Analytical Report: Employee Turnover

Some information was altered from the original for presentation in a digital portfolio.

Executive Summary

Our company spends more than $15 million dollars a year replacing employees. The candidate pool consists of individuals of younger generations. Nearly a third of the labor market is made up of individuals born 1979 or after, but the same group represents half of the unemployed. Our policies and job roles are written for an older generation that is fast leaving the workforce. With a revolving door of hires, the company risks not only financial loss, but also reputational damage from media inquiries or public relations disasters as a result of the dissemination of proprietary information.

The current methodology for the measurement of terminations may not reveal the full picture. The performance of a replacement employee is the key factor in determining whether attrition is positive or negative for the company, as wages remain constant amongst hires. Current research suggests that job design, transparent communication with leadership and feeling like one makes an impact are key to employee retention.

The solution involves:

  • Studying the younger generation and draft policies appropriately
  • Generate a performance-based report on terminations to study the functionality of employee attrition
  • Third party exit interviews performed for every termination
  • Focus on the new hire experience
  • Provide escalating professional benefits as a result of tenure
  • Penalties for bad hiring decisions.
  • Redesigning the job to create a “hybrid” banker utilizing a variety of workflow

Recommendations for Increasing Employee Retention & Reducing Turnover

Introduction

Each month, a new class of hires enters our building. They go out to their teams underperforming and drag down the statistics of the entire team. This in turn leads to ineffective management resulting from the supervisor giving up hope. “There’s no point in trying, since I’m just cycling through employee after employee” is a common mentality among supervisors. If it’s just a cost of doing business, then “[managers] are also not as likely to be concerned about why they are leaving (Branham 7).” This attitude perpetuates the cycle of employee turnover by fostering an environment that does little to cure the cause.

Purpose

This report answers two questions: What are the leading causes of employee attrition? And what are the best choices to implement in our business that will yield the best results?

This report reveals the:

  • Generational changes of the workforce
  • Ups and downs in the labor market
  • High cost of employee attrition
  • Loss of productivity in the work environment
  • Reasons employees leave their jobs
  • Specific solutions for our business to reduce employee turnover.

Why Care about Employee Turnover?

Labor turnover results in increased training and development costs and a loss of efficiency. In times of high unemployment, replacing a new worker with a qualified candidate can be easy (Smith xvii). In times of low unemployment, finding good people to hire is extremely difficult. Today’s managers must prepare for the hires of tomorrow, look at their attrition differently, recognize the costs of unnecessary hiring, and identify the risk factors involved in a high attrition environment.

Managing in the Generational Gap

Branham states that many managers today were promoted to that rank in the late 1980s and early 1990s, when a plethora of Baby Boomers existed to replace the workforce as employees left. Since that time, the unemployment outlook cycled every few years (6).

The Changing Workforce

The Bureau of Labor Statistics confirms Branham’s findings: the average age of all managerial positions in 2012 was 47.5 years old. That skews higher than the average age of a customer service representative: 36.6 (Bureau of Labor Statistics, “Age”). According to another study by the Bureau, the current candidate pool is made up of those born after 1979. Figure A shows this data and the relationship between age range and employment, unemployment and being withdrawn from the labor market.

Table A – Age Range and Employment Status Source: Data from U.S. Department of Labor. Bureau of Labor Statistics. (2014).

Nearly a third of the labor market is made up of individuals born 1979 or after, but the same group represents half of the unemployed. The labor market is full of candidates whose professional journey has been framed in a different context than current management. In this workplace, many of the leaders started in the entry-level position, but have been so long removed from it they are incapable of performing those tasks. This creates not only a generational gap, but also a skill knowledge gap.

Functional versus Dysfunctional Attrition

Wallace and Gaylor describe different perspective of looking at attrition. “Functional employee turnover is when low-performing employees are replaced with high performing ones, and dysfunctional turnover is the reverse, causing the remaining employees to pick up the slack (27).” In this workplace, the wages stay roughly the same, as most team members are hired at the same starting salary, meaning performance is the mitigating factor in determining whether or not attrition is functional. If a new hire ends up performing better at one year of employment than the team member they replaced, attrition could be a positive option for business.

Wages and other Expenses

Training for a typical employee costs approximately $3,000 in hourly wages alone, not to mention the administrative costs. Two hundred employees leaving without coming into full productivity results more than $1 million dollars in non-productive hourly wages, based on the average hiring salary. Wallace and Gaylor identify other costs, such as overtime paid to existing employees to cover the slack, human resources recruiting and advertising costs (27).

That’s not including costs for:

  • Books and supplies for their classes
  • Headset Orders and other office supplies
  • Hourly wages of support teams granting access to a variety of systems and the training facilitator
  • Opportunity cost of wasted coaching time
  • Fighting an unemployment claim because of poor hiring

Many factors are impossible to quantify, such as the relationship impacts in a team environment and our reputation in the community. The total cost of early stage attrition is nearly $11,000 per team member.

Security Risk

Employees have access to sensitive data. The amount of data they have access to greatly increases the possibility of exposure of company and customer information. We risk not only financial loss, but also reputational damage from media inquiries of public relations disasters resulting from the dissemination of confidential data. The employees should be hired for a long-term position, not a short-term one.

Contagiousness

Smith states “one bad employee will spoil the attitudes of everyone on the team, turn away customers, and even steal you blind (145).” By affecting the peer group, not only is the dissatisfied employee dragging down his or her own statistics, but are also influencing the behaviors of others around them. This will lead to more turnover and poor performance among even the most satisfied employees. They may begin to question why they find value in a job with which others are so dissatisfied. This problem is particularly dangerous when the contagion begins with leadership.

Changing Structure

The more a team member feels he or she is able to have an open dialog with their leader, the more satisfied they are in their position. This Member-Leader exchange model, explored by Brunetto, et al., is difficult to maintain when an individual is assigned to a new manager regularly (2240). From another perspective, the time that is devoted to the early stages of learning and development and rapport building is wasted when an employee leaves the company early in their career.


Solution

Working for a prestigious employer with good pay and great benefits should be rewarding enough to stay, but employees seem to drop like flies. So, if it’s neither of those things, why don’t people last? According to Sirota, Mischkind, and Meltzer, those factors are “achievement” (14), “camaraderie” (17), and “management credibility” (13). Smith argues that management credibility can be achieved by performing three primary functions: “Direction,” “Purpose,” and “alignment” (35). The keys to employee retention lie in the prevalence of guidance and leadership, employee confidence and success in his or her role, and working with others with common goals.

Managers as Leaders

Feeling “valuable” is hard to quantify, but the idea is that there is a reason for the position. When employees feel disconnected with the role they serve in the organization, they disconnect from work entirely.

Communication

By being too passive or directive, leaders miss out on a key opportunity. Each generation tends to produce a different management style. Baby Boomers tend toward micromanagement; Gen X-er’s tend toward a hands-off management style. Brunetto describes “Leader-Member Exchange” theory. The theory is that management relationships that “are characterized by a high degree of mutual support” are the most successful (2239). This indicates that by developing ongoing rapport with members of the team, a supervisor is better able to keep them engaged in their work. Management’s key responsibility is to articulate the “why” behind a call to action in order to get the most commitment from their team members. By also asking for feedback in return, a manager is better suited to find a better solution in the future. This style of leadership is referred to as participative. Authoritative and hands-off approaches lead to poor results in the long term.

Transparency

Branham states that “trust” is a crucial characteristic in keeping an employee engaged and satisfied in their position. “Expecting the company and management to deliver on its promises, to be honest and open in all communications with you, to invest in you, to treat you fairly, and to compensate you fairly and on time. (19)” Being open and honest in communications is crucial. Setting clear expectations about the performance expectations of a job in the interview is the first step to retaining employees. It sets the stage for the rest of their career. If an employee feels they are being coerced into doing a job by discovering negative details later on in employment, they will likely question management more often. This creates an environment of conflict, rather than harmony.

Winning

Everyone needs to be in a job in which they can be successful. Positions need to be designed for people; Branham suggests they lead to higher productivity (65). Higher productivity leads to a reduction in expenses. By hiring the right individuals for positions and creating a job that has a sense of purpose within an organization, managers are able to keep people satisfied in their jobs. This is possible by making a system that designs jobs appropriately, hires candidates that meet the qualifications, and sets clear expectations of performance.

Job Design and Job fit

Without enough variety in the workflow, it’s easy for a monotonous routine to become a minding numbing one. This leads to a lack of productivity as a result of disengagement. Branham paraphrases the research of Richard Hackman and Greg Oldham stating that a position needs to entail “Skill Variety,” “Task Completion”, “Task Significance”, “Autonomy”, “Feedback” (65). Table B summarizes the meaning of each category described by Branham paraphrasing Hackman and Oldham.

Five Qualities of Job Satisfaction
Job Need Description
Skill Variety Avoid repetitive tasks and alternate skills
Task Completion Start to finish ownership of the task, with a clear endpoint
Task Significance Job is tied to the company vision and makes an impact
Autonomy Job offers independence and choice when choosing procedures
Feedback Employee receives results regarding their performance

Table B – The Five Qualities of Job Satisfaction of Hackman and Oldham Source: Branham, Leigh. The 7 Hidden Reasons Employees Leave

These foundational qualities are pivotal in fostering employee retention.


Conclusion

Summary of Findings

The future is unpredictable, but past data can be used to extrapolate what might happen. Given the cycles of employment ups and downs, managers must choose to present their business in the most positive light. Ignoring the motivations behind an employee leaving the company leads to a continuous cycle of hire after hire. By designing policies specifically for the current generation of workers, the company will better hold onto those individuals, who will only grow in numbers of time. Statistical surveys of hire performance ratings over time will help to keep the trajectory positive.

Interpretation of Information

The costs we face as a company are extraordinary. By instituting new programs into our workplace, we can reduce or eliminate the expenses related to hiring new team members. Instead, that money can be spent on employee retention. If we are able to reduce our attrition by 50%, we would have more than $1500 per employee to spend either in the form of recognition, raises, changes to job structure, investment in technology to improve employee enablement and other creative choices. Alternatively, this could represent more than 80 full time employees.

Recommendations

A few low cost solutions are available to be implemented immediately. Other solutions are proposals for long-term job redesigns and will take time to deliver.

Positive Contagion

By identifying the most engaged employees, a manager is able to use those employees to spread the positive culture to others. Liu suggests having those fitting a “positive job satisfaction trajectory … share their work experience with coworkers and to mentor new hires [in order to] facilitate the spread of information on job satisfaction growth.” By using the principle Smith mentions (145) and flipping it around, as Liu suggests, a manager can encourage positive information spreading (1375). Job satisfaction trajectory should be used to analyze a team members satisfaction over time.

Peer Interviews

Branham suggests allowing team members to interview candidates and focus on a particular area of the interview. This panel approach allows for more accurate hires, as it will be based on different angles and allows the team member participating to feel empowered (42). In our workplace, those who have been nominated as the next batch of potential leaders, or at the very least, high performers, could be used in this capacity. This development opportunity would provide a new career skill, and help the company increase the quality of hires.

Attrition Functionality study

By performing a study of the functionality of attrition based on the work of Wallace and Gaylor would be enlightening in our work environment. By observing the functionality of attrition before and after implementing new strategies, our organization will better understand the retention efforts rather than the voluntary/involuntary method used today. If an instance of turnover is seen as functional, further investigation should be performed to identify whether it was a poor hiring choice. Incentive or penalties should be applied for bad decision making in the hiring process.

New Hires

The first point of contact with a team members direct supervisor should be made within the first three days of the new hires start date. Coaching expectations for new hires should be double or triple what they are for a tenured banker. A complete redesign and reworking of existing curriculum should be performed. New hire focus group information should be provided to the training delivery manager or trainer directly.

Third Party Exit Interviews

A member outside the workgroup of the employee leaving should perform interviews for any termination and return the results to the next level manager of the person who terminated. Probing questions should be used to determine the root cause.

Escalating Career Rewards through Training

Tenured employees need to feel that advancement is possible. Liu, et al., suggest considering the employee satisfaction trajectory, rather than just focusing on current satisfaction results. Ensuring an employee will be satisfied as their tenure increases is crucial to their retention. By providing escalating bonuses, training opportunities, and steps toward advancement that are tied to tenure, an employee is more likely to stay (1374). This could be the path toward the Hybrid representative, with training every year.

Generation Y Study and Focus Group

Great attention should be placed on creating an environment in which the younger generation can truly excel. Given the direction of the labor market, particularly unemployment, Generation Y will soon become the predominate part of our workforce. A study should be performed to get a deeper understanding of the desires of those born in the mid to late 1980s.

The “Hybrid” Representative

As common systems are deployed across departments later this year, the ability to create a hybrid representative will exist. The training for these agents would be relatively extensive, and would include a deeper understanding of all of the products. But the training would be conducted over a long period of time.

Skill variety would be introduced by allowing different types of workflows. Rather than operate in separate queues, agents would choose to take phone calls, answer emails, or  respond to written correspondence. By rewarding certain activities throughout the day, the service level agreements company-wide could become much easier to achieve. Giving more empowerment to the employee and giving them complete ownership of a customer’s entire profile would address task completion and significance.