How People Analytics Can Help Reduce Turnover
People analytics can help reduce turnover by giving you insights into where things are working, where they aren't and what is at stake. Here's how Brent Weiss, ADP's Senior Director of Product Management for DataCloud, sees this information changing how organizations operate.
Turnover and retention are always important concerns for organizations. That's especially true now, as workers are reprioritizing the role of work in their lives and looking for new positions or careers that are closer to what they need and want.
We talked to Brent Weiss, ADP's Senior Director of Product Management for DataCloud, about how people analytics can help leaders learn what's happening in their organizations and understand how to address turnover and improve retention. He had a lot of valuable insights to share.
Q: First, why does turnover matter?
BW: Anytime you lose employees, it's disruptive to business. When people are walking out the door, you're losing their knowledge, skill set, relationships and workflows. You must start over and find someone new for that role. Recruiting and training is expensive.
While you're finding the next person, you still need someone to do that work. You have three choices: have a backup person, put more pressure on your current employees, or stop doing the work in the third scenario, everything stops, and that affects productivity.
When the person who left was in a client-facing role, you don't have the luxury of work not getting done. Since your current employees already have full-time jobs, the reality is that you end up building redundancy in your workforce. Instead of having two employees to do the work, you need to hire three so that things don't stop when someone leaves. This increases your overhead.
Addressing turnover is essential to keeping the business running and executing your strategies.
Q: Where do you start to understand and address turnover?
BW: Start with a baseline assessment. Ask yourself, what is our turnover rate? How are we doing over time — better or worse?
Everyone has their magic number for a healthy turnover rate. It's usually around 10%. We see that as organizations exceed turnover rates of 20%-30%, that can get to be disruptive to the operations of the business.
Regardless, if things are improving, then you're in good shape, but you also don't want turnover to be too low. People get grumpy about lack of opportunity. Being overly insular can cause problems too. New people bring new ideas, skills and experience. It's about finding the right balance.
Q: What if your turnover is higher than your magic number? How do you figure out how to reduce it?
BW: This is where people analytics can make a difference. If turnover is too high, the next question is, where are we losing the most people?
Can we tie turnover to a specific location, or department or type of job? If so, then we can figure out what is happening in that part of the organization and start to address it.
Sometimes, it's not a specific division or location. Then we have to ask, why are we losing people? Is it money? Lack of opportunity? Better work-life flexibility?
Once you understand the reasons for your challenges, then you can start to think about alternative ways of dealing with it.
Q: Isn't it difficult to figure out why people leave? Even if you track stated reasons, they may not tell you much.
BW: Sure. People don't want to burn bridges on their way out the door. Even if they have a job lined up, they may want a reference down the line. Employees often won't tell you the real reasons they're leaving.
Managers also may not give you much insight. They may know there's a problem but leave out other reasons why the employee left because they don't want to deal with it. Looking at termination reasons is a good start but then you need to triangulate that data with other evidence.
For example, if people say they are leaving for better pay, do you see that your compensation is lagging the market? Or if people are leaving for better opportunity, do you see that your job promotion and transfer rates are low? You need to read between the lines to understand where to look further, but you also don't want to spend too much time tracking every reason why every employee quit.
Most people leave for three reasons:
- the work is not meaningful,
- their personal opportunity to be successful and grow is not there, or
- they are not paid fairly for their contributions.
You want to get working toward the solution.
Q: What's the alternative?
BW: You still want to learn about why people leave, but you don't want to get into who is and is not telling the whole truth, especially since they may not know themselves.
There are some basic analytics that can help you focus on what's happening and start working on change. Your baseline turnover rate is the first thing. The next step is to understand new hire turnover. What is the churn at lower levels of organization? Is it a revolving door?
If you are losing people after a few months or even a year or two, that's expensive, and you need to address it. Look at job descriptions and your interview process. Are people clear about the job they're signing up for, or is it a lot different from what they expected? Are there onboarding issues? Do you prepare employees to succeed, or are they left to fend for themselves? Maybe your newer managers need some help with integrating new people into their teams.
For new hire turnover, the magic number is about three years, depending on the industry. Some industries, like retail and hospitality, always have higher turnover, but the risk of losing an employee generally drops after about three years. People find their groove and tend to stay.
You want to look carefully at the turnover rates for those first three years because they will give you clues about where to look for both problems and solutions.
A focus on top performer turnover is also quite meaningful because it is hard to be successful if your best people are walking away. Basically, what I am saying here is that the segments of turnover offer more clues about what could be wrong.
Q: Are there ways to figure out what's going to happen with turnover so you can plan for it?
BW: Yes. That's where forecasting analytics comes in. Projections are basically a do-nothing scenario. If we just keep doing what we're doing and do nothing, where are we going to land? Are we happy with this trajectory? If we're not happy, then we need to do something differently.
Flight risk prediction can give us more details to understand who is at risk and why they are at risk. Look at the factors that are connected to higher turnover, including things like pay, commute time and whether there is opportunity for advancement. Once you know who has higher flight risk factors, you can start to figure out what would encourage those people to stay.
Q: Leaders are always interested in understanding what is happening with the bottom line. Can people analytics help quantify the cost of turnover?
BW: People analytics can not only estimate the dollars at stake with turnover; they can also estimate the loss of productivity when people leave. Once you understand who might leave, you can see how that will affect the organization, both in dollars and in how much labor capacity you're losing as a percent of total capacity.
Some of the costs of turnover include severance, time and expenses related to replacing the departing person and training the new person — and that's just to get back to parity and recover what you lost.
These analytics can show how reality is eating away at your margins and profit, and how it is tied to the velocity of employee turnover.
Q: What advice would you give people starting out with people analytics?
BW: Start with the basics and develop your understanding of historical turnover rates. Don't start with dollars, as tempting as it is because it's almost the most complicated. Leaders always question numbers, so you need to know your stuff. Have employee records beneath the graphs and charts to validate known employee exits and build trust in the data. Don't risk your credibility. As you get more comfortable, you can start to dollarize.
Your leaders likely aren't used to having this type of information either, so you will gain their trust and become valuable to them as you teach them what is possible and why it matters. It's important to build your own foundation of understanding first.
Meaningful insights about your people and processes are hidden in your people data. We'll help you find them.