Thursday, 20 August 2015

Employee Engagement Cuts Attrition Rates In Half

Why bother with employee engagement? Sometimes a question is so big, it's nice to break it down into a single, simple example rather than try for the 'big picture approach'.

Hence the reason for this blog. 

I've had the opportunity to work with an employee population over a number of years and see what effect engagement has in a number of different areas - one of which is staff turnover.

Conventional wisdom says that the more engaged a person is within a company, then the less likely they are to leave, and whilst this is true, that's not the whole picture. What is also often omitted from these discussions is that some attrition is actually desirable within an organisation for a multitude of reasons beyond the scope of this particular blog.

So let's take a first look at our population and break it down into some typical 'quartiles' - except in this case we're also going to break out the totally disengaged folks. Those that simply do not participate in any of the people metrics we can gather (and in this case sixteen different measures where used).

Without getting too geeky here, the chart below shows the number people in each engagement quartile - if you imagine a scale of 0 to 100, with the most engaged people scoring 100 - then there are on 38 people in the 75-100 band and 9,770 in the lower 25.

This may come as a surprise to some, but it's a fairly typical pattern. The 38 at the top of this distribution are the 'superstars' of engagement, the culture ambassadors, brand fanatics, cheerleaders and motivators that exist in all organisations and have huge impact on morale (you may know one or two in your company).
Typically, between 5-15% of any organisation are disengaged. They are the people who will tell you (should you ask) that they simply want to come into work and do their job, they don't want their contribution to exceed their role, or gain promotion. This should never be read as a 'happiness' indicator, but accepting that they cannot be more engaged is an unacceptable conclusion. The challenge is in the amount of effort that is needed.

For the sake of statistical stability, and to take some of the 'emotional' interpretation out of this - we'll divide up our population in four (almost) equal quartiles, while keeping our disengaged population separate - and see what happens to each of these groups over two years.

And this is where things get interesting.

In the very first quarter, attrition is four times greater in the completely disengaged group. Although the rest of the population is approximately the same, there is a noticeably higher attrition rate in the lowest engagement quartile too (but no where near as significant).

By the end of year one, the disengaged group attrition is approximately double that of the rest of the employee population, and after two years that pattern is consistent. The chart clearly shows that the more engaged people are, the less likely they are to leave the company - but the significant finding is that even the smallest amount of engagement is enough to halve the attrition rate.

Let's try and quantify this - there are a number of studies that analyse the cost of employees leaving, and the associated recruitment costs. I'm going to use this one by Oxford Economics, published in HR Review last year. It takes into account cost of lost output and recruitment costs and calculates a cost of £30,614 per employee. There are many less conservative estimates which place recruitment costs at between 30-50% of salary, but let's think about that for a moment.

The charts show that zero levels of engagement lead to twice the attrition. Move the engagement needle just one notch, and that problem can be addressed. More importantly that £30,614 cost can be avoided.

1,467 people in this sample were completely disengaged. In the first quarter of this analysis 107 of these left the company. Do the math: 107x£30k = £3.2m.

Stop and think about that for one moment. We know that even the slightest amount of engagement will halve the number of people leaving. Half the number of people leaving = £1.6m.

Not paying attention to employee engagement? Maybe it's time to start.


Geek Note: The relationship between engagement and attrition shows a strong negative Pearson correlation coefficient of -0.61, Kendall's Tau of -0.75 and Spearman's Rho is -0.85.

1 comment:

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