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Predictive Analytics For Reducing Employee Turnover - Sanjay K Raj
Predictive Analytics For Reducing Employee Turnover - Sanjay K Raj
Using Predictive
Analytics to Reduce
Employee Turnover
SANJAY K RAJ
Why is Employee Turnover important to Organisations?
Employee Turnover is a major cost to any organization. There is a great deal of cost
associated with employee turnover isolated to not just financial costs from the impending
recruitment and training processes, but also brings with it a high degree of intangible costs
associated with the loss of knowledge capital. Building and maintaining a talented, and
contented employee base can prove to be a challenge as well as an eventual source of
success to organizations. Given the well-known direct relationship between employee
dissatisfaction and employee turnover, and happy employees and happy customers, it
becomes of utmost importance for organizations to understand drivers of employee
dissatisfaction and other contributing factors leading to employee turnover. For these
reasons, it is imperative for organizations to understand the root causes of turnover so that
it may aid them in measuring and predicting turnover, to control and prevent it within
targeted talent and knowledge levels.
The evolution of analytical tools and technology has empowered HR professionals to be able
to influence retention rates within an organization. HR Analytics tools are a focused
extension of analytics and Human Resource Systems that aggregate not just HR data, but
also data from across the company. HR Analytics helps design, and build models that mine
and analyze data for unusual patterns helping to discover new trends and/or statistically
validate behavioral patterns. Traditional HR support systems do provide some insights into
employee turnover, however, HR analytics can point towards the root cause of such
phenomenon more accurately.
Effective Human Resource analytical system enables the organization to analyze the data
generated or collated by the HR systems key metrics to identify trends and perform
predictive modeling. These tools can also be used to help generate the standard turnover
reports that traditional HR systems churn out such as the nature of turnover, whether
voluntary separation or involuntary separation, the demographics of the employees (age,
ethnicity, tenure, skill specialization), the employee-cited reason for separation, and more
but also they are capable of generating a more comprehensive report on the identified
trends and relationships between the employee-data set and turnover.
Need for Understanding the Root Cause of Employee Turnover:
Understanding the root cause of turnover is not an easy task, as its complexity is
compounded by factors like the need for access to accurate, comprehensive data about
employees, their compensation and benefit structures, performance evaluation, training
results, and more, in a timely manner. While many organizations usually do document such
data, however:
i. The sense-making of such data often depends on analyzing the right data sets
in the right way, rather than the focus on collating and adding more
(unnecessary) data into the mix.
ii. The data is usually stored in isolated clusters that each department is
responsible for, making it harder to access them all at once for any analytical
process.
Furthermore, the data itself has to be valid because they form the foundation that analytics
depends on. For example, a meta-analytic study by Rodger Griffeth and Peter Hom (2000)
on turnover found that the employee-stated reason under the construct of intent to leave
for an organization was only true 12% of the time. This casts a doubt on the validity of the
stated intentions, and their use in any analytics in the future. It also implies that there is a
need to understand the true, root cause of the employees reason to quit an organization
before venturing into the domain of predictive analytics.
The commonly used methods for analyzing Employee Turnover are based on statistical
methodologies, some of them being:
1. Logistic Regression:
This form of regression is used in scenarios that have binary outcomes, in essence, a
result of 1 or 0, which aligns perfectly in the case of employee turnover people
either quit the organization or they do not. For this reason, this regression technique
is the most used in creating predictions for a turnover.
In simple terms, logistic regression helps to understand the past by clarifying the
impact that different variables, factors, or events had on a particular outcome of
interest and provides an insight into the future by using those variables, events, or
choices into an equation that can be used to predict the probability that an outcome
of interest will occur.
A downside to logistic regression is the difficulty associated with interpreting the
output of this statistical approach. Said output is usually derived in the form of an
odds-ratio comparison of the likelihood of one groups outcome (quitting an
organization) to the likelihood of another group using the same outcome as a
measure. To convert the derived odds of outcome into a percentage likelihood of the
outcome of interest requires further steps, which can be confusing for those not well-
versed in the language of advanced statistics.
2. Survival Analysis:
This method is also known as an event history analysis and is an advanced statistical
technique used to estimate the probability of an outcome occurring over time.
Historically used in medical science to predict survival rates of patients, this
statistical technique can be applied to estimate turnover as well. Unlike logistical
regression, survival analysis can be used to generate the likelihood of turnover a
specific point in time for a specific employee. This technique can also be used to
analyze and make predictions via tools like R-studio, which helps to visualize the data
for easier sense-making when compared to the logistical regression technique.
There exists a variety of business intelligence tools in the market that utilize and build upon
the above statistical techniques to help an organization predict turnover. A few of the
leading, and more commonly used analytical tools are:
i. IBM Watson
ii. IBM Kenexa
iii. Visier
iv. OrgVue
v. Talent Analytics
vi. HiQ Labs
1. Data Quality:
The most rudimentary problem associated with any kind of analytics is the
dependency on the quality of the data being fed into the analytical process. The
validity of outputs depends on the authenticity of the inputs, which underlines the
importance of the quality of the foundational data.
Exhibits
Exhibit 1.1: IBM Watson
Exhibit 1.2: Visier
Exhibit 1.3: OrgVue
Exhibit 1.4 Talent Analytics
Exhibit 1.5: HiQ
References:
1. Analyzing Employee Turnover - Predictive Methods. Rosenow, Richard. May 9, 2016.