Escape the Benchmark Data Trap and Calculate Turnover’s Real Cost

Might you and your top team compare your turnover or engagement data to an outside group, maybe by way of data you buy?  Or maybe by using comparison data that comes from your engagement survey vendor? Or maybe you obtain comparative data the old-fashioned way by contacting other companies to ask for it?

It Matters Where You Get Your Employee Engagement Data From

Many companies seek out this data, either as part of their engagement survey results or as a separate purchase. Those companies are already accustomed to securing benchmark data for operational areas like sales data, quality data, and more…so it seems right to make the same commitment to comparison data for employee retention and employee engagement.

Let’s focus first on employee engagement, where most survey companies will include comparative data in their contracts. So if our data source then becomes ABC engagement survey company because they are our vendor, then our only comparison data is from companies that also use the ABC engagement survey company. And of course we are also bound by that vendor’s engagement survey metric scale which might be different than for other vendors’ engagement survey scales.

To highlight this issue of measurement metrics, Gallup frequently points out that other survey vendors’ scales produce higher engagement scores because Gallup grades more conservatively. For example, Gallup places each survey outcome into one of just three metric categories which are engaged, not engaged, and actively disengaged…one positive, two negative…whereas other vendors might place survey outcomes for example into five categories for which two or even three might be classified as positive, as “engaged”. So again, your comparative benchmark data is restricted to just those companies that contract with your same vendor. And that could be a small number of companies, and if the comparative data pool is small then the comparative data might include companies across all industries instead of just your industry.

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Further Reading: To Cut Turnover, Survey Results & Benchmarks Don’t Matter

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The Major Employee Engagement Benchmark Problem

The bigger problem, though, is that somewhere along the way the average scores have become the goal. Regardless of whether your employee engagement benchmark group is large or small…depending on the vendor you choose…if the benchmark score is let’s say 62 and your company also scores 62, then the assumption can easily become, “If others scored 62 and we scored 62, then we must be doing pretty good because 62 must be the best that we all can do”. Or if you beat the benchmark by one point, then you might see yourself as the head of your class.

For engagement surveys, ask your vendor to compare you to their top ten percent, and strive to earn your way into that group.

How Turnover Benchmarks Go Awry

Imagine these contrasting conversations regarding turnover data:

Turnover-reporting scenario #1

HR: “Our annualized turnover is now just 18%, and according to benchmark data we are ahead of our peers.”

CEO: “Great work, Monica!”

Turnover-reporting scenario #2

HR: “Our annualized turnover is now just 18%, and according to benchmark data we are ahead of our peers.”

CEO: “Great work, Monica!”

HR: “This means our annualized turnovers’ overall costs are now down to just $6.2 million.”

CEO: “What did you say? Let me see those numbers. We have to do better!”

Reporting turnover in percentages only is speaking a foreign language to executives whose minds are trained to think in dollars…which results in their placing more value on comparative benchmark data than they should. Because there is no universal standard for turnover percentages, the external benchmark becomes the standard…so reporting turnover in dollars makes fixing turnover more obvious, more of an emergency.

Many executives see turnover like rush hour traffic, something that is inevitable so they must work around it…until they grasp turnover’s cost which drives them toward real solutions. Besides, uninformed CEOs believe turnover is driven by pay and benefits so they feel very OK about staying in the middle of the pack rather than increasing their company’s costs. Except that pay has little to do with why employees leave, and benefits mean even less.

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Further Reading: Should Referral Rewards Correlate to the Cost of Talent Turnover?

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Two Guidelines for Moving Forward Measuring Employee Engagement and Retention

Guideline #1 is always compare your company’s performance on engagement and retention to your own past measurements versus any other company’s performance.

The missing piece here is that very few organizations establish an actual turnover improvement goal…and far fewer establish an engagement improvement goal. So “doing better” by itself will never be enough. Your company’s very important operating metrics are all connected to goals at the company level and often-times at department levels…or even individual employee levels…and performance against these goals is reported frequently. The same must be done for employee retention and engagement.

Guideline #2 is that reporting turnover in dollars removes any reference to outside comparative data. And you can use our proprietary turnover cost algorithm today to place the cost of turnover on any of your company’s jobs: https://c-suiteanalytics.com/cost-calculator/

And btw, I am copied on and study each turnover cost entry, so I’ll be glad to reply to you with suggestions to improve your entry if I spot one or two. Enjoy!

Employee Retention for Organizational Success

If you know you have to address turnover or improve engagement, but aren’t sure where to start, email me at DFinnegan@C-SuiteAnalytics.com and I promise to offer specific ideas to jump start your employee retention strategy based on your current status and goals for 2025.