We may not often turn to economists to help us think differently about decisions we make about people, but I believe there are lessons to be learned. Economists seek out patterns or relationships between economic indicators, and many of these same indicators can give us a crystal ball into what is going to happen with people –– such as hiring and turnover.
One great source of this insight is the Job Openings and Turnover Survey (JOLTS) produced by the Bureau of Labor Statistics (BLS). The JOLTS data collected clearly shows that when times are tough, job openings fall and people stay in their current jobs, and the opposite happens in good times. While this might seem intuitive, what this data can do is turn intuition into facts and provide an early warning to guide actions.
It’s important to have benchmarks across the entire employee lifecycle, including hiring and turnover trends — notably using real-time data instead of surveys. Such insights can then enable you to look at trends more precisely than the JOLTS data.
For example, data among companies that use our software showed that in the second week of July, turnover was down 56% compared to 2019 — an impressively low turnover rate at face value. However, external hires were also down 43%. This matches our intuition that employees are staying in their jobs in part because they have nowhere else to go. And, particularly now, when business plans are being built and rebuilt month to month, it also gives weekly insight to use for planning.
We have, of course, been speaking very coarse grain about turnover. The astute reader would have noticed that resignations would be a better metric to highlight the phenomenon of people staying in their jobs in periods of uncertainty (our own data says resignations were down 55% in mid-July). Although turnover is one of the most prevalent HR metrics, it is often not a very good indicator of organizational health and employee experience. In fact, the employee turnover rate can be actively misleading.
It’s not just the pandemic that makes overall turnover a misleading metric. A single statistic can never provide a full picture of who’s leaving your organization and why, or how those departures impact business goals. And that information is vital if you want to understand the root causes of your turnover problems and design effective, targeted interventions.
To make a meaningful impact, your HR team needs to look beyond the overall turnover rate to paint a more nuanced picture of retention problems at your organization — and open up the opportunity for lasting solutions.
4 Areas to Dig Deeper on Turnover Data
When HR teams focus narrowly on turnover rate, they’re more likely to jump to quick-fix solutions, designing one-size-fits-all retention programs that don’t move the needle on HR goals or broader business outcomes. With a better understanding of where turnover occurs, why employees resign and how it affects your organization, you can begin to take a more targeted, intentional approach. Here are four questions to consider:
1. Is this turnover regrettable?
Not all turnover is bad. For example, a poor performer leaving a role can be an opportunity to hire someone who’s a better fit. By contrast, when your most talented and experienced employees leave, they take their connections and expertise with them.
To understand how turnover is impacting your business, look closely at who’s actually leaving. Analytics can highlight deeper trends: Is turnover making you less diverse? Are you losing organizational knowledge or critical skills? How much are you fiscally impacting the business in spending on replacements? Understanding all of these factors can help you prioritize where to intervene first to boost retention, if turnover is even a problem at all.
2. Who needs help with turnover, and is it the same help for everyone?
The solutions to addressing turnover rarely work organization-wide because the root causes are often different. For example, one financial services organization we worked with saw an alarming uptick in turnover — but when they looked more closely, they found the issue was focused in a small number of retail banking sales roles in a single region. Zeroing in on the specifics of where turnover is happening will help you craft a targeted solution.
Article Continues Below
Join the Retention Revolution: 3 tips for radical retention
Retention is the greatest challenge facing employers today — it drains resources and slows growth. To reverse the trend, employers must revolutionize the way they work. Learn how talent intelligence will help you lead the retention revolution with strategies to engage and retain top performers.
At the same time, make sure you’re using the same method to calculate specific resignation, layoffs, and firing rates across all departments. It’s not uncommon for these methods to vary, muddying data and making it hard to establish trends year over year.
3. Why are employees leaving?
This is the most powerful turnover question, but too often we report on how many left or who left. The nice thing about turnover is it tends to follow trends. There is even a name for this, turnover contagion. So dig into your HR data to find correlations among employees who have resigned, looking at factors like role, department, manager, compensation ratio, promotion wait time, tenure, performance and training opportunities.
By identifying current employees who share these characteristics, you can predict who is at high risk of leaving — and design tailored interventions to encourage them to stay. For example, if new hires consistently underperform in a particular department with high turnover, improved onboarding could reduce turnover. Other interventions could include changing pay and benefits, offering learning and development opportunities or improving career-pathing.
4. How much will you save by intervening?
Even after you’ve zeroed in on a specific turnover problem and a likely solution, your HR team may struggle to get the support for programs and policy change. Executives want to be sure that targeted retention interventions will generate ROI. Gathering data on the potential ROI of intervention, as well as the cost of turnover, can help overcome executive resistance.
The good news is that well-designed, targeted retention initiatives often pay off. For example, at one healthcare organization we work with, a particular hospital has long struggled with retention. A small increase in the hourly minimum wage decreased voluntary first-year turnover by 14% after one year — and the salary change was less expensive than the costly turnover the hospital had been dealing with.
HR Analytics Is a Powerful Engine for Change
By supporting decisions with data-driven insights rather than intuition or anecdote, HR teams are empowered to drive strategic business outcomes across the organization. Economists have been using market data to try to get ahead of financial trends. There are lessons we can still learn to help us apply analytics tools and techniques to retention efforts to reduce turnover in a targeted way, maximizing the business impact of your interventions, while also controlling for costs. But it all starts with looking beyond single statistics like turnover rate to see the bigger picture.