Showcase for a data-driven HR: Understand the business impact of employee’s attrition
Authors: Dr. Stefanie Becker and Matthias Heinzmann, People Insights experts at SAP COO HR
When it comes to #PeopleAnalytics at SAP, we are not satisfied with only tracking numbers – this is just the foundation you need. We are diving deeper into identifying the reasons and drivers for a score (asking ‘Why the trends, patterns or numbers come about’) and by evaluating the business impact that is caused by a certain metric. We strongly believe that by providing such in-depth insights, HR will really make a difference to business strategy as well as to the experience of our employees.
In a recent initiative we achieved exactly this: We were able to identify key drivers and reasons that lead to attrition and show the monetary business impact of people leaving SAP.
First step: Attrition driver and cluster analysis
For three pilot countries, we identified specific attrition drivers by fusing X-data (e.g. coming from engagement survey, or our exit interviews) and O-data (e.g. length of service, compensation components or diversity dimensions). In one of the counties, for instance, the attrition is mainly driven by the tenure of the employees. New employees with low tenure were more likely to terminate their working contract. That is not new insight because pure attrition numbers already show this trend. More interesting, for instance, were the results that employees that take vacations more regularly are more likely to stay. That could be related to a better work-life balance.
Additionally, we also ran a cluster analysis to identify common patterns within the group of leavers. The derived personas helped us to better understand which group of people are more likely to leave, and with that knowledge we can design tailored programs to retain these people.
Second step: Cost analysis to show the financial impact
While an attrition driver analysis can be considered almost as commodity in People Analytics, the more exhaustive part in our analysis was the business impact measurement. It is important to understand why attrition happens. However, it is even more insightful to combine it with the financial impact that attrition creates for the business. With the help of internal expert interviews and best-conservative guesses, we have been able to quantify the financial impact for the respective countries. In one country, for example, the financial impact in 2018 per leaving employee is round about 40,000 Euro, based on country-specific re-hiring costs, onboarding costs, the time that it takes to be productive again and the revenue lost, if the vacancy is not filled immediately.
Third step: Combine both insights for data-driven HR
Having both insights, the drivers plus the financial impact analysis, allows HR to be a trusted and valuable partner in planning and steering the budget for measures to tackle the identified problems and to know where to invest best. Further, to put it into Euro helps to explain to the business the need to improve the attrition scores. One of the piloted countries used the results to drive a new compensation package: Compensation was one of the main drivers for this specific group of employees and the costs analysis supports them to run budget discussion with the business.
The involved HR Business Partners recognized the benefits of such an analysis:
“Through cost analysis, we are able to measure tangible business impact of attrition, and the ROI of retention efforts.”
“Leveraging the power of X+O data, we can better understand WHY people leave and WHO are more likely to leave. With this we can partner with business to drive important talent decisions.”
The driver analysis in combination with the financial impact is a game changer and equips us in HR to really have an impact on the business side.