A Proactive Approach to Employee Retention
Updated: Feb 5
According to McKinsey, the most fundamental issue facing corporate leadership is attracting and retaining talent, which should come as no surprise to those responsible for attracting and retaining employees. You've read the articles and know the statistics. Maybe you've even tried some of the suggested strategies. But you still have a higher turnover rate than you'd like. What can you do?
The problem is simple. When there are more jobs than qualified people to fill them, it's much easier for employees to leave voluntarily. There are simply just more opportunities. CBS News states that almost every industry has a shortage of qualified workers, so no sector is immune. So, it is critical that companies do everything they can to retain their current employees.
The cost to replace an employee could be anywhere between 30% and 150% of the employee's annual salary. That means it will cost the company a minimum of $15,000 to replace an employee making $45,000 per year. The direct costs for hiring come from recruiter fees and advertising. Then, the cost of interviewing, and possibly travel, can add to the cost. If the salary and benefits exceed what the original employee had, those increase the cost of the new hire.
Post-interview costs such as checking references, conducting background checks or administering pre-employment tests can add up quickly. That doesn't include the personnel costs for coordinating and overseeing the new hire process. What about onboarding and new hire training?
Stephen King, the president and CEO of GrowthForce, estimates that external hires typically demand 18%-20% more in salary. It takes two to three months to replace a knowledge worker, and then another month or two before they are fully productive. Companies can lose more than six months of productivity if an employee leaves voluntarily.
During that transition period, other employees are compensating for the loss in productivity. If that continues for too long and without recognition, it can lead to employee dissatisfaction, which can result in more employee turnover. Once that ball gets rolling, it's hard to stop.
What are some of the strategies for retaining employees? If you search for employee retention, you'll find several articles suggesting ways to keep employees by addressing what they want from their employer. Depending on the article, the most common reasons for leaving include:
Lack of career development
Work-Life balance problems
Problematic Work Environment
Lack of compensation or recognition
These reasons are not insurmountable. Unfortunately, it is difficult to correct these concerns after employees turn in their notice. What if you could address their concerns before they result in an employee voluntarily leaving your company?
According to a 2017 study, more than 75% of the reasons for employee turnover are preventable. If a company only has a few employees, it's much easier to assess their levels of satisfaction and make adjustments before they turn in their notice. It's not so easy when the number of employees is in the hundreds or thousands. How does a company retain employees when the first time anyone knows there's a problem is when they walk out the door?
What if you could address employees' dissatisfaction before it becomes a motivator to leave? What if you could be proactive instead of reactive?
A Proactive Approach
What would a proactive approach to employee retention look like? First, let's look at companies that are already using a proactive approach to customer service. Businesses have been using this approach since about 2015.
Predictive analytics forms the foundation for proactive customer service. Instead of looking back, which is what data analysis did, predictive analytics uses large data sets to predict what will happen in the future. Two areas where predictive analytics is very useful are identifying customer needs and customers at risk.
The most common use of predictive analytics is one everyone who shops online or uses Facebook experiences. If you shop on Amazon for any period of time, you start receiving emails recommending an item to purchase based on your buying history. The predictive algorithm looks at the products, the brands, the price ranges and the last purchase of that type of product. It then predicts what you are most likely to buy.
Another area that predictive analytics is helping business is predicting the customers most at risk of leaving. Companies that know ahead of time that a customer is considering leaving have a better chance of retaining that customer. FedEx uses data to predict which of its customers will defect to a competitor with 60-90% accuracy. Similarly, Sprint is able to identify a segment of customers that is ten times more likely to cancel compared to other customers. By using data to identify the factors that lead to churn and the groups most likely to leave, companies can reach out with targeted messages to get the customers to stick around.
The same process applies to employee retention. If you can identify the issue before it becomes a problem, you can address it and most likely retain the employee.
Managers miss the vast majority of resignations. Using people analytics and predictive algorithms, a proactive approach can identify employees who are at risk of leaving voluntarily more accurately. With predictive analytics, a company can:
Identify employees who are at risk of leaving voluntarily
Identify employees who are experiencing burnout.
Identify employees who are starting to disengage.
Identify potential top performers.
Using a proactive approach, a company can identify who is likely to resign, why they are looking to leave, and what to do to retain them.
Imagine connecting with employees at a time where you can offer solutions instead of at the point they are walking out the door. Imagine providing a proactive solution to employee retention. Why not contact us to learn how predictive analytics can help with employee retention?