AT A GLANCE
- Companies with engaged employees are 17% more productive and 21% more profitable than others.
- Employers must keep track of three metrics: Tenure Stability Score (TSS), Performance Evaluation Score(PES), and Employee Value Score (EVS.)
- Leveraging the above metrics to make informed decisions is key to a successful, sustainable, and engaging environment, which yields results and quality outputs.
According to Gallup, companies with engaged employees are 17% more productive and 21% more profitable than others. Thus, organizations must ensure that their internal customers -that is to say their employees- should be well informed about its strategy and direction.
“Companies with engaged employees are 17% more productive and 21% more profitable than others.”
While informing employees is necessary, it is not sufficient. A company should involve its workforce -which is its main asset- in major strategic decisions. That would set an example for ambitious individuals to follow suit and consider themselves the primary stakeholder -rather than just an employee- of the company.
Where are companies doing it wrong? Why is employee turnover inevitably costly, and how can a company make sure that employee churn is at an acceptable minimum?
To understand the causes of employee turnover, let’s take a look at the following stats. According to Gallup, the high-performing companies have 28 percent less shrinkage, 41 percent lower absentee rates, 40 percent fewer quality defects, and between 25 and 59 percent less turnover.
An attentive employer could quickly identify sudden changes in an employee’s behaviour. A recently updated LinkedIn profile, an excessive number of paid leave requests, significant changes in personal life, an increased number of complaints, friction with other employees, and reduced work quality and productiveness are some of the logical indicators of an employee resigning from his/her position.
“The high-performing companies have 28 percent less shrinkage, 41 percent lower absentee rates, 40 percent fewer quality defects, and between 25 and 59 percent less turnover.”
At that point, the employer must make the correct assessment and decide whether that particular employee is to be retained or just let go. But how can a company collect the data, analyze employee churn variables, and determine what should be done to maintain that employee value? Three steps should be followed.
IDENTIFY CONTRIBUTING VARIABLES
First, the employer should summarize the above variables under specific metrics extracted from existing KPIs. Employee Engagement and Organizational Health Survey results could be the main sources for such metrics.
To illustrate, we will take into consideration the following example. A company conducted an Employee Engagement survey and asked several questions, three of which were:
- “How likely would you keep working for the company in the next two years?”
- “Would you recommend working for the company to others?”
- “Are you proud and motivated to work for the company?”
Based on the results, the company created a metric that measures the tenure stability of an employee.
The next step is to check the performance of your staff. The employees’ performance evaluation, the feedback provided by their supervisor, and their communication skills would allow you to get the factors related to the quality of work and attitude.
ANALYZE THE VARIABLES
The above metrics should be summarized into two simple attributes: Each function or department would have a Tenure Stability Score (TSS) and a Performance Evaluation Score (PES).
Additionally, one should focus on the Employee Value Score (EVS), which measures how much value an employee brings to the company in terms of financial returns, intellectual property, initiatives, mentorship, and potential leadership.
For example, for a sales company, the sales target achievements would be the focus of EVS. However, in a Research & Development company, the intellectual property and number of patents issued would take precedence over other factors.
Once all those variables are identified, Talent Management professionals could identify the highest PES employees within a low-TSS-score department. They would calculate the impact of potential churn to a high-performing, valued employee. Talent Management professionals can also identify the departments with the lowest performance and check whether that affects tenure stability. A root-cause analysis should be conducted anonymously through several targeted surveys with a smaller sample of respondents.
DEVELOP EMPLOYEE RETENTION INITIATIVES
At this point, you have all the metric scores; you have identified the main profiles that you want to retain in the firm, and you know the reasons causing tenure stability to drop.
Then, developing initiatives is straightforward. One simple example is setting the budget based on the best-case scenario of employee churn. In other words, if the best-case forecast is the churn of 10 employees, the budget would be set to be ten times the average employee value.
Once initiative charters and their budgets are set, the company should start executing management’s public endorsement and prioritization. The employer must periodically conduct a status revision of those initiatives, assessing their effectiveness in improving tenure stability. If some initiatives are deemed ineffective, either corrective action should be taken, or the initiative must be shut down.
In conclusion, with the rising demands on specific jobs and the shift in the market requirements -especially during the pandemic- companies need to maintain their competitive advantage and retain their employees to the best of their abilities. Leveraging insightful metrics to make informed decisions is key to a successful, sustainable, and engaging environment, which yields results and quality outputs.