When you try to forecast employee turnover, it's never a simple process; however, it's always important. Finance leaders know losing key talent is costly and can directly impact strategic goals.
Imagine you're expanding to China and you have a sales director who speaks Mandarin assigned to set up your Chinese sales office. Retaining that director is crucial to the success of your plans, and taking proactive action to engage them is crucial for the organization's future. Not all turnover situations are so strategic, but turnover is always a major financial burden.
Losing Talent Is Costly
Businesses forecast turnover to predict potential talent gaps and prepare hiring budgets. Loss of talent — whether involuntary or voluntary — means spending to replace that talent as well as a disruption in organizational capabilities. Finance and HR leaders are strategic partners when anticipating employee turnover and quantifying its cost. In the case of voluntary turnover, they must think ahead to prevent loss of talent.
Being reactive when it comes to managing flight risks is a mistake — the cost of losing an employee is higher than the cost of proactively engaging them. Think about losing the Mandarin-speaking sales director and the disruption to business, then consider the costs of recruiting, hiring and onboarding a replacement. The replacement must get up to speed while also integrating into your culture. These "replacement costs" are high, difficult to quantify and ongoing.
Use Big Data and HCM Analytics to Engage Talent
Big Data and workforce analytics can help you engage talent. By leveraging data and implementing HCM analytics, you can move away from costly turnover to having better control of labor costs. Look at your data to figure out why people are leaving. Is it because of compensation? Is it because of commute time? The answers matter.
Invest in ways to better engage talent. If benefits are a problem, customize them to meet the needs of employees. If commute times are a problem, consider flexible work arrangements. Issues with turnover impact both HR and financial leadership. Developing workable solutions will require a strong and communicative partnership.
The Role of Benchmarking
Benchmarks help measure your organization against others when confronting problems. For example, in the case of your efforts to retain the sales director who speaks Mandarin, it helps to know the average compensation for multilingual sales directors in your industry and region. If you fall below the average compensation for your industry, you might consider adjusting your compensation strategy to reduce flight risk. Or, if benchmarks show housing costs associated with turnover, you may consider offering to pay for a portion of employees' living expenses as a way to stave off potential turnover.
Predictive Analytics Tell You Who May Leave
Predictive analytics can tell you the factors that drive turnover and help you understand the scope and cost of the risks you face. Even if you do nothing to address those risks (you allow your talent to walk out the door), predictive analytics can tell you who may leave — allowing you to anticipate the costs. Of course, using analytics as a forecasting tool alone, instead of leveraging it, is akin to detecting a fire and deciding not to extinguish it.
Data tells a story, which is why it's so valuable. HR and Finance leaders should read that data-driven story together and collaborate to make sure it has a happy ending.
SIGN UP FOR THE BOOST NEWSLETTER