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Solve the Turnover Mystery: Investigation Approaches Identified

Our last blog posed the question, “Can turnover risk be used as a proxy for actual turnover?” The short answer is yes. But keep in mind, the drivers differ. So, let’s look at how to use your employee survey to investigate turnover risk and voluntary turnover to identify the specific drivers at your organization.

Examining Drivers of Employee Commitment & Actual Turnover  

Your organization can examine how the various topics on the employee survey (management, com­munication, compensation, job fit) drive employee commitment. We refers to this as “Turnover Risk” – the likelihood that an employee may voluntarily exit the organization. For example, how an employee feels about job fit may be related to whether they would like to be working for the organization 3 years from now – both topics that may be covered in the employee survey. Next, organizations that use a confidential, identified survey can link back to employee survey data a few months after the survey and flag employees who have left the organization following the administration of the employee survey. For example, employees who voluntarily leave the organization can be “flagged” in the survey data for sub­sequent analysis of the employee experiences that related to whether or not an employee later left the organization. This identifies the key drivers of actual turnover among employees. These two approaches each have advantages and points to consider.

Investigating Turnover Risk

What to Do: To investigate turnover risk (commitment), the analysis can be conducted alongside any other survey analysis to understand right out of the gate, which employee experiences are critical in building, or conversely harming, employee commitment to the organization.

The Benefit: In SMD’s re­search across numerous clients, the company found that employee commitment, or turnover risk, is the strongest leading indicator of future voluntary turnover. When leaders can understand these key drivers alongside their survey results, they can create action plans to directly focus on building the employee experiences that will improve commitment and reduce the chances of future voluntary turnover.

The Cautions: The concern with this approach is that turnover risk is a complex phenomenon. While turnover risk (commitment) is the strongest leading indicator of future voluntary turnover among all the topics that are typically covered in an employee survey, it still does not account for a majority of the variance in actual turnover behavior. Meaning, while it may be the best predictor, there is a lot of room for false predictions. People who report being very committed still leave, and people that indicate on a survey that they are not at all committed often stay for a variety of personal or unavoidable reasons. Additionally, through SMD’s research, it found that the drivers of employee turnover risk are often differ­ent than the drivers of actual turnover. While this may seem to be a disconnect, think of it this way: the attitudes that influence other attitudes (experiences influencing felt commitment) can differ from the attitudes that influence subsequent behavior (experience influencing exiting an organization).

Investigating Voluntary Turnover

What to Do: When investigating voluntary turnover, revisit the employee survey and “flag” the employees who have taken the survey and have subsequently left the organization. This allows for an analysis of the experiences at work that are related to an employee’s voluntary turnover.

The Benefit: With this approach, the analysis directly links experiences to subsequent behavior, rather than an attitudinal outcome (i.e., commitment). SMD recommends taking this direct analytic approach.

The Cautions: This approach comes with a couple of requirements before it can be conducted.

  • Confidentiality is Key: The survey must be administered in a confidential, but identified way. In other words, respon­dents have to be able to be tracked at a later date so they can be coded as to whether they have turned over or not. Without a way to link employee attitudes to actual turnover, there is no way to use predictive analytics to determine the aspects of the employee experience that cause employees to ultimately leave the organization.
  • Patience: An organization must wait a certain amount of time after the survey to amass enough em­ployees who have voluntarily left the organization (who also took the employee survey) to be able to conduct the analysis. For some organizations that are relatively large or are experiencing high turnover rates, this may be as short as a few months. For others, it could take 6 months or more to have enough voluntary turnover to properly analyze the employee experiences that lead to actual turnover.
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Can Turnover Risk Be Used as a Proxy for Actual Turnover? We Have the Answer

You would probably jump at the chance to impact your organization’s bottom line by reducing the voluntary turnover rate of high performing employees (i.e., reducing the number of good employees who choose to leave the organization). Are you scratching your head to figure out why employees are leaving in the first place? You’re not alone! So, we set out to figure out which key drivers typically emerge with turnover risk as an outcome and how that maps to subsequent analysis of actual turnover behavior.

In a recent study, we looked at the five most recent clients with which we had conducted analytic approaches and tracked the differences in key drivers between turnover risk and voluntary turnover.

But first, turnover risk defined. Organizations can examine how the various topics on the employee survey (management, communication, compensation, job fit) drive employee commitment. We refer to this as “Turnover Risk” – the likelihood that an employee may voluntarily exit the organization. For example, how an employee feels about job fit may be related to whether they would like to be working for the organization 3 years from now – both topics that may be covered in the employee survey.

Now, see figure 1 below.

Figure 1. Turnover Risk vs. Actual Turnover Drivers

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TR = Turnover Risk; Term = Voluntary Turnover
Predictors are rank ordered; 1 = Strongest predictor of the respective outcome
Analyzed drivers across 5 organizations, representing more than 150,000 employees
Commonly measured categories that were not found as drivers of Turnover Risk or Actual Turnover were: Accountability, Staffing, Tools & Resources, and Wellness

Numbers indicate statistically significant drivers of either Turnover Risk or Actual Turnover. Green when the same, red when different. Turnover Risk is measured by two items –

“I would like to be working at this organization 3 years from now.”
“I would feel comfortable referring family and friends to this organization for employment.”

Turnover Risk was consistently the strongest predictor of actual turnover, but the drivers were often different when examining Turnover Risk versus Actual Turnover. SMD found that while there were some consistently predictive topics across the two outcomes, many other topics differed in what drove commitment and what caused actual turnover. For example, SMD found that management was a strong predictor of actual turnover, but not usually a driver of turnover risk. We also found that when compensation was a driver of turnover risk, it did not actually cause an employee to ultimately leave the organization. Job Fit and Senior Leadership were among the only topics that were consistent drivers of both turnover risk and voluntary turnover. These key topics address how an employee feels they are suited for their current role and their impressions of senior leaders in the organization.

As we always say, predictive analytics is not a one-size-fits-all approach. Stay tuned for our next blog post to learn how to investigate turnover risk and voluntary turnover, with an employee survey, at your organization.

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The Employee Survey: A Strategic Tool vs. Engagement Barometer

Are you simply using your employee survey to measure engagement? How do you demonstrate the ROI from that approach? What if you instead use your survey to connect the employee perspective to business outcome data, such as financial performance, turnover rates, productivity numbers, and any other metric that the C-suite is using to evaluate company performance? If your current employee survey is not predicting critical outcomes to your company, your organization is potentially wasting valuable time and money on initiatives that will not impact business outcomes.

We’ve created a how-to guide to help you do just that. Yes. It’s possible to strategically use the employee survey to show ROI and improve business outcomes at your organization!

HOW TO: Think Strategically About Survey Content & Administration

Work Backwards: Go into a survey initiative knowing the business questions you want to answer and what the ultimate outcomes or goals of the survey should be. Think through the following:

  • What questions are being asked across the organization?
  • What are leaders hoping to understand?
  • What organizational issues are concerning to leadership?

Easy Peasy Access: Surveys should be accessible online, through a computer, tablet or mobile device at home or in the office, to ensure broader reach and greater participation rates. By doing so, you’ll achieve high participation and ultimately a fair representation of all employees. And, the turnaround time for analytics is greatly reduced, meaning your organization can move from survey to action in a much shorter period.

HOW TO: Connect Employee Survey Data to Business Metrics
(to prioritize organizational follow-up & solve common issues)

Show Me the Money: Advanced analytics that link employee scores to real business outcomes allow for the prioritization of time and resources in response to the employee survey results. This can also allow for a dollar amount to be placed on employee attitudes by demonstrating the connection between the employee experience and the organization’s performance.

CASE STUDY #1: Link to Bottom-Line Metrics

SMD helped a client link its employee survey to the following business outcomes: employee commitment (precursor to turnover), actual turnover rates, ROI metrics, and customer satisfaction scores. This linkage allowed the organization to prioritize around key topic areas, provide managers with specific scores on these key drivers, and direct follow-up and action planning. This approach is outlined in a graphical plot called a HeatMap® (below), which allows leaders to quickly see the attitudes that are key drivers of results and prioritize improvement efforts in these areas.

Happy businesswoman with colleagues in the background


CASE STUDY #2: Understanding Turnover

This is a pain point for everyone, right? SMD helped a client understand key employee experiences that were leading to voluntary turnover among their staff. By identifying 1) what employee perceptions led to turnover and 2) where in the organization employees scored low on these key drivers, this organization created targeted follow-up directed at the most at-risk work units. In a year’s time, they reduced turnover by 24-28 percent across the organization, saving an estimated $8 Million. Learn more about this case study in our recorded webinar; click here.

And, if you’re still not sure if your employee survey is up to snuff, take this quiz and see where you land.

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Money-Mouth Guarantee for HR Investments

turnover reduction guarantee seal2Is this you? A charge from upper management to reduce turnover – check. Your survey vendor gives you stacks of survey results – check. The vendor provides a snazzy PowerPoint presentation – check. The vendor’s survey platform provides lots of charts and tables of said results – check. The vendor guarantees the actions you take based on these results, tables and graphs will impact the bottom line? You probably have a big “X” on that aspect, right? In fact, the vendor gets paid the full amount regardless of the actual results of your time, money, and energy. What if you had a guarantee on the money you are spending with your survey provider to reduce voluntary turnover by 10 percent? With us, you can. We are pleased to announce our new Results-Based Pricing for Turnover Reduction.

What is Results-Based Pricing?

With results-based pricing, the price is based on the value delivered. This approach acts as a guarantee to deliver results. Several other industries employ this type of approach – marketing, consulting, industrial, etc.

How Does it Work?

While clients pay a minimal fee up front, we lose money if the performance goals are not achieved. Of course we offer the traditional commodity pricing that exists in our industry, but the results-based approach differentiates our approach by sharing the risk/reward with you. Essentially, if you don’t make money/achieve results, we lose money. That is how confident we are that our approach works!

Results-Based Pricing Example: Nurse Turnover

Consider the following healthcare example.

  • Five-hospital healthcare system: 15,000 employees with 4,000 nurses
  • 18% voluntary turnover for nurses: 720 nurses turnover each year at $50,000 per nurse, for a total cost of $36 million each year

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Why Do It?

HR leaders continue to struggle with demonstrating the worth and/or showing the ROI of the investments companies make in their people. How can HR executives expect the C-suite or business owners to approve of expenditures if the value can’t be clearly depicted with analytics? The average total turnover rate reported across industries by employers in 2015 is 16.4 percent, according to Compdata Surveys’ national survey. As such, turnover provides a ripe opportunity for HR to contribute to the bottom line of organizations. Imagine being your company’s standout employee by proving that your actions reduced turnover. Or even better – picture your company being the superstar in your industry with this approach.

Do Other Vendors Offer It?

We are the only firm in the survey and analytics industry to offer results-based pricing. By utilizing our expertise in data integration, surveys, and the most advanced analytics, all delivered through our patented reporting and action planning platform, we’ve maintained a remarkable track record of reducing voluntary turnover for our customers. In other words, we are willing to put our money where our mouth is!

Contact us today and we’ll help you reduce your company’s voluntary turnover by 10 percent.

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A Solution to Revolving Doors (and other issues) at Restaurant & Retail Organizations

Does this sound like you? You’re working in a restaurant or retail organization and your default response when senior leadership speaks about razor-thin profit margins and extremely high employee turnover is “we should conduct an employee survey” or “let’s look at engagement scores or benchmarks.” Is this approach effective for you? Do you have an answer when senior leadership then asks you to provide the ROI of these activities? If your answer to these questions is “no,” take a moment to hear about a large restaurant chain that leveraged the power of its people data in order to most effectively pinpoint where to focus managers at all levels to improve its business outcomes, all thanks to predictive analytics. The outcomes it was seeking to improve were the following: (1) customer count (the number of customers eating at the restaurant); (2) customer satisfaction; and (3) employee turnover.

“86” Engagement Scores

Since we’re talking about a restaurant, let’s start with some lingo – “86” – which means remove. And for this chain, it was “86” the focus on engagement scores only. Instead, the chain made its employee survey truly business-focused by honing in on four areas:

  1. Link employee attitudes directly to their real business outcomes (e.g., customer count and customer satisfaction)
  2. Prioritize interventions that have the greatest impact on their business outcomes
  3. Focus front-line managers on the areas that will improve their business outcomes
  4. Show the business impact of improving their key business drivers from the survey

Bake not Broil

A key step in building the analytics process was to align each restaurant’s employee survey data with its respective customer count data, customer satisfaction data, and employee turnover data. We think of it as organizing the food pantry so that canned goods are together, starches are on the same shelf, and so on and so forth. From there, it was critical to use the most appropriate analytics technique — structural equation modeling — which allows the organization to examine multiple business outcomes simultaneously, control for measurement error, and imply cause-effect relation­ships. Just like in cooking and baking, the method matters. You wouldn’t broil cupcakes because even though you had the correct ingredients, broiling would not produce the desired end result. Broiling has its uses as do gap analysis, correlations, and regressions. But, these methods simply are not rigorous enough to warrant advis­ing critical people investments.

An Award-Winning Recipe

For this restaurant chain, the analytics work revealed that the most important drivers of outcomes were Senior Leaders, Teamwork, Management, Communication, Ethics, and Job Fit. Thanks to this information, instead of every manager chasing an engagement score or focusing on what they think are the most critical elements from the survey, all managers across the organization can be working on the business drivers from the survey and truly drive change and get results. Consider the bedlam if, each day, a new line cook prepared your restaurant’s recipes by guessing, or worse, everyone used a different recipe. Figuring out your award-winning recipe for improving your business issues could take your restaurant or retail chain to an entirely new level.

If you’re interested in figuring out your restaurant’s or retail store’s recipe for utilizing employee surveys to improve your business outcomes, please contact us at info@smdhr.com. Also, you may read our white paper that details this approach further.

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Tailor-Made, Not One-Size-Fits-All: An Analytics Approach for Employee Retention & Turnover Reduction

Randstad recently announced the results of its most recent Employer Branding Survey, citing four key factors impacting employee attraction and retention.

  • A lack of career path, not salary, is the number one reason employees leave their jobs
  • Facebook, not LinkedIn, is the number one social media tool used for job searches
  • A strong work/life balance is the leading factor for employee retention
  • More than any other generation, millennials are likely to look for a new opportunity if they do not feel engaged in their current positions

The survey triggered some thoughts on the issue because there is no question that the challenge for employers is figuring out what to do to maintain top talent.

Caution: One Size Does Not Fit All

We certainly don’t disagree that the issues Randstad cites could be playing a factor with employees at many organizations. But, we caution companies to not employ a one-size-fits-all approach to reduce turnover and retain high-performing employees. How do you know which of these are the most impactful at your organization? Remember: each organization is different, and the factors that contribute to turnover differ depending on the organizational context. Unfortunately, one-size-fits-all is only helpful when you need hats, gloves and the like – not when running a business.

An Analytics Approach

Instead of relying solely on turnover/retention research, best practic­es, and benchmarking surveys, it is important that you conduct internal analyses to identify the factors that contribute to turnover in the unique context of your organization.

  • The first step in using analytics to diagnose turnover risk is to collect the appropriate data (e.g., competency ratings, employee opinion survey results, performance ratings, objec­tive turnover data, and/or employees’ turnover intentions) at the appropriate level (e.g., workgroup level).
  • The next step is to conduct a linkage analysis to identify the critical drivers of turnover risk. Using structural equations modeling (a sophisticated statistical technique with many advantages over correlation and/or multiple regression analyses), it is possible to identify the critical competencies, attitudes, etc. that lead to higher levels of turnover. The combination of multiple data sources and the statistical linkage to turnover adds analytical rigor to the processes and reduces ambiguity about the factors that contribute to turnover in your organization.
  • Although the results of the linkage analysis are informative, few senior leaders have the time to wade through piles of data to identify actionable results. SMD has developed the Turnover Risk Scorecard™ to enhance interpretation and make the results readily accessible by all members of your organization. A sample of the Turnover Risk Scorecard is provided in Figure 1.

It Works!

SMD conducted an analysis like mentioned above, utilizing SMD Link, for a large healthcare organization experiencing high nurse turnover. The intervention, which was targeted at the organization’s 800 nurses, produced a substantial ROI. Within one year, the nurse turnover rate dropped from 18 percent to 12 percent, meaning that they lost 48 fewer nurses than in the year prior to SMD’s involvement. The cost of nurse turnover was estimated to be $50,000 per nurse. Therefore, SMD’s work resulted in an approximate savings of $2.4 million (i.e., $50,000 X 48 nurses) for the organi­zation. A tailor-made approach; can you argue with the results?

Why Does It Matter?

Employee turnover is rampant in today’s competitive talent market – and it’s a costly problem for organizations. The costs associated with recruiting, hiring, and training new employees are often greater than 100 percent of the annual salary for the position being filled.¹ At the executive level, these costs have been estimated at two to three times the executive’s annual salary. Worse news than that — the costs increase dramatically when the time and expenses associated with tem­porarily covering the vacant role are considered. What organization can afford this type of hit?

Consider the tailor-made approach for your employee retention efforts. To learn more, download our white paper, “Understand Your Turnover Risk: An Analytics-Based Approach” or contact us at info@smdhr.com.

¹Allen, D. G., Bryant, P. C., & Vardaman, J. M. (2010, May). Retaining talent: Replacing misconceptions with evidence-based strategies. Academy of Management Perspectives, pp. 48 – 64.