HEALT H WEALT H CAREER

TRENDS AND DRIVERS OF

WORKFORCE TURNOVER

T H E R E S U LT S F R O M M E R C E R ’ S 2 0 1 4
T U R N O V E R S U R V E Y, A N D D E A L I N G
W ITH UNWANTED ATTRI TI ON
16 July 2015

David Elkjaer & Sue Filmer

T O D AY ’ S S P E A K E R S

Sue Filmer David Elkjaer

Principal, Senior Associate,
London Copenhagen

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AGENDA
W H AT W E ’ L L C O V E R T O D AY

1 Workforce turnover trends

2 Drivers of workforce turnover

3 Summary comments

4 Questions

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THE MEASUREMENT CONTINUUM

What is happening? Why and where is it happening?

Simulations
and fore-
casting
Move from “I think” to “I know”
Causation

Correlations
Segmentation
and
Comparisons
Ongoing
reports
Reactive
checks

Anecdotes

Less Powerful Measurement Continuum More Powerful

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EMERGING TRENDS IN WORKFORCE ANALYTICS
WORKFORCE
TURNOVER TRENDS

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 TURNOVER TRENDS
AV E R A G E 2 0 1 1 - 2 0 1 4 V O L U N TA RY T U R N O V E R
United Kingdom Germany China India Brazil US
Key Observations:
16
• In UK and
Germany there 14

V O L U N TA R Y T U R N O V E R
was a increasing
voluntary turnover 12
trend in 2014.
• In growth markets 10
(China, India &
Brazil) there was a 8
more flat trend.
6
• The US followed
the same trend as 4
Europe and there
was an increasing 2
turnover trend.
0
2011 2012 2013 2014*

YEAR
Source: Mercer’s Workforce Metrics Survey (2011 – 2013)
*Mercer’s 2015 Turnover Survey

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 TURNOVER TRENDS
AV E R A G E 2 0 1 1 - 2 0 1 4 I N V O L U N TA RY T U R N O V E R
United Kingdom Germany China India Brazil US
Key Observations:
16
• Across most
markets shown in 14
the graph the
involuntary I N V O L U N TA R Y T U R N O V E R 12
turnover rate is
within a small 10
spread.
• Brazil is the outlier 8
with considerably
higher involuntary 6
turnover rate than
the other 4
countries.
2

0
2011 2012 2013 2014*

YEAR
Source: Mercer’s Workforce Metrics Survey (2011 – 2013)
*Mercer’s 2015 Turnover Survey

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 TURNOVER TRENDS
AV E R A G E V O L U N TA RY T U R N O V E R B Y I N D U S T R Y

Key Observations: Europe Latin America Asia US

• In the consumer goods
industry the highest 16
turnover is in Asia

V O L U N TA R Y T U R N O V E R
followed by the US and 14
Europe and Latin
America closely 12
aligned.
10
• In Energy sector
Europe and Latin 8
America has the lowest
turnover with also Asia 6
and the US higher.
4
• In the Life Science
Industry the turnover is 2
much closer aligned
0
across the regions.
CONSUMER GOODS ENERGY LIFE SCIENCES

INDUST RIES
Source: Mercer’s 2015 Turnover Survey

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 TURNOVER TRENDS
AV E R A G E V O L U N TA RY T U R N O V E R B Y P E R F O R M A N C E

Key Observations:
Europe Latin America Asia US
• Overall the highest
level of turnover is in
16
the medium
performer group

V O L U N TA R Y T U R N O V E R
14
where as the
high/low performer 12
groups are
considerably lower. 10

• If the low performing 8

employees are the
employees which are 6
most reluctant to
leave the 4
organization there
may be significant 2
cost and productivity
0
impact.
HIGH PERFORMERS MEDIUM PERFORMERS LOW PERFORMERS

PERFO RMAN CE GROUPS

Source: Mercer’s 2015 Turnover Survey

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 TURNOVER TRENDS
AV E R A G E V O L U N TA RY T U R N O V E R B Y G E N E R AT I O N

Key Observations: Europe Latin America Asia US

• Across generations
there are different 16
factors driving

V O L U N TA R Y T U R N O V E R
engagement and 14
retention. If
companies doesn’t 12
have a segmented
approach they may 10
see different
8
turnover trends
across generations. 6
• Except for Latin
4
America there is a
clear declining trend 2
as employee age
increases. 0
GENERATION Y GENERATION X BABY BOOMERS
AGE 19 - 37 AGE 38 - 50 AGE 51 - 69
G E N E R AT I O N S
Source: Mercer’s 2015 Turnover Survey

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EMPLOYEE TURNOVER
IS IT A GOOD OR A BAD THING?

‘Good’ - refreshing the organisation:

• ‘Innovate or die’ – bringing in fresh blood and new thinking to keep ahead of the
curve and encourage a thirst for the ‘new’
• Assisting with the management of workforce planning and responding to a change
in skill requirements / employee profiles
• Creating ‘head-space’ for career flows and replacing instances of poor performance
with more effective employees

‘Bad’ - loosing key talent:

• Critical organisational knowledge/skills
• Small pool of external talent for critical jobs / key people / core capabilities
• It is having an impact on the business

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EMPLOYEE TURNOVER
KEY QUESTIONS TO CONSIDER

What is the business impact and where is the business impact of employee
turnover on operations and results?
• Key individuals, specific capabilities or key roles?

Why is dissatisfaction and voluntary turnover happening?

• Pull - Attraction of a new job or new experiences
• Push - Dissatisfaction with the current job, manager or employer
• Pull vs Push: It is rarer for people to leave jobs in which they are happy, even
for more money

How do you most effectively address identified issues for the specific
individuals/capabilities/roles?
• Addressing an untargeted employee population may be ineffective and
expensive
• The issue may be more complex than it first appears
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DRIVERS OF WORKFORCE
TURNOVER

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U N D E R S TA N D I N G E M P L O Y E E T U R N O V E R

Using
Predictive
Analytics is like
driving your car
and watching
traffic through
the front
windshield,
Using Turnover Reporting is like driving
anticipating
your car but watching traffic through the
traffic, making
rear-view mirror, not seeing what’s ahead
course
and thereby in danger of crashing
corrections to
avoid traffic
jams and
getting their
faster and safer.

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S T R AT E G I C W O R K F O R C E P L A N N I N G
M A I N TA I N I N G A F U T U R E P E R S P E C T I V E T O
EMPLOYEE TURNOVER

1 Gain strategic
insights 2 Measure
gap risks
the
3 Model talent
management options 4 Take action
Quantity Quality Location • Attraction
Organisation Talent Talent Development
• Retention
Imperatives Demand (build strategy)
• Engagement
Talent Acquisition
Talent Workforce (buy strategy) • Career
Implications Gaps & Risks Development
Contingent Workforce
(borrow strategy) • Performance
Talent Talent Deployment • Rewards
Supply (transform strategy) • Leadership
Talent Retention • Mobility
(bind strategy)

Demand Scenarios for Risk

Risk Workforce
Workforce Talent
Talent Solutions
Solutions&&
Critical Segments Assessment
Assessment Plan
Plan Ownership
OwnershipModel
Model

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THE WORKFORCE FLOWS
U N D E R S TA N D I N G T H R E E I N T E R R E L AT E D L A B O U R
FLOWS

Attraction Development Retention

Who comes into the
organisation, and who of
these stay within the
organisation?
How successful is the
organisation at growing and
nurturing the talent it needs to
execute its business strategy?
How successful is the
organisation at retaining
people who have the right
capabilities and produce the
highest value?

• Many organisations report on these three areas in silos and struggle to see how they interact
• Workforce maps clearly shows the relationship between these three flows
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 I D E N T I F Y I N G W H AT I S H A P P E N I N G
INTERNAL LABOUR FLOWS

% of terminations
from career level
External hires % of employees with a 12 month
made in the last that had an period
12 month period internal transfer
within the career
level during a 12
month period

Career
Levels

Average headcount at % of employees

career level during a promoted into next
12 month period career level during a
12 month period

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IDENTIFYING WHY IT IS HAPPENING
C O R R E L AT I O N S

Correlation can tell you something about the relationship between variables. It
is used to understand whether the relationship is positive or negative, and the
strength of relationship.

Correlations are often visualised through a scatterplot diagram.

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IDENTIFYING WHY IT IS HAPPENING
S TAT I S T I C A L M O D E L L I N G

CAUSE EFFECT
Independent Variable Dependent Variable

External Influences
• Unemployment Rates, Location,
Market Share and Labour Pool
Organisational Practices Turnover
• Size of facility, Supervision,
Spans of Control, Overall
Turnover of Staff, Risk,
Workload
Employee Attributes
• Age, Gender, Ethnic
Background, Tenure, Education,
Pay Level, Promotion History

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IDENTIFYING WHY IT IS HAPPENING
S TAT I S T I C A L M O D E L L I N G

Understanding cause and effect:

Time 1 Time 2

Percent
Bonus Individual
Employee Bonus Employee Bonus Employee
Bonus
Pay Turnover
Performance Pay Turnover Pay Turnover
Pay

1. Correlation 2. Time (directionality)

A relationship must be The relationship must exist over Closeness Job
demonstrated to exist time (causes precede of Type Tenure
consequences) Supervision

The key is to analyse multiple variables to 3. ISOLATION

isolate those that impact the outcome of Other factors that could influence
interest. the outcome must be accounted
for

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IDENTIFYING WHY IT IS HAPPENING
S TAT I S T I C A L M O D E L L I N G : E X A M P L E O U T P U T
Percentage difference in turnover probability

Less likely to quit More likely to quit

Sup's Span (+10 EEs) 48%

Levels from Sup (+1) 39%

Rating: Needs Improvement 17%

Female 15% Manager’s span of control

Promoted (Grade) in Yr 12% and level were associated
with effectiveness of on-
Hired in Yr 12% the-job training and
Non-white 9%
camaraderie

Tenure in Job (1 more yr) 5%

Base Pay ($70K v $60K) -3%

Stock Option Value ($60K v $50K) -6%

Promotions were associated
Rating: Excellent -12% with small pay increases,
Stock Option Receipt -21% greater responsibility (with
inadequate training), and
EEO: Professional v Mgr -30% better outside opportunities
Own Span (+10 EEs) -34%

Level 4 v 2 -43%

Supervisor: Line>=3 -56%

-60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60%

The models on which these results are based control for individual attributes, organisational factors, and external influences
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P R E D I C T I V E A N A LY T I C S
SCORE AND FORECAST

Once the impact of independent variable is determined, the model can be used to analyse
current employees to create a probability for that employee to quit.

Once a probability has been determined for each employee, aggregate forecasts can be created.
Areas of focus can be identified to help minimise the risk and protect the opportunities.

At Risk Employees

Location Region Employee Predicted AA543755

Count Turnover (next
12 months) AA54827
City O West 230 43.7%
AA485432
City P West 210 40.1%
City Q West 190 31.8% AA852436

City R West 210 32.5% AA9687

City S Central 310 20.7%
AA00342
City T Central 180 35.8%
City U Central 190 27.9% AA99564

City V Central 150 45.2% AA05643

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P R E D I C T I V E A N A LY T I C S
MONITOR
Location Region Employee Predicted Actual
Count Turnover Turnover Turnover is
City O West 230 43.7% 25.3% substantially below
expectation in this
City P West 210 40.1% 43.7% location, based on
City Q West 190 31.8% 38.5% the characteristics
of these employees
City R West 210 32.5% 31.1%
and the statistical
City S Central 310 20.7% 24.7% models.
City T Central 180 35.8% 66.7%
City U Central 190 27.9% 28.2%
City V Central 150 45.2% 48.3%
City W East 210 47.3% 41.4% Turnover is substantially
above expectation in this
City X East 160 45.5% 52.0%
location, based on the
City Y East 170 41.4% 48.2% characteristics of these
City Z East 250 36.4% 38.0%
employees and the
statistical models

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APPROACH

1 2 3 4 5
Issues and Model Score Forecast and Monitor
Hypothesis Optimise

Articulate Use Create and Forecast Monitor to

clearly the statistics to apply a score outcomes compare
employee understand for each for particular deviations
turnover the employee to segments between
issues historical determine the and consider actual and
requiring ‘cause-and- probability strategies to predicted
insight, and effect’ that the manage outcomes
hypothesise relationship dependent risks and
potential event will opportunity.
causes. occur

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A P P LY I N G T U R N O V E R A N A LY S I S
EXAMPLES

Google:
• Has developed an algorithm to successfully predict which employees are most
likely to become a retention problem so that they can act and plan accordingly.

• Also has developed an algorithm for predicting which candidates had the highest
probability of succeeding after they were hired. Its research also determined that
little value was added beyond four interviews, dramatically shortening time to hire.

Hewlett-Packard:
• Has generated a “Flight Risk” score that predicts which worker will quit their job for
each of its more than 330,000 worldwide employees. HP can focus its efforts on
retaining those it wants to keep.

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S U M M ARY C O M M E N T S

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A R M E D W I T H T H E D ATA W H AT A R E T H E
SOLUTIONS?

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FOCUSING THE RETENTION EFFORTS

An Employee Value Proposition represents the total value

an employee receives from their employer

PRIDE/
AFFINITY/
PURPOSE
PRIDE/
EMOTIONAL AFFINITY/ UNIQUE
PURPOSE

WORK
CAREER
PLACE
WORK Potential
PSYCHOLOGICAL CAREER
PLACE DIFFERENTIATED
differentiator

CONTRACTUAL CASH BENEFITS

COMPETITIVE Easy to copy
CASH BENEFITS

WORKFORCE PLANS

CUTURAL ALIGNMENT
BUSINESS VISION

Emotional connection complements the contractual deal.

The greater the emotional connection, the less dependence on contractual components

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QUESTIONS?

Sue Filmer David Elkjaer

Principal, Senior Associate,
London Copenhagen

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