Employee Retention Strategy: Using Analytics to Reduce Turnover

Where should you start with turnover modeling?

When modeling turnover, the primary challenge is building a foundation on the right tracking metrics. Not surprisingly, many organizations struggle when determining what should be tracked.

"It's really important to standardize which metrics should be tracked, using different streams of data from HR along with operational and financial data to uncover the true costs of someone leaving the organization," explained one Perceptyx consultant. "It's somewhat easier to measure the direct costs here, because someone from HR is telling you how much talent marketing and training cost. The indirect costs are oftentimes more expensive than the direct costs, and proportionally harder to measure, but reaching out to organizational stakeholders outside HR for more data can establish confidence and credibility in the modeling while improving the cost modeling and overall strength of the analytics."

The cost of replacing an employee includes both direct and indirect factors:

• Direct Costs: Separation processing, accrued benefit payouts, vacancy replacement costs, recruitment administration, and onboarding.

• Indirect Costs: Lost productivity prior to departure, strain on remaining employees supporting the open role, and the learning curve during a new hire's onboarding.

"These costs are too complex to compress to a single slide or bar chart," noted one industry speaker. "We need to use inferential methods like machine learning models that are designed to accommodate large amounts of data from disparate sources that can give us lots of insight, because this allows us to control for factors like job attributes."

The resulting model has to account for the fact that, in situations where a company has only a 10% turnover rate, someone could simply guess that employees would stay in their roles and be right most of the time. As one industry speaker explained, "We have to manufacture a balanced playing field so that the analyst can't cheat and so that we can really derive the risk factors associated with attrition. We can assign these risk factors to individuals throughout an organization, then we can determine if the factors are more prevalent in particular areas of the organization." Tools such as Tableau or Power BI can then visualize these risk factors via dashboards, empowering organizational decision makers with the actionable insights needed to quickly understand what levers they can pull to influence attrition.

How can organizations address attrition in wholesale supply chains?

Like other companies in the logistics and supply chain sector, in which revenues are high but profit margins quite low, organizations in this space face challenges during periods of elevated voluntary turnover that see millions of jobs open across the country.

The severity of the labor shortage in the logistics industryis significant:

• Current Shortage: 50,000+ CDL-licensed driver openings.

• Future Projection: Shortage expected to expand to 80,000 drivers.

• Context: Voluntary turnover reached unprecedented levels in the logistics sector.

Many organizations recognize that retaining hourly talent in logistics and supply chain operations is vastly different than retaining more knowledge-based workers. "With a lot of organizations I've worked for in the past, there was a mismatch in terms of the expectations of the workforce, where many organizations were looking for lifers," said one industry leader. "They were looking for people who were going to come in and work for 10 to 20 years. If your target is looking for a long-term employee like that, you're never going to hit it."

Organizations also realize the hazards of focusing too much on compensation rather than the rest of the employment experience. "People will say we're not as competitive as we thought we were in terms of pay or benefits, and while that's important, it isn't the be-all, end-all to driving retention."

How can an employee listening partner help improve retention?

When organizations seek to determine the keys to success on the attrition front, they turn to employee listening partners. Their ability to gather engagement survey data and exit survey data with the highest degree of trust and confidentiality proves essential to this strategy.

"We needed a third-party partner to help us match different data points together and give us guidance regarding what those analytics meant," explained one organization. "And we had to maintain confidentiality and employee trust throughout."

This partnership results in the creation of modernized reporting for more accessible turnover dashboards, consistency in the calculation of turnover, and a better understanding of the cost of turnover for use when evaluating investments and interventions. That, in turn, leads to the identification and assessment of risk factors to predict and reduce turnover, which can be leveraged for strategic initiatives.

How can analytics shape an organization's retention strategy?

More fine-grained insights enable organizations to craft a precise strategy for dealing with attrition:

• Human resources information system (HRIS) data determines when people leave the company.

• Provide flexible work hours and, where feasible, remote work options to support work-life balance.

• Invest in wellbeing programs that address physical, mental, and financial health.

• A better accounting of indirect and direct costs of employees leaving the organization, thus showing how much return on investment (ROI) different interventions provide.

• Maintenance of employee trust throughout the process by using Perceptyx to guarantee the highest level of data confidentiality.

The strategy yields an understanding of attrition that goes far beyond mere guesswork rooted in concerns about inadequate compensation. Organizations learn that warehouse and driver employees have different turnover rates, as well as where geographic hotspots for attrition are concentrated. Companies also discover that optimism about the company's future as well as opportunities for career growth are key predictors of turnover, as is supervisor feedback indicating to employees that the company cares about their well-being, performance, and professional development.

With this in mind, and with the data clearly visualized on dashboards easily accessible to leaders and key stakeholders, organizations can make interventions and investments that best address the true cost of the turnover they're experiencing. And with new awareness of the value of feedback and optimism, companies can choose to reemphasize their employee recognition programs to drive improvements in those areas after noting that supervisors who most frequently leverage recognition programs boast far greater retention rates than their peers.

"After we found that optimism was an important predictor of retention and reduction of turnover, we started to focus on some of our leadership initiatives and training initiatives, and even some of our communications explaining elements of our business," shared one organization. "We just didn't always do the best job of communicating that out. We're a very humble kind of culture, and so those things can sometimes be not as strongly vocalized at times, but now we're encouraging our leadership and our supervisors to be more vocal about the strengths of our business."