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Measuring Quality of Attrition Helps Spot Unwanted Turnover

March 8, 2011 | Pamela Babcock

When it comes to HR analytics, simply tracking employee turnover isn’t enough. High-performing companies use quality-of-attrition metrics to drill down and determine the extent to which they might be losing their most valuable employees and those in positions critical to their company’s future.

“This is HR’s method to tell the story—more than just the number of employees who are no longer with the firm,” Mary Ann Downey, i4cp’s human capital management practice leader, said in a Feb. 24, 2011, webinar presented by Seattle-based Institute for Corporate Productivity (i4cp.)

It pays to get at things like voluntary, involuntary and controllable or uncontrollable attrition. But managers also are interested in turnover in “critical” roles, “regrettable” terminations and turnover of high performers and high-potential employees, Downey said.

Anticipate Post-Recession Attrition

When it comes to voluntary attrition, the recession has actually had “positive” effects, according to i4cp Senior Researcher Carol Morrison, who also participated in the webinar.

In i4cp’s September 2009 Employee Turnover and Engagement Pulse Survey, 72 percent of the 286 respondents said turnover had remained the same or decreased in the previous year, and approximately 70 percent of those respondents attributed that to the recession.

But businesses fear that as the recovery progresses, turnover could increase. In a November 2009 i4cp Retention Strategy and Execution Pulse Survey, 76 percent of the 254 respondents said they were concerned about their ability to keep talent on board as market conditions improve, Morrison said.

The i4cp reports comprise findings from surveyed member companies and the organization’s panel of approximately 20,000 HR professionals. Most of the surveys target a niche audience within these groups, thus partially explaining the small sample sizes.

Morrison conceded that given the economy, “it’s hard to get management’s attention regarding cost-of-attrition or other human capital metrics.” She acknowledged that this is a challenge in organizations with long-tenured employees and traditionally low attrition.

Measure Quality of Attrition

Attrition, which typically reflects total voluntary and involuntary turnover, is the most common human capital metric that organizations measure, Downey said, noting that a March 2009 i4cp HR Metrics Surveyrevealed that high-performing companies measure more than do low-performing ones.

But an April 2010 i4cp Talent Management Measurement Surveyabout uses of a half-dozen metrics (see sidebar) that assess separation found that only 24 percent of the survey’s 426 respondents said their companies use high-performer separation rate to a “high” or “very high” extent, though approximately 77 percent said they should. Interestingly, that metric netted the greatest proportion of respondents.

Quality-of-Attrition Metrics

The separation metrics presented in i4cp’s Talent Management Measurement Surveyinclude the following:

Regrettable termination rate—employees who left the company but who the company had planned to retain.

Nonregrettable termination rate—employees who left the company whose departure did not hurt the company.

Controllable separation rate—employees who left for a reason that, if known, the organization might have been able to address (e.g., dissatisfaction with career opportunities).

Uncontrollable separation rate—employees who left for a reason that, even if known, the organization could not have prevented (e.g., spousal relocation).

New-hire separation rate—employees who left the organization in a specified period after their hire date.

High-performer separation rate—employees designated as high performers, as determined by organizational performance evaluation ratings, who left the company.

Source:i4cp’s Quality of Attrition white paper, 2011.

Far fewer respondents said their companies look at things like controllable and regrettable turnover. For example, approximately 15 percent of high-performing companies said they measure “controllable” separation, which Downey defined as someone leaving for lack of career opportunities or salary dissatisfaction. However, 63 percent said they should measure it.

Likewise, just 30.6 percent of respondents said their companies measure “regrettable” termination rate, though nearly 68 percent said they should measure it.

“These results suggest that companies recognize that attrition metrics have value to offer their firms,” wrote Downey and Morrison in an i4cp white paper, Quality of Attrition.

“However, it also points out how far organizations have to go in order to capitalize on that promise.”

Better understanding of when attrition occurs and in which employee groups can help organizations to take action in areas that can strengthen overall organizational performance, they wrote. For example, understanding the factors that precipitate uncontrollable departures such as loss of employees because of spousal relocation can lead to development of policies and procedures such as telecommuting that can help lower such losses.

Similarly, investigating trends in regrettable separations might help an organization identify an ineffective manager or a department in which working conditions don’t support talent retention, they contend.

Keep Scorecard Stats

Downey said in her webcast that i4cp recently developed a quality-of-attrition scorecard designed to help organizations:

* Define (or segment) the employee population with management’s input to find out “which populations are near and dear” to management’s heart.

* Determine how to track selected populations.

* Establish baselines so management understands “how these calculations are going to happen.”

* Provide overall exit and hire data, including monthly exits by selected employee segments.

* Provide monthly hires and transfers to selected employee segments when possible.

* Set targets for selected populations.

But remember that targets are just one factor, Downey reminded. “If you put too much stress on targets, that’s when it seems to become punitive and not a tool that will assist the manager.”

A hypothetical scorecard might show the overall number of employees, with attrition data and new hires broken down into those critical roles, high performers and “regrettables.”High performers are typically determined using the performance management process, while “regrettables” are often loosely defined as employees that “the management team really cares about” and would be sorry to see leave the company, Downey said. But many employees fall into several or all of the categories and could be counted multiple times, she added.

To lend context to an organization’s quality-of-attrition story, Downey said, it’s critical to produce a narrative about what data show. Using hypothetical data, such a narrative might sound like this:

“In the past year, a total of 475 employees left the firm (or 15.4 percent). While critical roles account for 21 percent of the workforce, only 11 percent of the attrition was from critical roles. Meanwhile, high performers account for 36 percent of the workforce, and a respectable 31 percent of the attrition were high performers. A significant percentage of critical employees left in April after bonuses were paid, while the highest percentage of high performers/valued employees departed in August.”

“Leaders should know they’re accountable and responsible for attrition,” Morrison said. “Regularly providing them with consistent data reinforces this idea and helps them take ownership.”

Pamela Babcock is a freelance writer based in the New York City area.