What is the cost of losing an employee?
If you’re asking this question, you’re not alone.
Reason being that there is a really good reason to worry about this particular question – from the perspectives of both top management, HR and management.
First, it is crucial for the financial health of companies to be able to attract and retain talent.
Several substantial surveys such as MIT’s newest ‘Toxic Culture Is Driving The Great Resignation’ reveal that currently more than 40% of all employees are contemplating leaving their job.
Between April and September, 24 million Americans left their job under the phenomenon, ‘The Great Resignation’ – a phenomenon which has also started to reach Danish companies.
Losing an employee comes with consequences for the workplace, both financially and for the work environment.
The largest direct financial costs can be traced in the loss of production, recruitment and training of new staff in order to cover the human loss.
Still, it is difficult to ascertain the exact loss. But some studies point out that every time a workplace substitutes a full-time employee, the cost is an average of 50% of the employee’s annual salary.
However, this is merely the directly measurable costs. If you count the indirect costs in the form of lost production, cooperation difficulties and similar issues, the picture appears much scarier.
Having worked as HR Director for many years, I can say that, in HR, we know that losing an employee isn’t only about the money! Losing a great talent cannot only be traced in an Excel sheet, but has substantial consequences for the unity of the team in terms of cooperation, broken friendships and a psychologically bad work environment.
The most important number for HR
In this connection, one number speaks its own clear language when we want to know about employees’ well-being; that of employee turnover rate – or simply: How many employees leave the company, and how quickly do they leave.
The pivotal number in HR.
The number most clearly reflecting the degree to which employees vote in the company and its managers, culture and benefits.
The number which – coupled with the financial costs associated with the loss of an employee and the recruitment of a new one – has been HR’s key to the number- and facts-based discussions within the executive board for years.
Because it is costly to lose one’s employees. No question about it.
Only rarely, however, is a sharp focus aimed at what could be done to lose fewer employees. Even in companies with an employee churn in excess of 25%, information like this does not give rise to making a special effort.
And why is that? There are often two reasons.
One is that it doesn’t hurt enough.
The company and its employees manage to compensate for the large employee turn-over rate and reach their goals nonetheless.
It is off, all right, but not sufficiently off.
Another reason is that something inadvertently happens when you dive into the numbers. The focus of the discussion then shifts from a number reflecting a problem for the whole company to the individual employee.
”Hanne left, yes. But she had worked here for a long time…”
”So Peter left. But maybe it was time for him to try his hand at something new…”
”Well, Jakob left. Men he wasn’t exactly cut out for the job…”
And when it is all about individual employees, it won’t make sense with initiatives embracing the whole company to solve the problem.
But from my perspective, unwanted staff departure may be first and foremost an overlooked problem which can actually be solved using technology as a lever. Let’s take a closer look.
How to make the change
And what does it take to change this?
This is my suggestion: Take action in two areas.
Most importantly, the journey from data driven feedback from employees to action needs to be as short as possible.
This applies regardless of whether we are talking about the mandatory health and safety risk assessment, the employee engagement survey or the leadership evaluation.
It is important to find a digital solution which doesn’t merely deliver data, but also gives you an idea of what the data means, and what actions you can take to proactively prevent loss of key employees.
If you receive data only, much too often the result is talk and good intentions, without any real action or change.
It is also important not to play with closed cards within a narrow group consisting of HR and the company’s top management when it comes to data and insights from the measurements.
If HR wants to create real change, the results must be put to work in all the company layers.
For these reasons, the best solutions go one step further and offer some good advice and recommendations as to how you may work with the work environment and employee engagement on the basis of the feedback from the surveys.
And the recommendations for actions must flow directly to all the layers in the company – at the levels of the individual, the teams, the management and the top management – so that you may work with prevention as a joint effort for the whole company.
And when we have succeeded in making the journey from data to action as short as possible, the next step is to work proactively with the data.
Predictive analytics – tomorrow’s HR
The few – but grey – hairs on my head may reveal that I have worked in the HR business for an unsaid number of years now. And, until recently, we have primarily worked reactively with our employee feedback.
Typically, the process has been like this:
We collect feedback and discover the problems.
We then correct the problems (mostly).
Our modus operandi has therefore been to look back at the data and feedback from various employee engagement surveys. In other words, we have had our backs against the future.
But what if we could work looking forward, peeking into the future and predicting human losses before they happen?
We can actually do this today using – the popular term – ‘predictive people analytics’.
As the name suggests, ’predictive analytics’ uses machine learning to predict the development and future results with the help of historic data.
This gives HR and management a real possibility of looking into the future where they can identify risks and prevent problems that haven’t happened yet – but will happen if we sit on our hands.
The companies are simply given the ability to foresee potential problems and the loss of key employees before these problems arise.
And if you want to reach the very premier league of HR, there is no way around this.
’Predictive analytics’ is the big deal in HR data. And the possibility of putting it to work isn’t just a distant dream anymore, but the new reality that has come to stay.
In just five years, the number of HR professionals skilled at data analytics has risen with 242% (LinkedIn 2020 Global Talent Trends).
And I am certain that ‘predictive people analytics’ will become a significant game changer for the whole of the HR industry, which will transform the way in which we work in HR.
A game changer in the sense that it will enable HR to quantify the effects of their efforts on the bottom line.
By the help of ’people analytics’, HR is enabled to be data-driven in their so-called ‘people decisions’ – spotting signals previously based on intuition only – and to act proactively in managing its area of responsibility.
Further, HR will find themselves able to deliver quantifiable financial gains from their employee engagement strategies with a whole new level of precision and speed than previously seen.
If HR succeeds in making this paradigm transition, companies will not only save an unimaginable amount of money – but will also save an incomprehensible number of people from losing themselves.
And this is worth working towards.
If you wish to learn more about the possibility of implementing ‘predictive people analytics’, please contact me.