Can “Big Data” Help Prevent Employee Turnover?

CFO to CEO: What happens if we spend training funds developing our people and then they leave us?

CEO to CFO: What happens if we don’t and they stay?

You never know where inspiration may come from. I saw this quote the other day and thought it was a very telling insight about the need for investing in developing employees in general and given my interests, managers, and leaders as well.

The best corporations, like General Electric, my former employer, have consistently invested in developing their leadership talent. When times are flush for an organization, such expenditures are easier to justify. When times are tight, these expenses are fewer investments and more costs to be controlled.

I’ve made my living as an executive leadership coach with organizations who have seen fit to make these investments in their leadership talent.

Our economy seems to be humming along very nicely and the unemployment rate continues to fall. This means that the demand for talent is increasing.

A recent article in the Wall Street Journal reflected on the costs of this reality:

• As the employment picture improves, companies are focusing more on retaining workers, largely because replacing them is costly. The median cost of turnover for most jobs is about 21% of an employee’s annual salary, according to the Center for American Progress, a liberal-leaning think tank.
• William Wolf, Credit Suisse’s global head of talent acquisition and development, says a one-point reduction in unwanted attrition rates saves the bank $75-$100 million per year.

This article is an example of how companies are using big data to try to understand organizational trends and, in this case, trying to create retention predictions on how to prevent employee flight risks.

In other words, are there work factors that can help us understand who may be most at risk for leaving the organization and what can be done to retain good talent and to reduce employee replacement costs?

Although such sophisticated analysis might be expected to identify one or two clear causes for employee turnover, the human condition is such that simple answers will rarely emerge from the almost infinite variables of organization structure, tenure of employees, dynamics of the industry, and technological change.

This article did identify several interesting risk variables, but none that are generalizable across a broader population in various companies. Rarely did any single piece of data prove to be substantially predictive, but here are a few that did come up:

• An employee’s connection to their team;
• The manager’s performance and the size of the team an employee is on (in one case there was a spike in attrition on larger teams with lower-rated managers);
• Employees who had waived benefit coverage;
• Where employees felt that their jobs were not accurately described when they were hired;
• People who had to relocate for a job;
• Employees who went through significant job transitions, such as a promotion or personal milestones, such as maternity leave.

The article also mentioned that “Our goal is to never say the only reason we are coming to talk to you is that an algorithm told us to do so,” says John Callery, director of people analytics at AOL Inc., which recently started working with workforce analytics firm Visier Inc. on a program to help predict attrition down to the individual employee.

So the key question that I have is why don’t the employee’s managers have a better feel for these “retention risks”?

Unfortunately, I can think of several key variables that serve to limit the effectiveness of managers in dealing with this important leadership responsibility:

• Manager’s spans of control, or the number of people that managers are responsible for, is too large for them to have detailed insight about each employee.
• Many employees work remotely, or even in other countries and again the contact is primarily electronic or voice, not in person.
• Many managers must split their time between leading other’s work and doing their own work. As levels have been flattened in many organizations and administrative support been reduced by using technology, the time demands for most managers have increased dramatically.
• Improved networking skills and the advancement of many technologies regarding job opportunities may provide an irresistible attraction for many employees.
• For many managers, the range of options for rewarding employees or increasing engagement, seems to be very limited. Some of this is the reality of cost control in some organizations and some of it is a lack of creativity on the part of many managers. Managers need help to expand their range of options.

In my work with leaders across many organizations, I am struck by the increasing complexity and difficulty of their challenges. But retention of talent, especially as it becomes scarcer, has got to be an organizational imperative.

From the depths of the downturn in 2008, I think the perspective was that every employee was replaceable so many organizations gave short shrift to the concept of employee retention. Not so now.

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Ask yourself:

• Do you have a good feel for the relative job satisfaction for each member of your team?
• Do you have a good sense of how engaged each member of your team may be?
• What are the options that you have that will encourage greater levels of engagement within your entire team that can enhance not only organizational performance but serve to minimize “retention risk”?

I look forward to your comments and suggestions.

Photo credit: Kevin Krejci