Employee Turnover Data Analysis: 8 Tips for Success
A team consisting of talented, engaged employees helps a company gain a competitive advantage. Therefore, HR leaders are very concerned with keeping employee turnover low. That’s why employee turnover data analysis is a valuable tool in your HR arsenal. Understanding employee turnover helps you prevent employees from leaving and retain top talent.
Let’s dive into all you need to know about employee turnover data analysis!
What is employee turnover data analysis?
Employee turnover data analysis is an HR analytics or people analytics process that involves collecting data, analyzing, and reporting HR data to help understand a company’s turnover rate. Employee turnover data analysis helps you break turnover data down and get insights into what turnover looks like in your company.
A company’s employee turnover rate is the percentage of workers leaving an organization and then being replaced by new employees within a specific period. You can calculate it on a monthly, quarterly, or yearly basis. Below is the general formula:
With a thorough employee turnover data analysis, you can determine, for example:
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- The number and rate of employees that leave
- The financial impact turnover has on your organization
- The turnover risk among your existing employees
The term employee turnover is often used interchangeably with employee attrition and employee churn; however, there are some differences. Employee attrition happens every time an employee stops working for an organization and isn’t replaced for a long time. On the other hand, employee churn can be defined as the percentage of employees leaving a company within a specific period.
Typically, it’s the HR department or a dedicated people analytics team who conducts the analysis or owns the process.
Why conduct employee turnover data analysis
There are several reasons carrying out an employee turnover analysis is a good HR practice. They include:
Understanding employee turnover in detail
Conducting a turnover analysis will help the HR department know who is leaving. For example, they can quickly know which department has the most employees leaving. Furthermore, they will know when most employees leave the company. For instance, do they go after a salary review or after receiving their bonus? That would be a signal for you to reevaluate your compensation strategy.
You can also dive into the demographic to find out if there are any specific demographic groups that leave more often than others. That might indicate that your organization has a lot of work to do when it comes to DEIB.
Creating targeted employee retention strategies
Based on the information gained from the analysis, you can design targeted retention strategies that will help you keep your top talent on board.
If many sales employees leave after a salary review, it won’t help much to roll out a company-wide L&D initiative as your new employee retention strategy. Instead, you might need to change your sales compensation structure. In fact, a survey shows that 65% of employees said that a salary increase is the main reason they look for a new opportunity.
Reducing the cost of turnover
Getting to the root causes of turnover and preventing unwanted turnover helps reduce the costs associated with turnovers, like the recruiting costs and loss of productivity. Estimates say that losing a worker can cost a company up to 1.5-2x a worker’s salary. Therefore, understanding the leading cause of turnover can help plan and better manage the HR budget.
A comprehensive employee turnover data analysis helps you uncover predictors of employee turnover. You will know who is most likely to leave and when, which is often referred to as flight risk. With this information, you can work on the targeted retention strategies we mentioned above and also prepare contingency plans for when employees leave.
A financial services company Credit Suisse built a turnover model that helped them identify turnover risk factors. They trained their managers on how to retain high-performing employees with these risk factors, which ultimately saved them $70 million per year in turnover costs.
How to conduct employee turnover data analysis
Employee turnover rate is something every HR department should measure. Knowing the percentage of employees who left your organization, you can create effective hiring plans and calculate hiring costs.
However, by drilling deeper down into your turnover data, you gain more valuable insights that will help you retain top employees a build a robust workforce to help you achieve your organizational goals.
1. Gather your data and tools
Generally, you’ll find the data you require to conduct an employee turnover analysis in your HRIS. Depending on the goals of your analysis, you might want to collect the following information:
- Length of employment
- Months/Years in current role
- Performance rating
Your exit survey data are another valuable source of information that you could include in your analysis.
Excel is the most accessible tool to perform your calculations, especially if you’re just starting to build the people analytics capabilities at your organization. Check out the common Human Resources formulas and functions for Excel.
2. Distinguish between voluntary and involuntary turnover
Your turnover data will include people who’ve left voluntarily, as well as those who were let go. Understanding voluntary and involuntary turnover helps you get a more accurate picture of the state of turnover at your organization.
Voluntary turnover occurs when workers leave a company by their own choice. Generally, this type of turnover is more expensive for a company since it mainly involves the loss of a better performer. It usually leads to a knowledge and skill gap within a company that you have to fill with an external or internal candidate. Replacing these positions, if they are at the senior level, can be time-consuming and costly. Examples of voluntary turnover are:
- Internal transfer
- Taking another job
- Extended sabbatical
- Personal reasons
- Going back to school
- Job dissatisfaction
Involuntary turnover happens when a company terminates an employee and then replaces them. This turnover can either be good or bad for the company.
For example, terminating a candidate who violates the company’s policies can positively impact the company in the long run. On the other hand, layoffs are often a sign of financial difficulties or poor management. Terminations, layoffs, and workforce reductions are all examples of involuntary turnover.
3. Go granular
Of course, you can calculate your overall employee turnover and compare it to the previous period (e.g., quarter or year). However, going into more detail will help you understand the specific issues. Below are some examples of what you can analyze:
- What’s the average tenure? For instance, if you see many people leave after two years, it might have to do with a lack of career progression opportunities at your organization. If you see new hires leaving in their first year, onboarding might be an issue.
- Demographics – You can compare different demographic groups in terms of their turnover rates, for example, older vs. younger employees, women vs. men, White vs. people of color, and different intersectionalities among the groups. A high employee turnover rate in underrepresented groups may indicate that the company policies have a disparate effect on these groups.
- Reasons for leaving – E.g., if many workers leave for family reasons, the company might need to adopt more family-friendly policies.
- Departments/roles – E.g., is there a specific department or a position with high turnover?
- Date of birth – Analyzing this data might help you know trends specifically to Baby Boomers, Gen X, Millennials or Gen Z that you may need to address.
- Date of termination – This may help you know if you have a seasonal departure trend. For example, some workers leave a company after receiving their annual bonuses.
- Annual salary – You might uncover that your company’s compensation plan doesn’t attract and retain the right talent.
- Yearly/quarterly trends – Analyzing this data might help you anticipate when to expect high staff turnover. This way, you can plan for recruiting budget and effort. You’ll also know whether your annual turnover rate is decreasing or increasing.
- FLSA status – E.g., high turnover rates in non-exempt roles might indicate you need to restructure jobs. At the same time, a high turnover in exempt positions may seriously drain company productivity and financial resources.
4. Enrich your data
While you might be able to make pretty accurate assumptions about why people are leaving based on your quantitative data, you might want to gather more information to ensure your hypotheses are correct.
For example, use qualitative data from exit interviews and surveys to understand why people leave in more detail. While developing, exit interviews ask employees whether they are leaving because of a career change, dissatisfaction with the management, or for a better opportunity. This will give you specific reasons why people are leaving your organization.
5. Understand the root of the problem
You have to understand the company’s leading cause of the turnover problem. The following are several areas to look at:
- Management: Have you ever heard the saying that people don’t leave the business; they leave managers? Although this may not always be true, it plays a significant role in employee turnover data analysis. Employees are likelier to leave an organization if the senior management or direct manager doesn’t meet their expectations. For instance, you must assess the manager’s performance if you see a high turnover from one manager or department.
- Hiring and onboarding: Are employees leaving within the first year? Then this is a key indicator of a flawed hiring process and/or ineffective onboarding. New workers should stay with the organization much longer when you hire the right talent for the right reasons. Otherwise, you need to revisit the selection process to be sure you are hiring the right people. You should also review how you onboard your employees.
- Compensation: Is your salary competitive for a specific skill, industry, and geographical area? Even if money is not everything, it is a significant motivator when workers get offers for new jobs.
6. Look into the cost of turnover
Turnover is an expensive problem, with voluntary turnover costing US businesses as much as $1 trillion every year. Translating turnover data into monetary value will help you convey the urgency of the turnover issues to the company leadership.
As you calculate the cost of turnover, you need to consider multiple factors. According to research, a direct replacement can cost companies up to 50%-60% of a worker’s annual salary, and that’s without the indirect costs associated with losing an employee. These include missed or delayed revenue, and loss of productivity and knowledge.
By calculating the turnover cost, you could showcase how much your company can save if you managed to reduce turnover, for example.
7. Prepare an employee turnover report
Once you are through with the turnover data analysis process, you should create a report. An employee turnover report is a comprehensive summary of your findings, including visual elements and monetary terms.
From the report, the company leadership gets a good understanding of the specific reasons why workers are leaving. This report can help you get the leadership buy-in for investing in strategies to mitigate turnover and increase retention.
8. Take action
Use the insights from your analysis to drive action to decrease the turnover and get it to the levels you want. You can develop a plan aimed at the specific issues you’ve uncovered. You need to make an effort to retain well-performing workers. This is because they are the company’s most vital assets. So, taking actions that make them happy and content is necessary.
Examples of the actions you can take include:
- Offer better compensation and benefits: In addition to a comfortable, inclusive working environment, workers seek companies that value their presence and contribution. Therefore, making an effort to recognize them and their successes is crucial. Compensating your workers fairly, rewarding them, and enhancing their benefits can boost employee loyalty.
- Ensure a work-life balance: Maintaining a balance is critical in any workplace. Workers who have a lot of work on their plates mostly feel they don’t have enough hours to complete their tasks. For such people, having too much work is not something that makes them motivated and satisfied. Instead, it may lead to higher stress levels or employee burnout.
- Implement pulse surveys to get feedback: How can you know your workers are genuinely happy and satisfied? The best way is to use pulse surveys to get relevant feedback.
- Invest in your employees’ careers: For instance, offering your staff members good career development opportunities will show them that you care about their growth. Also, promoting learning and development will enhance your workforce’s skills, thus increasing productivity.
What’s more, your data can help you predict employee turnover and prepare for different scenarios.
Like most company issues, employee turnover generally has clear causes and symptoms. Performing employee turnover data analysis, considering the associated costs, and knowing the causes will help your company stay ahead of potential issues and mitigate them early.
However, analyzing employee turnover data doesn’t end with taking action. You must conduct your employee turnover data analysis regularly to keep turnover within your organization. By doing this, you can be sure that your retention strategies stay relevant and practical.