How to Improve Retention Using Workforce Intelligence
Employee retention is a key issue for many businesses, especially in a turnaround economy. While many workers have stuck around during tough economic times, the abundance of open jobs now has employees running for the door. Consider this comment from a recent article on Glassdoor, a site allowing employees and candidates to anonymously rate employers:
With half of employees reporting they’re confident in their ability to find a new job in the next 12 months, and 35% reporting they will look for a new job if they don’t receive a pay raise, the 2015 job market may see some movement… Employees are feeling more confident in the job market than they have in six years. Half (48%) of employees (including those self-employed) report confidence that they can find a new job matched to their current experience and compensation levels in the next six months. Glassdoor.com
In short, most companies can expect to see some voluntary turnover. And depending on the responsibilities of the departing employee, some organizations will feel the sting more than others. Yes, it’s painful to lose employees, but what is the true impact? To be honest, if you search a dozen different turnover calculators, you’ll get a dozen different answers. The key to understanding the importance of calculating turnover is to measure it consistently.
In addition to turnover rate, departure reasons are another element of workforce intelligence you’ll need to know so you can connect the dots and identify the factors driving your turnover. Once you have enough quality data from these sources you’ve been able to see the big picture of what’s going on with your workforce and start using the data to make decisions and course corrections along the way. That continuous measurement, feedback, and improvement process are also discussed in our report on workforce intelligence.
Let’s look at some of the intricacies surrounding turnover calculations, reasons employees leave, and how to take action on that information.
Determining Your Turnover Rate
It bears repeating: turnover is more important as a relative measure internally when it helps to understand and compare rates for various subsets within the employee population. In other words, there’s not necessarily a “good” number as every organization has unique needs and a unique workforce. We asked Alison Elsaesser, Vice President of Research and Development at People Element, about best practices for determining turnover rates.
“We can assist clients and have a calculator they can use if they want, but we pretty much use whatever they already have in place and help them measure change and impact. Sometimes it’s as simple as first understanding the turnover rate and monitoring that. Turnover rate is the simplest measure that can be monitored and used as a guide for managing costs.”
So when it comes to figuring out what the “best” turnover rate is, there’s not really a specific number. It comes back to establishing an internal standard and then using that to measure against over time. If your organization has access to industry statistics, that can help to give an idea of what to expect; however, even those numbers can fluctuate wildly.
For instance, People Element works with one trucking organization with a turnover rate that seems somewhat high, at first glance. However, when calculated against the entire industry, the organization proudly claims a turnover figure approximately one-third that of the trucking industry as a whole. Those external benchmarks can be insightful in terms of keeping track of performance against competitors.
Top Reasons for Departure
When establishing that internal benchmark, it’s also a good practice to keep track of departure reasons. Be careful not to get too granular–it’s not helpful to track seventy separate items over time unless each item is unique enough to be of value. Organizations can develop a more powerful data set by grouping departure reasons into “buckets” and then keeping an eye on each. According to an article on the top reasons employees quit, the top six reasons include the following:
- Inadequate salary/benefits
- Limited advancement opportunities
- Unhappy with management
- Lack of recognition
- Bored with the job
These are certainly not the only reasons employees leave, but it’s a good look at the cross-section of HR topics that impact employee retention, from benefits and recognition to career opportunities and workload.
Over time and with careful measurement and enough quality, actionable data, any organization will begin to see trends in departure reasons and be able to pinpoint which areas to focus on.
Turnover Action Planning
Once leadership has its fingers on the pulse of the organization and is aware of the turnover, it’s time to take action. For many companies, this represents a struggle simply because it requires translation of the data to an action plan. That’s where having an experienced partner can really help, says Elsaesser.
“Much of the consulting work [we do] applies understanding the reasons for leaving with turnover rates and then working with clients to prioritize based on their goals and initiatives. From the data, [we can] identify strengths, opportunities, and any quick wins. Then it’s about who’s going to own what and assigning accountability for action with next steps/target dates outlined.”
For companies seeking to not only understand turnover within the organization but to also get out front and meet it head-on, this is a must. All too often the practice ends with gathering and reporting the metrics. Little thought is given to how to actually strategically improve performance over time. In reality, it’s as simple as choosing one of the reasons for turnover, developing a plan to improve it, and measuring that performance over time.
Turnover is a challenge for every organization in some capacity. But with the right mindset, each one can develop a plan to not only understand, but also improve the issue with time.