Part 1 of 3
This is a three-part series about how two Lean Six Sigma teams addressed the same issue – employee retention, but by using the same methodologies and collecting and analyzing the right kind of data, they arrived at different root causes and effective solutions for their organizations.
Employee retention is one of the hottest topics today, but strategies to improve retention often fall short, thus leading to the issue’s persistence. With so many organizations coping with staff turnover and vacant positions, why hasn’t this problem been solved yet? Could it be that managers are not getting to the root causes of turnover, and instead of using data, rely more on simple remedies or well-established industry-wide anecdotes which may have worked in the past, but no longer apply to a younger workforce and different working environments? Let’s review two case studies and try to shed some light on this dilemma.
In 2018, two different, but similar size, hospitals enrolled staff in our Lean Six Sigma Green Belt certification program – one in the spring, and the other in the fall. One of the projects in each class was to increase employee retention. Each organization had tried identical strategies to understand and address the issue to retain staff but were still dealing with 24% and 27% annual turnover levels for workforces of more than 6,000 employees. Following are some of the key elements and findings from these two projects:
Defining the problem was an issue facing both teams. Neither could decide if they should focus on filling vacancies quickly, staffing levels, or turnover. Although these issues are related, my suggestion is always to first “stop the bleeding”. For these teams, it became employee retention. Next, each had to define the term “retention”. We agreed that a successful hire was one that was retained for at least 12 months after the hire date. Each team then collected 12-months’ data and developed line graphs showing performance levels (team #1 – 24% and team #2 – 27%), targets of 14% and 17%, and the resulting gaps of 10 percentage points each. Each team then developed a SMART objective statement (using team #1 as an example) as follows: Reduce the annual employee turnover rate from 24% to 14% by December 31, 2019, to impact strategic goal #3 – “Highly engaged workforce”.
Along with the performance measure and gap, each team had to quantify the financial impact, or the Costs of Poor Quality (COPQ), the gap was having on the organization. Roughly speaking, what was the financial burden for each hospital because of the need to hire more employees each year than the targeted level? For example, if each had an authorized staffing level of 6,000 employees, and the gap was 10 percentage points, then 10% X 6,000 = 600 more hires than the target. If each new hire costs $20,000 to recruit, onboard, train, and support administratively, then 600 X $20,000 = $12,000,000 annually. With the gap of 10 percentage points and a COPQ of $12 million annually, a compelling business case was presented to each leadership team.
End of Part 1 – To be continued
In Part 2 we will discuss how to analyze the process driving the performance gap and collect the best data for identifying the most significant problem.