Data analytics is useful not only to inform strategic decision-making, mitigate risk, and increase operational efficiency but also to help ferret out problems that prompt resignations and contribute to employee turnover costs that are high in the best of times.
Recruiting, onboarding, and training new hires can be expensive. In addition, nonfinancial costs include the loss of skills and lower morale and engagement among remaining employees who must take on extra duties, lost relationships with clients or vendors, and potentially missed opportunities when a team is not fully staffed. The departing staffer also takes away institutional knowledge that a new person may take months or years to gain.
“It all equals to a slowdown in productivity,” concluded Brenda Morris, CPA, CGMA, partner, CSuite Financial Partners, Manhattan Beach, California.
As versions of the Great Resignation play out worldwide, putting companies under pressure to fill open positions, finance professionals can play an important role in using data analytics to reduce employee attrition and turnover costs — with benefits for their own teams and their entire companies. Having a stable and agile workforce helped many companies to be more resilient during the uncertainty and disruptions of the past two years.
Finance team members “are data-savvy and curious, and they have the ability to solve problems with numbers”, said Alastair Woods, the London-based joint global PwC leader for people analytics and partner in PwC UK’s People & Organisation consulting practice. “That’s already a win.”
How to bring to bear your expertise
Here is best practice that finance team members can put to work:
Broaden your perspective
The typical focus for finance and accounting leaders tends to be on timely and accurate financials, good modelling, and supporting business strategies, Morris said. “They may support the human resources or payroll team around metrics for retention or other areas, but most haven’t really used data or predictive analysis to help companies manage employee turnover or loss on a routine basis.”
That is evolving, though, as more sophisticated CFOs and controllers expand their contributions in this area. “There’s a real opportunity, depending on the size of the organisation, to work with HR or the people and culture teams to be a partner from a metric standpoint,” Morris added. Within the finance and accounting team, cutting down on attrition is an important goal given the high demand for professionals. Turnover problems can, for example, affect the ability to close the books quickly, she said.
Also, much of the minutiae of finance and accounting jobs can now be handled by algorithms, reconciliation tools, and systemised processes, Morris said, allowing finance and accounting to add significantly more value. “They can spend time on exception management and analysis, research, critical thinking. Finance and accounting leaders can exercise this muscle,” she said.
Tap into a range of resources to collect data
Employee satisfaction surveys, for example, can tell a company how well someone likes working there, and managers’ performance evaluations can measure employee effectiveness, according to Michael Lieberman, founder of statistical consulting firm Multivariate Solutions and an adjunct professor of market research at New York University.
Many organisations also look at a churn model, which shows turnover, and a cost replacement model, which reveals the expense of losing an employee. Either model can be used to create an average for the entire organisation, or the data can be stratified to look at certain job levels, he said.
In addition, predictive analytics can create an approximation of future retention, Lieberman said. For example, a lifetime value model, usually employed in marketing, can be put to work in the human resources context by using past data to determine, for example, how long people stay in particular jobs. The organisation might then perform regression analysis using employee satisfaction survey data to create the best incentive to keep the employee, he said.
Cost-per-hire metrics that demonstrate the value of avoiding turnover are another important tool because they can motivate organisations to focus on improving retention if they are losing more people than they would like.
Target problems to solve
If a company is facing attrition, it can better address the problem if it knows whether it is happening at certain levels or areas — for example, after a certain length of tenure, with a particular gender, or based on any other attribute patterns in the dataset, Woods said.
For clients, he typically creates a labour map that covers the entire workforce and a heat map that highlights areas of attrition. The heat map can show, for example, which areas hover at a reasonable 5% attrition rate and which are seeing 25% or 30%. “That visual is really powerful,” Woods said. Companies can then determine if the issue causing attrition is compensation, benefits, lack of flex-time or promotion opportunities, ineffective management, transparency about careers, or another concern.
“There are so many nuances within the employee population,” Woods said. “Data allows you to get underneath that.”
Woods worked with one professional services organisation that was facing significant losses of newer employees after the company had already invested a great deal of money in training. Data analysis showed that the point of exit came before employees received promotions. The company was able to lower attrition by creating and communicating a career progression framework that helped people understand what their first five years with the company could look like, which demonstrated that there was a pathway to promotion and larger salaries if they stayed.
In another case, one of Woods’s clients found that the greatest turnover wasn’t amongst people with the highest performance ratings but with those just below that level, mainly people in their 30s who were worried about mortgages and childcare expenses and were seeking higher raises than they had been getting. In this situation, an organisation can decide whether it’s worth offering more money and opportunities to this group or specific valued individuals within it. In both cases, “data is absolutely the key”, Woods said.
Don’t assume the effort is too complex
The necessary tools are relatively simple to implement and readily available, Woods said. The first step is to extract information from an HR information system, such as Workday, into a dashboard. In working with clients, he typically uses bespoke dashboards that are based on a reasonably priced tool such as Tableau. The power is not in the technology tool itself but in the visualisation that’s possible in a dashboard and the ability to manipulate it live.
“With Excel, you have to really interrogate it to get the data you need,” he said. “Now you can have the data all in one place on a dashboard that can illustrate trends across the organisation or in a narrow sector and show the patterns.”
In a small organisation, a junior person could be assigned to set up a process for analysing attrition using these steps, he said. Organisations that are reluctant to make a large upfront investment could begin with a trial subscription to test out the best tools for them.
Don’t overlook the human factor
Analytics are a valuable tool, but they can’t replace professional judgement that can decide, for example, which employees the organisation really wants to keep, Lieberman said. Natural attrition can bring in new people and makes it possible to promote others. “You don’t want a revolving door,” Morris said. “But you don’t want to hold on to all of them.”
Good performance and talent measurement systems can help identify which employees are most valuable. However, organisations should keep in mind that, in some cases, poor performance reviews may reflect low employee engagement. Globally, 20% of employees are engaged at work, according to a Gallup study.
One danger is that organisations will allow good people to leave when better engagement might have made them more effective and productive. A strong interpersonal relationship with a supervisor may help identify — and ultimately keep — these people.
“You can’t get to a place where employee retention can be fully digitised,” Morris said. “People want to be heard and listened to. They want someone to ask how they’re doing.”
A strong employee user experience is another advantage in recruiting. That includes providing updated technology that makes it easier for employees to do their jobs, collaborate, or access important internal data or their own HR information.
Also, counteroffers may keep good employees from leaving. Morris said that many organisations she works with use data analytics and business intelligence tools to gather market data from the internet to analyse comparable compensation for existing internal team members as well as for new positions being recruited for in the organisation. The ability to mine this information allows for real-time salary comparisons to help retain and recruit.
The shift to remote work during the pandemic is another key consideration in setting performance expectations or interpreting performance data. Some people may be able to accomplish all of their work in six hours at home, even though they had remained at their office for eight hours in the past because it was expected, Morris said. That may force organisations to revisit some of the productivity metrics they have used in the past. The key takeaway is that retention will always require a balance between data and personal engagement, she said.
Get a seat at the table
“Information is power,” Lieberman said. “It can allow companies to make better human resource decisions.”
Rising wages and labour shortages have pushed companies to take more interest in retention data, according to Woods. “Anything to slow down the rate of attrition can help the organisation be more effective.”
Some organisations are using agile squads — small multidisciplinary teams with specific focuses — to address issues such as retention, Woods said. Finance should have a seat at that table along with HR and project management experts, he said. “This approach helps the organisation connect the dots between workforce strategy, attrition, and skills gaps, and allows for more targeted interventions that touch on pay, taking a more customised offering to critical individuals rather than a blanket approach.”
Anita Dennis is a freelance financial writer based in the US. To comment on this article or to suggest an idea for another article, contact Oliver Rowe at Oliver.Rowe@aicpa-cima.com.
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