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Can You Guess What Drives Turnover in Your Organization?
By Matthew Such, Ph.D., Chief Scientist
First Advantage
Retaining talent and reducing turnover is consistently a top
concern for organizations. Results of a recent Society for
Human Resource Management survey showed that 63% of
organizations believe that retaining talent will be their largest
challenge over the next three to five years. Pair those results
with recent findings from Mercer that indicate one out of
every three workers is seriously considering leaving their job
and there appears to be a need for organizations to refocus
attention on retaining their talent. 1
it is difficult to translate these findings into meaningful action
plans. Organizations struggle to identify root causes. They
attempt to address turnover, but often do so using reactive
methods, typically based on anecdotal evidence, which
produce little to no impact. These results have led many to
resolve that turnover is just a “cost of doing business.”
Typical Methods for Assessing the Drivers of Turnover
There are two primary methods for determining causes, or
drivers, of turnover – assessing former employees who have
recently turned and assessing current employees. The most
common method for examining turnover drivers is conducting
exit interviews or surveys. This method can provide useful
information about why individuals left an organization, but
response rates typically are low and those willing to respond
may be atypical of those who have left, potentially skewing
results and making it difficult to identify consistent and useful
trends. Further, exit interviews and surveys focus solely on
turnover or why employees may be leaving, yielding little to no
understanding of why employees stay with an organization.
Turnover comes in two forms. It can be involuntary (i.e., when
a company separates an individual from the organization)
or voluntary (i.e., when individuals separate themselves
from the organization). Both types create risk and impact
organizations; however, voluntary turnover can profoundly
impact organizations’ bottom lines in a myriad of ways,
some of which include: increased training costs, decreased
job performance, decreased customer satisfaction, and
decreased effectiveness, and profitability.
The Impact of Turnover
According to the U.S. Department of Labor, the national
average turnover rate is 38%.2 By industry, this rate can be
as low as 6% to 21%, but it is not uncommon for individual
organizations to have turnover rates exceeding 70%-100%.
Turnover costs are substantial, ranging from one to two times
the annual wage for entry-level positions. The cost of exempt
professional, management, and executive position turnover
can be substantially greater and come with additional risk,
such as loss of knowledge, innovation, and leadership.
Estimates place the cost of turnover in the United States in
the billions of dollars per year, while global estimates are
even more staggering.
Assessing current employees using surveys is another method
for examining the causes of turnover. Traditional employee
survey methods (i.e., engagement and satisfaction surveys)
capture current employee perceptions, but these types of
surveys are not designed to predict turnover or retention. As
such, many organizations end up with results that show while
their workforces are engaged or satisfied, they also continue
to leave in droves. These results are surprisingly common
and lead to frustration and confusion over how to address the
issue. Too often, traditional methods for identifying turnover
drivers focus on assessing the wrong individual perceptions
at the wrong times, leading to action plans that are vague or
directed toward areas that will yield limited impact.
Given its prevalence and cost, it is obvious why reducing
turnover is a concern for organizations, but turnover is a
complex phenomenon. Hourly or front-line employees often
have higher annual turnover rates with lower calculated costs
per turn, while exempt positions typically have lower turnover
rates with higher direct costs. This paradox makes turnover
difficult to address with a uniform approach. There have been
hundreds of studies published that examine factors that lead
to turnover. While these studies provide a degree of insight,
1 - Mercer Report: http://www.mercer.com/press-releases/1418665
http://www.mercer.com/press-releases/1430455
2 - US Bureau of Labor Statistics: http://www.bls.gov/cgi-bin/
surveymost?jt
First Advantage
www.FADV.com
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e-mail: tas@fadv.com
Tel: 866.400-FADV (3238)
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Fax: 727.563.2408
Better Methods for Assessing the Drivers of Turnover
If traditional methods of identifying turnover drivers are less
than ideal, what can organizations do to understand employee
turnover? The solution is to employ a data driven method
focused on truly understanding what leads employees to
stay and leave, with the primary focus on understanding
what drives retention, as much as what drives turnover. This
method is built upon several key foundations, including:
Examples of these different factors are listed below.
• D
efining the root cause(s) of retention and turnover
based on measurement of actual behavior
Management-related examples
• Amount of support given to employees
Push and Anchor Factors Pull and External Limit
Factors
Organization-related examples
• Clarity of job/role requirements
• Amount and quality of training
• Presence of growth opportunities
-- Determine specifically what factors drive behavior
versus just how employees feel
• Active involvement with employees
• Clear communication and expectations
• Obtaining actual turnover data is essential to success
Reward-related examples
• Compensation
-- Develop rigor around collecting timely, accurate data
required to predict this phenomenon
• Benefits
• Q
uantifying the costs of employee turnover is critical for
action planning
• Pay-for-performance linkage
Economic-related examples
• Labor market
-- Determine the likely return on investment of different
interventions to enhance retention
• Perceived work alternatives
• D
evelop creative, actionable, and measurable solutions
to address root causes
• Industry and occupational trends
-- Identify and prioritize those actions most likely to
significantly impact retention
Societal-related examples
• Industry tenure
-- Evaluate the actions to determine where to begin and
how to sequence
• Generational factors
Risk-related examples
• Industry instability
• M
ake retention a business challenge, not just an HR
issue
• Industry shifts within markets
-- Equip leaders and managers with information and hold
them accountable for retention-related actions and
improvement
• Search risk and perceived investment required to move
Identification of important factors is the first step, but
to understand what is driving turnover and retention,
organizations need to examine differences in these factors
across the employment lifecycle. For example, new hires
often place greater importance on the extent to which
their new job meets the expectation set for them and how
much involvement they have with their new manager. As
employees settle into their jobs and the organization, their
needs change and often shift more toward having access to
development and growth opportunities. As a result, turnover
and retention drivers should be measured consistently
and within different employee groups to determine what
similarities and differences exist among them and how the
results change over the employment lifecycle. Organizations
should then pair this information from its employees with
actual turnover and retention data. This allows for more
concrete conclusions, helping identify what factors lead
employees to consider leaving and how long it takes for them
to act on these considerations. With a complete picture,
organizations can create meaningful action plans to address
problem areas, and then monitor their impact and adjust
efforts, when needed.
-- Create a task force focused on managing and
measuring retention initiatives
A Better Model for Identifying Root Causes
The data driven model requires data, but what data are
most important? Turnover is a complex issue and the
reasons why employees stay and leave evolve throughout
the employment lifecycle. To account for these complexities,
the data driven model used to identify turnover drivers must
measure employee perceptions and reactions related to
critical job and organizational “Push and Anchor Factors”
and external “Pull and Limiting Factors” that exist outside the
organization. To the extent that job and organizational factors
are important and meeting employees’ needs, these factors
act as “Anchors” keeping employees in the organization. To
the extent job and organizational factors are important and
do not meet employees’ needs, they act to “Push” employees
to consider other alternatives. When factors outside the
organization are important and attractive to employees,
they serve as “Pull” factors. When these same factors are
unattractive to employees, they serve as “External Limits.”
First Advantage
www.FADV.com
n
e-mail: tas@fadv.com
Tel: 866.400-FADV (3238)
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Fax: 727.563.2408
Case Study
A large organization with employees in a range of call center, maintenance, professional, and management roles wanted to
understand why its “highly engaged” workforce (as measured by a common industry engagement survey) was turning over at
an alarming rate, particularly in the first three months, post-hire. Not only did this organization want to understand the problem,
it was poised to take immediate action. This organization’s existing evidence of turnover causes was anecdotal examples
pointing to competitors luring employees away for a little more money. This organization also had invested in various traditional
approaches to identify and deal with turnover root causes but these efforts yielded limited impact.
This organization implemented the data driven method, collecting evidence of employee perceptions and behavior. After data
collection was completed, it analyzed the rich data and created a model of employee retention and turnover. This model made
clear the factors driving employee retention and turnover in the first three months, post-hire. The organization leveraged these
results to create a tangible action plan that included an array of initiatives, such as:
• Updating new hire communications
• Updating training materials and the protocol for delivering training
• Refining the talent acquisition strategy
One immediate action this organization implemented was to implement an applicant assessment process to identify, prior to
hire, talent who would be less likely to turnover in the first three months, post-hire. This assessment immediately reduced early
turnover by 16%, leading to millions of dollars in annual savings. Other intervention followed and their impact was monitored by
a cross-functional team focused on reducing turnover. This team works to continually review, update, and improve processes
that impact employees’ desire to stay with this organization.
Conclusion
Understanding employee turnover and retention should not be guesswork. Organizations can define the factors that drive
behavior and implement plans that yield tangible, high-impact results. Taking this approach allows organizations to keep their
best talent intact, providing an advantage in what is shaping up to be an increasingly competitive talent market.
First Advantage
www.FADV.com
n
e-mail: tas@fadv.com
Tel: 866.400-FADV (3238)
n
Fax: 727.563.2408