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Are you seeing the whole picture when analyzing employee exits?


Employee exits are a perennial people issue for many organizations.  Losing too many employees too quickly and operations could grind to a halt or at least operate sub-optimally, where remaining employees have to work harder to handle the workload across fewer headcounts.  It is not surprising that many organizations track employee exits, typically expressed as a percentage of the workforce, as a means to track and manage such human capital risks. 

Exit rate is not a commonly used term, organizations typically use the terms attrition rates or turnover rates.  Regardless of the terminology used, it boils down to how exits are defined and what is or isn’t included in the measure.  Organizations typically measure a subset of employee exits; and may not see the entire picture and risk being blindsided by such human capital risks.  Employee exits may be broadly classified into the following categories:

  • Voluntary – Exits initiated by the employee themselves.

  • Involuntary – Exits not initiated by the employee.  This includes exits initiated by the organization (termination, re-organization) and untimely employee death (due to natural causes or accidents at work)

  • Retirement – Usually defined by labor laws, typically defined by a specific age.  In many developed nations where populations are aging, these numbers could be quite sizable.

Let us consider each category of employee exits.

Retirements

Employee Retirements are a cause for celebration for a long history of service and achievements in the organization.  As disparate personal events, each employee’s retirement is a cause for celebration; but taken in aggregate, if the numbers are high enough and occur in a short span of time, the retirement of large numbers of employees in the workforce could be significantly disruptive to an organization. 


This is quite common for large organizations with a substantial history in the market; large enough to regularly conduct campus hiring where sizeable numbers are hired in batches straight out of institutions.  Back in the day, many would probably stay with the company for long periods of time, sometimes the organization would be their only employer in their career.  However, in today’s job market, employees are less willing to stay with one employer preferring to switch jobs throughout their career; and while employers still do some campus recruiting, it is not at the same scale as before.  Over time, some of these large organizations get a nasty surprise when large batches of such employees reach mandatory retirement age, which leaves them scrambling to manage through the capacity crunch. 


The good news is that employee retirement risks are quite predictable, if organizations pay attention to it.  The employee age profiles should provide plenty of lead time for organizations to prepare for the eventual exits and scale up capacity along the way, even with early retirement as an option.

Involuntary Exits

Refer to exits that are NOT initiated by employees; that said, it isn’t always due to the employer, though employer-initiated employee exits do make up the majority in this group.  Employer-initiated exits could include:

  • Terminations - Where employees are asked to leave due to persistent poor performance or violation of regulations.  Note that such decisions are usually not taken lightly, and both employee and employers typically have had some time to

  • Reorganization - When organizations go through changes in strategy or processes, some jobs/roles become redundant while some new roles emerge.  Some employees may lose their jobs as a result. 


While this may be a morbid topic, but employee death and disability could be considered another form of involuntary exit.  Untimely employee deaths could occur due to

  • Accidents or incidents at work – Some could be attributed to lapses in safety or misfortune despite the complying with safety measures.  An independent investigation will determine which it is.  Most organizations have some form of insurance to cover for such instances.

  • Pre-existing health conditions and natural causes – Some employees are employed with pre-existing health conditions, which could be a contributing factor to their untimely death during employment.  In most cases such deaths occur through no attributable fault of the organization; but some employees pick up health conditions because of prior roles in their careers.  Again, organizations typically have some form of insurance to cover for such instances.


Regardless of the cause involuntary exits, a detailed analysis of the patterns in employee deaths could reveal potential human capital risks.

  • Terminations – A large or growing number of terminations might suggest a performance management or talent selection gap in the organization.  If terminations show a persistent pattern, it might also result in a poor reputation in the job market, discouraging potential candidates from applying.

  • Reorganizations – When reorganizations happen too often and in large enough numbers, potential candidates take notice and organizations may gain the reputation of not being a reasonably stable place to work.  As a result, the organization might find it harder or more expensive to attract the right talent down the road.

  • Accidents or incidents at work – In higher risk roles, some accidents or incidents will occur even with the best of safety practices.  Persistently high numbers, especially is the fatality and injury rates are higher than the industry, could prompt investigations and enquiries by authorities which could prove to be costly in terms of potential fines, loss in reputation and being less desirable place to work.

  • Pre-existing health conditions and natural causes – As they say, no one can escape death, especially as employees age.  While insurance covers the risk exposure; but it is worth paying attention to employee deaths and disabilities for long tenured employees. There is potentially grounds for employees to cite occupational disease resulting in their pre-existing conditions, deaths or disabilities. 

Voluntary Exits

Refer to exits that are NOT initiated by employees, and typically this represents the bulk of employees exits for most organizations.  This is typically initiated by a letter of resignation from the employee to the employer; while this covers the contractual formalities, employers are more interested in the reasons behind resignation.  Most organizations typically conduct an exit interview as part of the exit process, to tie up any loose administrative ends but also to gather intelligence and context behind the reasons for leaving the organization.  Most organizations religiously collect and collate this as part of their HR information systems. 


Unlike personnel data like date of birth or date of joining, which are indisputably accurate; data for reasons for leaving is subject to how honest the exiting employee had been in the exit interview.  It is well known public secret among HR professionals that most employees do not report their reasons for leaving honestly.  The future is uncertain, exiting employees may eventually choose to return to the same employer sometime later in their career.  In the interest of keeping their options open, many exiting employees may choose to report politically correct reasons for leaving as opposed to the honest reasons. 


Politically correct reasons for leaving could be defined as reasons that is believable while not hurt the feelings of the interviewer or the organization in such a manner that could hurt their future chances of employment with the same organization.  These could include, better paying job, better career prospects, personal reasons or to further their studies; as opposed to leaving because the employee hated the manager, job, the culture etc. On this basis, the exit interview data collected is suspicious at best; and there is no practical way to sort out the truthful from the politically correct reasons.  And yet, when organizations need to address employee retention; this is often the first place for organizations to look for inspiration.

One of the first challenges is that there is often no practical to prove that the existing exit interview data is unreliable, even though many HR professionals suspect so.  And the absence of such proof, exit interview data is a better alternative to not doing anything at all.  

FYT had the rare opportunity to explore this very challenge for a large client and validate to management and to HR the accuracy of the data as the basis for employee retention.  We started with the exit interview data captured in the HRIS over 1 year; and the data suggested the following profile of employee exit drivers.

Management and HR had 2 key questions about the data:

  • Is the exit interview data representative of the real drivers of employee exits?

  • If it is representative, how can it be used to better manage employee retention?  If it is not representative, what can they do about it?


The challenge was to develop a method to objective collect the “real” reasons for leaving the  organization and compare with the system data; if the exit interview data is representative of the “real” reasons for leaving, then the profile of drivers should be similar.  Using available contact information, FYT called up each employee that exited the organization in the last 6 months and interviewed them to better understand why they left; this was on the conditions that the findings would be presented in aggregate form only and anonymity would be guaranteed. 


The Upper donut chart shows the proportional key drivers for employee exits, excluding those who gave no documented reason for leaving.  The Lower donut chart shows the data collected from interviews with the employees who exited in the last 6 months.  Without any further judgement or analysis, it is clear that the left chart is quite different from the right chart; and on that basis we concluded that the exit interview data captured in the system is probably not representative of the reasons for leaving and that any employee retention strategies using the data would be misleading.

This leads us to the next question, “what can the organization do to collect better intelligence on drivers of employee exits?”  The post exit interview process was very time consuming and costly; it would not be practical to do this annually.  But the gap in intelligence gathering was still an issue that needed resolving.  After much discussion, the client agreed to take the following approach:

  • The organization will continue to document the reasons for leaving based on employee input during the exit interview.

  • The HR business partner will also include what they perceive to be the real reason for leaving based on discussions during the exit interview.

    • While this is not accurate as well, but it is better than the reason provided by the employee.  It eliminates the employee’s self-interest when documenting the reason for leaving. 

Key takeaways

  • When looking at people issues (employee exits of otherwise), it is important to look at the whole picture, not just the pieces and parts.  In some cases, the omitted parts could prove to be the crucial factor in the analysis.

  • Even when there is data available for analysis, HR should consider the underlying basis of how the data was collected, what it means and how reliable it is for the intended purpose.  The number of employees who left the organization is not subject to further interpretation, but the documented reasons for leaving could be subject to significant interpretation and reinterpretation.

  • Data and metrics without context does not provide meaningful insight.  Employee resignations are typically cause for concern, since the loss of any employee is not desirable; which is a great soundbite.  A better question to ask is if the resignation rate is significantly different from the industry.  High or low employee movement in and out of organization could be par for the course in some sectors.


For more insights to FYTs research you can either click the link to see our past research here or you can simply contat us here.

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