Employee attrition: how to make an antidote

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By: Wise Marketer Staff |

Posted on October 10, 2002

Companies that don't have employee retention programmes are in danger of losing their best people, according to a survey by Webster Buchanan Research, published by PeopleSoft.

The survey highlights the need for businesses to implement employee retention programmes that are actively supported by measurement and analysis systems, if they are to retain their most valued staff.

While relatively new, human resources (HR) analytics provides the intelligence required to support the HR department's evolving role in developing innovative strategies to acquire and retain key employees - a critical factor in driving business performance.

Senior HR professionals across a wide range of industry sectors in the UK participated in the survey, of which 50% of the organisations had annual revenues in excess of 1 billion. They were asked what kind of metrics are being used, and which ones were likely to be employed in the future.

Slow take-up
Less than half of the respondents (46.5%) have a formal retention programme for key employees, and almost one fifth (19.8%) have no plans to introduce one despite the fact that key employee retention is generally seen as an important factor in developing long-term corporate value.

However, the respondents were relatively critical in assessing the level of analysis that HR provides, reflecting the slow adoption of HR metrics. Half the respondents believe the level of employee-related analysis given to senior and board level executives is excellent or good, whilst 24.4% describe it as 'poor or very poor'.

Their assessment of the level of service provided to business managers is marginally better, while 40% believe the service provided to individual employees is 'poor or very poor'.

"No longer perceived as merely an administrative operation, HR is now expected to provide workforce related intelligence to board members and employees," explained Elizabeth Wilson, HCM strategy manager for PeopleSoft. "The key to providing this kind of information is to develop meaningful metrics and then support them through the use of human capital management (HCM) analytical software."

Analysing attrition
Questions about employee turnover revealed that the most common method of analysing attrition is through exit interviews - a technique currently used by 84.9% of respondents. The survey could not, however, determine whether information from those interviews is fed back and acted upon, or whether it remains buried within the HR department.

Just over half of the respondents take hiring costs into consideration when measuring employee cost and value (currently 51%, with 14% planning to do so in the near future). Almost a quarter (23.3%) have no plans to do so, even though the full range of hiring costs can impact heavily on the employee value equation, particularly during the first year of employment. Some 52.4% of respondents regularly carry out 'revenue/profit-generated' analysis, while 26.7% never do so.

Most popular metrics
The three most common metrics used in HR departments are:
1. Headcount reduction and increases (91.8%)
2. Attrition rates (83.7%)
3. Departmental employee compensation (74.3%)

Only 31.4% of respondents said that their HR department measures or manages revenue and/or profit per employee, and 39.5% have no plans to do so. Given that 52.4% of organisations carry out this kind of measurement at a corporate level, it is apparent that responsibility for this analysis lies outside the HR department itself.

According to the survey, while respondents expect significant benefits from adopting HR analytics, take-up remains relatively slow. Perhaps unsurprisingly, adoption levels are significantly higher for larger organisations than for their smaller counterparts.

Dennis Howlett, research director for Webster Buchanan said, "Analytics are critical in helping companies retain, measure and get the best out of their employees. The survey indicates that HR practitioners really do see the value in deploying software to support their analytical efforts, but it also shows that they're still in the early stages of understanding and discovering metrics that work for them."

Andrew Mayo, professor of human capital management at Middlesex University, commented, "If people are to be taken seriously as the most important asset a business has, we need to be much better at finding ways to value them and maximising the human capital we have."

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