Employee Turnover & Attrition

This week I attended an excellent seminar on accelerating salesforce performance. The seminar was led by Prabha Sinha, who was my professor at Kellogg when I was pursuing a PhD. Later, he was my colleague at London Business School when we jointly conducted the executive education program on sales force. He is the most insightful and knowledgeable person on sales force that I know and has built a large consulting practice in this area called ZS Associates. I encourage you to seek his book or books if salesforce interests you.

In this read, I will discuss one of the ideas he explored during the seminar. While his focus was salesforce, the idea has more general implications.

We often believe that employee turnover is negative, and as a result, deploy simple solutions to solving it such as increasing compensation or looking at quality of life indicators in the organization. Prabha’s big insight was that turnover data is meaningless without the associated performance data on who is leaving. Once one examines the profile of people actually leaving the organization, the following insights can result:

  • If a lot of the leavers are the low performers and the organization has classified them as low potential, then there is a recruitment problem. Fix the hiring as the wrong people are being recruited.
  • If a lot of the leavers are the low performers and the organization has classified them as high potential, then there is an onboarding problem. Fix the training for new recruits and the coaching as people are not being supported adequately after being hired.
  • If the high performers are leaving, then first one must accept that a certain number of high performers will leave especially in industries/functions where mobility is high because company specific skills are few. While some amount of compensation fixes may help reduce this, generally these people are being paid well enough. And, regardless, other recruiters would match any increase. The answer here, albeit not a silver bullet, is availability of career advancement opportunities as well as appreciation and recognition.
  • If everyone is leaving, then of course there are fundamental culture and strategy problems in the organization.

To the above, may I add an insight too. In certain industries, you want to encourage people to leave after some time because of the cost pressures. For example, in low cost airline and retail, companies like Southwest Airlines start with lowest cost structure in the industry. But, over time, inevitably their costs start to rise as the employees become more experienced and older. The annual raises and the increased health care costs for older employees leads to leaving space for a new entrant, like Jet Blue, who hires new young people at lower cost. Furthermore, in these industries, most of the workforce are engaged in front line jobs where greater experience does not lead to superior performance. If anything, employees get jaded over their tenure and the customer service they deliver declines. I have heard that some of these companies have as part of their talent strategy to encourage people to leave after a few years and help them with outplacement.

On a different note, I am not sure how many of you are following the fascinating USA presidential primaries. To understand the support of Trump and Sanders, the enclosed article from The Atlantic is thought provoking. The stagnation of the middle class and in many cases the decline in their financial situation has been disguised by the better “average” income data because of the increased inequality. Nothing like a personal story combined with general data to make it come alive. Nearly half of Americans would be stretched to find $400 for an emergency! And, this is the most prosperous nation in the world by many indicators. The article has gone viral as it reflects what has happened to the middle class over the past three decades because of loss of white collar jobs, increased college and health costs, divorces, lower home prices, and no real savings. Unfortunately, the article goes in and out of open subscription so not sure if you can access it.

http://www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/

Warmly

Nirmalya

Magic Dust

RIP Prince: “A strong spirit transcends rules” “I didn’t dress like anybody, I didn’t look like anybody, I didn’t sound like anybody. We still try to do that. Why do what everybody else is doing?”

3 Comments Add yours

  1. Anonymous says:

    People matters are linked closely with business and how.

    1 Business strategy redefined but org structures and roles and responsibilities fluid
    2 Person non alignment with redefined business strategy and leadership
    3 Mushrooming business opportunities in the economy
    4 Demographic mismatches
    2 Cultural changes and maladjustment
    3 Competency mismatches
    4. Career xpectation mismatches
    5. Higher career aspirations
    6.Startup waves
    7.Inability to adjust to political innuendos
    8.Being assigned an inappropriate role
    9 Inability of appraisal systems to be executed objectively
    10.Absence of good mentors and smart leaders
    11.Role, competency and training mismatches
    12.One bad patch which tags an employee as a non performer
    13.Lack of intellectual stimulation
    14.Mismatch between capability, thinking levels and execution abilities within org
    15. Restructuring
    16. Employee optimisation for profit margin optimisation
    17. Non transparency of people processes
    18. Compensation and benefits upgrades
    19. Many more triggers.

    We can keep adding to this maze and build several tens of scenarios and correlations to understand attrition and remedial measures if so desired.

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  2. Sorry forgot to add my name in the above post hence appears as anonymous. It’s from me Sarah Mathews Chacko 😃

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  3. Jivraj Sandhu says:

    Many People leave to satisfy their “greed” or “scale new heights”. A few may leave because of mismatch of their value system with that of the organisation and quite a few leave for they do not feel like or look forward to going to work place due to host of reasons. Going to work becomes a pain and they exit. t different stages of career the requirements differ and at some stage money and position does not matter – rather it comes to self satisfaction. So if people can find a purpose in what they do and link it up with higher level objectives contributing to nation or society , attrition can be reduced but this has to sync with personal beliefs which get formed in childhood – so catch them young and mould them accordingly. If I am not mistaken Japan has least attrition across sectors & industries.

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