economic crisis in late 2008. Likewise, voluntary turnover rates will probably continue declining in 2009.

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 growth rates, headcount distribution by department, and turnover metrics for the following departments: 

• Customer Support

• Finance & Accounting

• Human Resources

• Sales

• Marketing

• Information Technology (Internal Corporate Information Systems)

• IT Professional Services (External Client Services)

• Research & Development

The comprehensive report also includes the following data tables:

• Hiring Rates

• Headcount Distribution by Job Level (i.e., Executives, Directors & Managers, Non-Management Employees)

• Headcount Distribution by Employment/Worker Status (i.e., Full-Time, Part-Time, Contract Workers).

Availability of Comprehensive Report as Downloadable PDF

• Free to participants in 2009 Hiring, Headcount, and Turnover Survey

• Free to Culpepper Library and Small Company Plus subscribers.

• $295 for non-participants and non-subscribers (Order Form)

Data Source: Culpepper Trends Survey of 173 organizations.
Survey Dates: January 14 through March 31, 2009

Breakdown by Sector:
Technology 69%, Life Sciences 16%, Healthcare Services 4%, Energy 4%, Engineering 1% Other 6%

Participant Breakdown by Number of Employees:
Up to 100: 42%, 101 to  500: 28%, 501 to 2,500: 17%, 2,501 to 10,000 11%, Over 10,000: 2%

Participant Breakdown by Ownership/Corporate Status:
Public 24%, Private 71%, Non-Profit 4%, Other 1%

Participant Breakdown by Country:
United States 92%, Canada 4%, Other 4%