Employee Turnover Reduction Background:
In December, 2000 a Health Care company of 350 employees was experiencing significant Human Resource related problems. Strategic Consulting Group completed a Human Resource Audit during the first three months of 2001. After reporting the results of the audit, there was a consensus that improving employee turnover was a top priority. In addition to the immediate cost of turnover, It was felt that there would be secondary benefits throughout the organization in operational
performance improvement. This was in fact confirmed when SCG completed a work flow analysis of the staffing process within the company and found that the total costs for each new hire was $10,000. With approximately 140 employees leaving the company per year, this problem had a cost of $1.4 million to the company annually.
Performance Analysis:
The rate of employee turnover was 42%, 40%, and 40% from 1998-2000. The industry average for employee turnover was 32%. A three-year sample by month of employee turnover showed a very consistent and predictable pattern of poor performance. There were temporary improvements followed by one-month setbacks to the original level of performance. These patterns occurred predictably in four-month segments. (See chart below in evaluation section). Subsequent analysis showed that the average length of employment for those leaving the organization was 4-6 months. The activity of the employee during those first few months became a focus of further analysis. Cause Analysis:
A cross-functional problem-solving group was formed to evaluate the problem, analyze causes, and suggest improvements that might be taken. The group had been involved in determining the costs of the employee turnover problem so there was significant motivation in solving the problem. The group brainstormed a list of 50 possible causes. The causes were grouped into eight major categories:
Compensation, Working conditions, Treatment by others, Poor training, Poor supervision, Lack of goals and vision, Poor equipment, and Lack of understanding of career path
These causes also corresponded to exit interview summaries that had been collected during the three-year period.
Intervention Selection and Design:
Each member of the group voted on the top three cause categories. After much discussion and consideration to the cost and likelihood of interventions being effective, the group made
suggestions to:
1. Increase the general new hire orientation program from 8 to 12 hours over a two-day period. 2. Develop a more formal departmental orientation program where the first four months have
structured interactions and informal reviews.
3. Develop supervisory training on related HR policies and procedures.
This combination of interventions was greeted with much enthusiasm. The Human Resources Department took a lead role in working along with operations management to design, approve, and implement each of the three interventions. A sub committee of Human Resources and Operations Management was formed and met monthly. Strategic Consulting Group facilitated the meetings and assured that commitment to the intervention work plan was maintained.
Intervention Implementation and Change:
When the interventions were considered, it became clear that the longest lead time item was the development of supervisory training on HR policies and procedures. Strategic Consulting Group worked with the Human Resources to identify those policies and procedures that were most related to employee turnover causes. We then designed 30-minute modules for each major issue. We determined that we would provide training once/month for each manager and supervisor at each of ten locations throughout the state. Work began immediately on the design of the modules.
Increasing new hire orientation and developing departmental orientation guidelines was easier to implement because the cross functional group had the support of Senior Management within the company.
By July, all interventions were designed and in place to be implemented. As we expected, there were some false starts and backsliding initially, but we developed a natural rhythm and forced ourselves to work through implementation obstacles to move the project forward.
Evaluation:
The following chart best describes the change that occurred in employee turnover. The chart depicts the variation between the new hiring rate and employee turnover.
Variation Between New Hires and Employee Turnover Per Month
-10 -5 0 5 10 15 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D By Month Va ri at io n
4 Mos. 3 Mos. 4 Mos.
4 Mos.
One can see that from August through the end of the year, we experienced five consecutive months of increase in headcount within the company, i.e. employee turnover was reduced compared to the increase in new hires. The cost savings amounted to approximately $70,000 during this period; i.e. we reduced the rate of turnover by the equivalent of 7 positions. Employee turnover has been reduced to 36% still above the industry standard, so we know that there are significant gains to be made during the next few months as we enter the new year.
As is often the case in performance improvement, there is a qualitative side of the process. The Operations Management/Human Resources sub committee sensed that improvement was occurring throughout the five-month period even though there was a lag between activity and quantitative results. They also sensed that the turnover that was occurring was 'good turnover', i.e employees whose performance did not meet the expectations of the company.
The secondary benefits of performance improvement are profound. Operations soon had all positions filled in their staffing plan, something that they had not experienced before. Human Resources became known as a function that had really made a difference in the operational results of the company. Finally, they now have the performance improvement tools and know how to continue making further improvements and monitor results.
Lessons Learned:
• Involvement of those who can most benefit from performance improvement is an asset. • Gaining Senior Management support early in the process is essential.
• Expecting a delay between action and results is difficult but essential. We are not use to thinking that way.
• Ambiguous problems can be quantified and solved with the proper improvement tools, patience, and the support, involvement of others.
August, 2002
It is now eight months later than when the previous material was written.
Employee turnover has now been reduced to 30% on an annual basis. The cost avoidance impact has now risen to slightly more than $300,000 on an annual basis. Planned supervisory training has been completed. The same programs are being offered to new supervisors and employees who are interested in pursuing the supervisory career path in the future. A separate analysis has shown the significance and positive impact of moving to a two-day orientation program.
Finally, the most interesting of all is the emergence of new ideas to reduce employee turnover even further. In our traditional way of thinking, we tend to place limits on the amount of improvement possible. In reality, we continue to learn that continuous improvement can occur and even flourish if realistic goals are set in a data based way, people are allowed to contribute their ideas, and we can learn patience to let the process yield results over time.
While we don’t know the level of future improvement, it will be interesting to see how it evolves. Check back in a few months.
January 2004
Employee turnover has dropped to 28% and been steady at that level for several months. Because of the turnover reduction, employment has risen 20% since the start of the study in mid 2001. As a result revenue for the company has risen even higher during the same period. The company has expanded its operations to other sites.
In 2001 efforts to increase revenue and employment were not available because the company could not maintain or grow its employee base. The demand for their products and services were above their capacity to grow. By increasing capacity the company has become stronger. Future goals have been established to reduce employee turnover even further.
