Your search is over. You finally found an ideal candidate after months of screening and interviewing. It took a lot of work (and many awkward conversations), but thinking about your new hire’s potential contributions to the team made it all worthwhile.
However, don’t pat yourself on the back just yet… because one third (33%) of new hires quit their job after about six months. So it’s time to ask yourself some hard questions: What are your retention strategies? Do you know if they work? Who is in charge of retention in your organization? Is it an HR issue, or a leadership issue?
These are all important questions. And one of the best ways to answer them is by using human capital analytics.
What Is Human Capital Analytics?
Human capital analytics (which I like to call people analytics) is the application of data analysis tools to assess areas of organizational performance. Or as Human Resources Today explains, it is “the art and science of connecting data to discover and share insights about your workforce that will lead to better business decisions.”
In practical terms, using human capital analytics helps organizations make decisions based on evidence rather than feelings or intuition. It also helps HR professionals and organizational leaders dispel misconceptions, debunk myths, or (dis)confirm held (but untested) beliefs.
The fact is, you probably already have a lot of the information you need to create a retention strategy based on data. However, knowing how to organize, share, and analyze the data is another story. That’s why organizations that don’t have a people analytics team work with human capital analytics professionals.
But how do data analytics actually help with retention? Let’s take a look at the big picture. Here are three important questions about retention that people analytics will answer:
Three Important Questions About Retention That People Analytics Will Answer
- What is your retention problem and how much is it costing you?
Some organizations know their retention rate, but often the data are not collected uniformly, which doesn’t give you the information you need to see overall trends.
People analytics makes uniform data collection easier and can help you better understand what’s happening with your retention.
Once these data are collected, it’s time to look at who is resigning and the associated costs. Replacing one employee costs the equivalent to two and a half to four times their salary. So when you look at who is resigning, pay attention to their salary too. While it will cost less to replace a new hire, replacing them on a constant basis adds up. Another cost to consider is loss of knowledge. If you are losing your top performers, it’s costing you more than just money.
- What is causing the attrition?
After clearly identifying a retention problem, it’s time to look at what is causing the attrition. Using analytics enables organizations to take a look at what factors correlate to resignation. For example, you could evaluate how compensation ratio, promotion wait time, pay increase, pay increase per gender, performance, performance evaluations, training opportunities, and management opportunities for minority workers, all correlate with turnover. This information can be used as part of your retention strategy, by informing decisions about pay changes, promotions, learning opportunities and more.
- Who is leaving?
Looking at the resignation rates across locations, age, gender, diversity groups, performance level and tenure gives you a better picture of what type of work experience you are providing. This helps decide which programs to invest in. For example, you may identify a large number of resignations from women in middle management across all locations. This data can be presented to leadership to highlight where to invest.
There are also data analytics programs that can determine the potential risk of employee resignation. Let’s face it; you can identify who may leave more efficiently with data than with your intuition. And it’s much easier to stop an employee from leaving than to bring her back. Finally, if these flight risks are management or subject matter expert positions that would otherwise be vacated, the savings from preventing departures can be significant.
After answering these questions, you’ll better understand where to focus your efforts; with the knowledge of what drives people away, you can create an employee retention program. Let’s walk through two common scenarios.
Two Common Reasons Behind Attrition and What To Do
- Lack of Personal Development Opportunities
You may find that your retention issues have to do with the fact that your organization is either not offering training opportunities, or is not encouraging team members to take the time to participate in these programs. In this situation, you would present the data showing this relationship and request an increase in the training budget and/or more time for learning programs.
Once any new programs are implemented, don’t forget to measure the effectiveness of the training programs! You’ll want to look back on that data too, when it’s time to re-evaluate the budget.
- Lack of Career Advancement Opportunities
Your human capital analysis may show that there is a lack of promotions in your organization. This will require a closer look at how promotions are handled in the organization. What are the parameters? Is there a particular age, gender or ethnic group that experiences fewer promotions?
To tackle this problem, set clear promotion goals, measure these goals in the same way for each person every time, and create a compensation plan that gives the same amount of increase to promoted employees. After the implementation of this promotion protocol, measure the data again on a future date to see if you are experiencing the same amount of resignations related to lack of career advancement.
Who Owns Retention?
Deciding who will be responsible for the creation of retention solutions is important. Will this be solely HR’s responsibility? Will leadership be responsible for developing solutions based on the reported data? Will it be a collaborative effort? This is up to you and what’s best for your organization.
The important thing is to clearly define who is responsible for translating data into solutions. Otherwise you might end up trapped in a classic house fire analogy, otherwise known as the bystander effect: If a house is on fire and one person sees it, they do everything they can to put it out. But if a house is on fire and 30 people see it, most wait for the other people to step in and help.
The use of data to make informed decisions is a real game changer. When you’re able to pinpoint exactly what and where the problems are, you have the opportunity to design innovative solutions.