Beta Company

BACKGROUND

Beta Company (a pseudonym) is a leading provider of financial planning products, and services to several million individual and institutional investors, primarily in the US. Through its broker network, the company sells insurance, mutual funds, college savings plans, and personal trust services.

SITUATION

In 2007, Beta Company commenced a program to measure the strategic and financial impact of its human capital. Like most organizations, the firm reviewed summary data – such as overall turnover results – across several dimensions of performance and tenure. Metric-focused discussions with Beta Company’s senior leadership team (including the CEO and CFO) heightened awareness of workforce trends in new hire and high-performer terminations, talent investments, and firm-wide diversity.

Despite success in educating leaders about core metrics, critical questions remained unanswered:

1. Which segments of the workforce deliver the highest levels of performance and engagement?

2. What is the potential dollar-and-cents impact of performance-based turnover, and will an economic upturn increase the risk of high-performer terminations?

3. Is Beta Company losing staff that could be prime candidates for retraining?

ACTION

Equipped with a fast-growing workforce analytics team (rising from 1 individual in 2007 to a staff of 18 people at corporate headquarters and India by 2009), Beta Company began building workforce models to:

1. Understand the relationship between productivity and engagement - Using performance ratings as a proxy for productivity, Beta Company dissected performance and engagement data by gender, generation, business unit, and pay band to estimate the extent of the firm’s “talent degradation.”

2. Forecast quarterly workforce turnover - Across a 3-year period (Beta Company lacked accurate data prior to 2007), analysts used statistical models and data from the Inform i3 dashboard to estimate the probability of an employee terminating at the end of each quarter. Models also included data cuts by gender, band, performance, tenure, generations, job function, and organizational units, along with external unemployment rates, with the results used to calculate an overall forecast of workforce turnover.

RESULTS

Cumulatively, the descriptive results were extremely insightful:

1. Productivity & Engagement

Staff had relatively low productivity in Year 1 of their tenure with Beta Company, rising in Years 2-3.
High performers with 5-10 years of tenure delivered the greatest productivity.
Using tenure- and generation-based cohort analysis (Beta Company did not have access to individual results), the firm found that engagement is highest in Year 1, falls in Years 2-3, and increases in Years 4-5.
Surprisingly, staff with 5+ years of tenure had the highest engagement. The pattern was similar for high-performers, while low-performers generally had low engagement levels across the board.
Millennials had the lowest engagement, highest productivity, highest termination rates, and represented the largest percentage of high performers by generation.

2. Predicting Turnover

Forecasted turnover is a near perfect match to actual rates, even accounting for seasonal variations (typically present in the third quarter of each year).
At many locations, forecasted departures align closely with changes in external unemployment rates.

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