How to Save Your Company from Unhealthy Turnover and Optimize Retention
High turnover is a major concern for many organizations. In 2018, over 40 million people quit their jobs in the US compared to just 30 million in 2014.
But how do you know if your turnover really is an issue? And if it is, how do you focus your efforts to improve? Let’s take an analytical approach to retention.
Identify the symptoms
Turnover is a key HR metric and tends to be understood by leadership as a serious risk. If you are looking to leverage people analytics, employee retention is a great place to start.
Key areas of focus
A high turnover rate is likely to catch your eye, but what else should you be paying attention to?
The most important symptom to watch for is an unexplained change in internal historical trends or an unexpected difference relative to the rest of the organization. A number on its own tells us little out of context.
To better understand turnover, dig deeper into why people left and how much control the organization had to prevent it. Exit surveys and interviews are now a standard part of HR practice and remain an important source of insight.
Also look at which segments see different retention rates, such as department, role, manager, and/or location. And within the historical trends, look at times of the year or month at most risk. For example, companies often see a turnover spike in January.
Pre-turnover red flags
Turnover may soon become a problem when you see decreases in:
- Employee engagement, which can be measured in surveys
- Volunteerism in workplace projects or activities
- Completions of employee development plans
Surprisingly, a red flag can be fewer complaints. Less feedback on how things could go better might be the quiet before the storm, meaning employees have given up trying to improve the situation in the workplace and are now looking elsewhere.
Some organizations do "stay interviews" in addition to exit interviews, meaning asking the questions we only think of when employees leave, in order to prevent unhealthy turnover.
"Typically it's not until the exit interview that you're given perspective on what went wrong, and by then it's too late to change the person's mind." Mandy Gilbert, Founder and CEO, Creative Niche
Diagnose the disease
Data sources and relationships
Combining retention data with other relevant metrics may uncover reasons behind turnover issues and give clues as to how to address it.
Key sources of data include:
- Basic employment data (e.g. tenure, manager, training completed)
- People data (e.g. employee experience, engagement, recognition)
- Business data (e.g. sales performance, error rates, operational efficiency)
- External data (e.g. company review sites, government statistics, consulting firm studies)
Simple analysis and insights
The goal of collecting and analyzing this data is to diagnose root causes. Solutions will depend on the problems identified.
Before you consider investing in new technology, take a look at the software you already use. There may be analytics capabilities to leverage in your HRIS. Lightweight tools like Excel are often enough to track metrics and chart trends. They often include capabilities like conditional formatting or a correlation matrix of variables to highlight trends. Platforms like Bonusly can provide insights on engagement trends and connections within teams.
Of course, data analysis should be informed by human insights into what is going on inside and outside the organization. Quantitative data is also best used together with qualitative data.
Surveys and focus groups help you ask the right questions to understand issues and their underlying causes at a deeper level. Survey design and focus group facilitators are key to using these methods effectively, showing employees that you care about what they have to say and that you are invested in providing them a positive work environment.
More advanced analytics
In the same way analytics can identify elements that drive success in a role, retention risk analysis can analyze the profiles of employees who quit to identify current employees with similar profiles.
For more on the subject, The Data Driven Leader walks through the steps of applying people analytics to a detailed example of strategic recruitment and employee retention. An important reminder, whenever working with employee data, is to respect privacy and consider the ethics of analyzing information in a new way.
Some companies are experimenting with aggregate analysis of communications. One firm applied artificial intelligence to emails over five years and found that “employees who veered away from the culture in their messages were more likely to quit."
Organizational network analysis identifies the flow of information within your organization, including informal paths. In Bonusly, for example, the Organization Graph helps to visualize and understand connections between your people and teams. It can identify connectors, those who play an essential informal role in bringing people and information together.
There are exciting analytics tools designed specifically for HR, like Visier. This technology helps target and tailor retention efforts based on root causes and business impact. For example, Children’s Health found that certain hospitals had a higher than average first-year turnover rate that they were able to reduce with a small increase in hourly wages.
That said, algorithms are not necessary to enhance your retention strategy or make your people practices more data-driven. Just asking strategic questions with the data you have is a great start.
Assess the prognosis
With an understanding of your current retention state, the next step is to decide if you should continue on your current path or make a change.
Is turnover a problem?
Traditionally, organizations separate turnover into categories based on the reasons people left.
Most companies distinguish between voluntary and involuntary separations, and often will separate out retirements because employers tend to have less control over whether employees retire than whether they leave for another employer. Spikes in voluntary turnover tend to signal a problem.
Newer quality-of-attrition metrics to consider are “unhealthy” or “regrettable turnover.” Turnover is regrettable or unhealthy when it means losing people important to your business. In addition to identifying why people left, this is about who left.
It may be healthy turnover if there is no longer a skills match or it is just the nature of seasonal or project work.
Healthy turnover may also be the case where an employee without room to grow in the organization leaves before they become frustrated. In some situations, low turnover is a red flag that low performers or toxic employees stay with the company for reasons like job security or salary.
“When you lose your top talent, people who you’ve sincerely invested in, in the hope that they have long-term future with you, that’s a concern.” Alison Sibree, VP of HR, APAC and Japan, Oracle
Regrettable turnover is defined by how big an issue it is when that person leaves. If the employee had been identified as high potential, the loss is likely more regrettable. If the employee was offered a separation package, it may have still been costly to replace them, but the departure is less regrettable and likely better for the organization in the long term.
Other ways to identify if a resignation was regrettable is if the departing employee had a high number of reports, critical skills, or intellectual capital. Past performance evaluations and metrics can be considered as well. The bigger the impact of them leaving, the bigger the need to address and prevent losing them.
The amount you invest in retention depends largely on turnover costs and internal trends. However, looking outside the organization puts your retention in context.
Examples of benchmark sources include:
- The US Department of Labor’s quit rates by industry and region
- Mercer's survey, that found an average voluntary turnover rate of 16% in the US in 2018
- LinkedIn’s study based on half-a-billion members providing an end date for their position at a company
Consider region, economy, employment rate, labor market, industry, and types of roles that generally have higher turnover. For example, hospitality is known for high turnover rates.
Value of retention
The other question is whether turnover is costing you more than it should.
Most of a company's investment in its people is in recruitment and rewards, but ROI depends on retaining the people you recruit and giving them the training and tools to contribute more value to the company than the company spends on compensation overall.
Try out Bonusly’s cost of turnover calculator to estimate how much turnover is costing your own organization.
Want to learn more about employee retention strategies? Click here to download 11 Strategies for Building an Outstanding Employee Retention Program and send it to your coworkers!
Prescribe the treatment
Once you have identified the problem, the most important step is implementing a treatment plan.
Problem solving approach
To see impact quickly and maintain agility long-term, it is important to continuously ask questions and adapt based on the answers.
Design thinking is a framework to consider when approaching a problem to solve. It starts with the end user’s needs in mind and uses evidence and experimentation to determine the most effective and feasible solution.
If you are concerned you do not yet have the data or analytics capabilities, don’t worry. You can begin by addressing the common reasons that people leave, and then adjust your focus based on new and unique information on your people.
Take, for example, a top reason that people cite for leaving: opportunity for growth. Generally, it is worthwhile to invest in this area. However, it is possible you could find–based on surveys, focus groups, and data like internal job applications–your employee population may be happy with opportunities for advancement, yet they are leaving because of culture.
If the data or direct conversations indicate specific groups are at high risk of leaving, engage them in the problem solving. This could be in the form of a targeted focus group about why people stay, why people leave, and how to retain the best talent for collective success.
Strategies to increase retention depend on the root causes.
For example, new hires tends to be a group with lower retention rates. As a result, you can review your current onboarding practices against what evidence tells us about effective practices. One key ingredient in retaining those new hires is to recognize their actions, helping them feel included and engaged. For strategies and examples related to onboarding, check out this webinar recording.
You may have already identified specific individuals as presenting more risk of leaving. Sometimes the intervention is therefore individual, meeting one-on-one to discuss what would keep them engaged and committed to staying with your organization.
Appreciation and recognition are important factors in retaining top talent. Organizations that score highest for building a "recognition-rich culture" have 31% lower turnover rates than their peers. Following recognition best practices also helps to boost morale and productivity.
As with anything important to the business, retention must be monitored on an ongoing basis.
Track key drivers of turnover and maintain ongoing dialogue with employees and leaders. There will always be new information, so establish a simple process to stay on top of your retention and adapt accordingly.
Ensure leaders are having regular one-on-one discussions with their team members for continuous dialogue about their performance, development, and support.
To sum it up: listen to your talent to keep your talent. For more tips about fostering a fantastic company culture, check out this guide:
Originally published on April 10, 2019 → Last updated July 16, 2020