We are living in a time of scarcity. Not only resources like oil and gas or goods that cannot be transported due to the pandemic-related supply chain disruptions, but also a shortage of qualified workforce across many different industries. The airline industry is lacking tens of thousands of service personnel in Germany. Qualified engineers are more scarce than anything else in Europe’s economic powerhouse. Finding qualified software engineers in the post-pandemic remote work world where you compete worldwide with other employers for a very limited talent pool is a pain. And it costs your organization every day.

Hiring Costs

According to Gallup, the costs of replacing a qualified employee range from 50% to up to 200% of a year’s salary. Let’s say a qualified senior software engineer in Germany who makes 80k€ p.a. quits a mid-sized company, this costs the company around 72k€ to replace them (if we assume only 90% replacement costs). These costs consist of different components:

• Direct hiring costs
• Onboarding costs
• Indirect costs due to the lack of productivity
• Vacancy costs
  

Direct hiring costs are what you think about first when you want to find a new employee: creating paid job posts on LinkedIn, having recruiters find candidates, having senior staff interviewing, and eventually creating contracts. 

Onboarding costs refer to all the costs your company has directly in the process of getting a new hire up integrated into your organizational structure. This includes everything from security briefings and IT onboarding to purchasing new work material and introductions to the team.

Indirect costs are often overlooked but make up the overwhelming majority of the costs. An employee that worked only 3 years for your company spent a significant amount of time learning your processes and products insight out. They know the social dimension of your organization. If you need to get something done quickly, to whom do I go? Who is the expert in a domain that can help me most efficiently? A new employee has to learn all these things from scratch. This knowledge that you cannot get from a university, but only when you are there and work. 

Vacancy costs are pretty simple: when you don’t find anybody for a job, the work does not get done. In the best case, motivated colleagues take over some of the responsibilities of the colleague that left. But time is not stretchable. A qualified professional missing is a qualified professional’s work not getting done.

Address the Symptoms or Cure the Source

When you realize your company has a high turnover rate (people quitting and replacing), you can do two things:

1. Fill up your pipeline of candidates so that you have somebody lined up soon after some
2. Make your people stay longer in your company
   

These approaches are fundamentally different. One addresses the symptoms (a need to hire more people fast) and the other one cures the source (people quitting) that got you into the situation in the first place. Both approaches are valid, but long term, the most sustainable approach is to keep people in your company.

Understand Why People Quit

According to Indeed  the 10 most common reasons for people quitting are:

1. Needing more of a challenge
2. Looking for a higher salary
3. Feeling uninspired
4. Wanting to feel valued 
5. Seeking a better management relationship
6. Searching for job growth and career advancement
7. Needing more feedback or structure
8. Wanting a different work environment
9. Looking to live somewhere else
10. Feeling conflicted with workplace policies
    

But how do you know those reasons before your people actually quit? Through some sort of intelligence. The human intelligence and emotional competence of a manager to „sense“ when somebody is unhappy is one part of this. Empirical employee surveys are also a sort of intelligence. But there is a new tool that many organizations do not utilize: artificial intelligence.

Privacy-preserving AI to the Rescue

Your organization already sits on a lot of data that can be used to predict who is going to leave when and what their drivers are. Your typical HR data gives you an indicator of salary and employee development, but there are so many sources that can give you insights. Employees who want to leave often reduce their engagement in their work before they leave. You can see this in data: people being less responsive to emails or Slack messages, people not showing up at meetings, or being late. And if you are a mid-sized company, the chances are high that you have that data already. Why not use it?

At People Horizon, we build an AI tool that helps you predict which of your employees will leave and what their drivers are. With our bring-the-code-to-the-data approach, you do not run into any privacy or compliance issues because data never leaves your premises. People Horizon supports HR departments, managers, and decision-makers at a scale to keep the most valuable employees in your company: those who want to leave.

Sounds interesting? Get in touch with us!

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