Recruitment, Training, Appraisal and Labour Turnover

The human resource cycle. Workforce planning forecasts how many people with which skills the organisation will need, then recruitment attracts applicants, selection chooses among them, induction settles the new employee in, training develops capability, appraisal reviews performance, and retention decides whether the person stays. The cycle is worth memorising as a loop rather than a list, because when someone leaves the organisation returns to step one and pays the whole cost again. That is why labour turnover is not a personnel statistic but a recurring cost line.

Internal versus external recruitment. Recruiting internally is cheaper and faster, the candidate's abilities are already known, and the promotion motivates others. But it leaves a vacancy further down, and it brings no new thinking — a serious weakness for an organisation that needs to change. External recruitment brings fresh ideas and a wider pool, but costs more, takes longer, carries greater risk because the evidence is only an interview and references, and can demotivate internal candidates who were passed over.

On-the-job and off-the-job training. On-the-job training is cheaper, immediately relevant and productive while it happens, but it can transmit the trainer's bad habits and disrupt output. Off-the-job training gives access to specialists and wider ideas, but costs more, removes the employee from work, and may not transfer to the specific job. Induction is a distinct third category with a distinct purpose: it is not about skills but about reducing early resignations, which are the most expensive kind because the firm has paid the full recruitment cost and received almost no productive work.

Appraisal, and why its purpose matters. Appraisal reviews performance against objectives. It can be developmental, focused on identifying training needs and setting goals, or judgemental, feeding directly into pay and promotion. Mixing the two in one meeting is a known failure mode: an employee asked to be honest about weaknesses in a conversation that determines their pay rise will not be honest. The strongest answer in an exam separates the two purposes and, if they must coexist, separates them in time.

Labour turnover. The rate is the number of employees leaving in a period divided by the average number employed, times one hundred. Using the opening headcount instead of the average is the standard arithmetic error. The cost of each replacement includes advertising, screening time, interviewing, induction and training, and the period of low productivity while the newcomer learns — plus the item that never appears in the accounts and is often the largest: the tacit knowledge that walks out of the door.

Why zero turnover is also a problem. A high rate is not automatically bad and a low rate is not automatically good. Zero turnover means no new ideas enter and weak performers are never replaced. The useful questions are who is leaving — losing poor performers is functional turnover, losing your best people is not — and how the figure compares with the industry norm, since 25 per cent is unremarkable in retail and alarming in software engineering.