The ADP Research Institute is home to a singular collection of valuable resources: detailed payroll and econometrics data on more than 25 million employees, and ongoing sentiment surveys that—so far—have amassed responses from nearly a half-million workers in 29 countries.
Armed with this massive stockpile of information, ADPRI is uniquely positioned to see what’s happening in the world of work. By layering real-time payroll activity with continuing sentiment surveys, the institute provides HR professionals with timely, reliable and meaningful information through our Data Lab blog, our flagship Today at Work quarterly report and other publications.
In August, Data Lab examined the connection between HR staffing ratios and employee turnover. We drew on ADPRI’s HR XPerience Score, a survey we deploy every six months that measures people’s feelings and intentions about the workplace. We also examined billions of observations collected by ADP’s human capital management system to see what circumstances might contribute to those feelings, including wage histories, promotion trajectories and career development.
Finding the HR staffing sweet spot
Our Data Lab report—”HR: How much is too much—or too little?”—showed that HR staffing might have a sweet spot when it comes to employee turnover.
It might not be surprising that companies with the lowest HR staff-to-headcount ratio have the highest turnover. Yet, companies with the highest HR staffing ratios also have elevated levels of turnover.
Does the relationship between turnover and HR staffing ratios mean that companies should push their HR headcount closer to that supposed sweet spot? Or is this just an example of correlation, not causation?
The jury is still out. However, the pattern is consistent across all company sizes. And that consistency makes the sweet spot theory plausible enough that we should dig deeper.
To do that, we looked for corroborating evidence from other sources, including ADPRI’s HRXPS, which ADPRI set out to build in 2020 to measure the performance and impact of HR personnel. In July, the HRXPS survey found that 27% of respondents who left their employer within three months of being surveyed considered the HR division a net negative to the organization. Among those respondents who didn’t leave their employer, only 19% reported such negative perceptions of HR.
Yet even this corroborating evidence isn’t enough to draw meaningful conclusions. Maybe the workers who left had a low opinion of their employer in general, for example, and as such, had a low opinion of HR, too.
Digging deeper, we asked why an HR sweet spot might exist in the first place. The HRXPS survey provided two clues.
First, it showed that employees who interact frequently with HR departments have a better opinion of them. If an employer’s HR staffing ratio is too low, HR personnel might generate ill will if they’re too busy to address employee issues.
Second, the survey also found that employees rate HR more highly when they have a single point of contact in the division. When HR staffing ratios rise high enough, HR employees become specialized or redundant, and employees might become confused about who to turn to for help.
These survey-based insights tell us that future research into the HR staffing sweet spot would benefit from measuring the frequency and quality of interactions with HR.
Acting on the data
While we’ve demonstrated a relationship between HR staffing and turnover and have learned that there might be an optimal HR staffing ratio, there’s no guarantee that employee retention will improve automatically for every organization in that sweet spot.
Among all the responsibilities HR professionals carry out, we found a few that might lead to the biggest rewards. Here’s a synopsis.
An employee’s first introduction to an organization’s brand often comes during onboarding. We asked survey respondents to rate the formality of their onboarding when they were hired. In 2021, employees who had a formal onboarding process were 8.5 times more likely to view HR as adding value to an organization. Employees who had a less formal onboarding process were 2.5 times more likely to view HR as a negative. Welcoming a new employee to an organization is important and sets the stage for years of employee tenure.
Even as many organizations throw out their performance appraisal systems, we find that employees still crave attention. In our survey, employees who received the most frequent feedback on their performance were 4.4 times more likely to say HR was a net positive than those who got no attention. Even though HR might not be delivering that attention directly, an employee who has weekly or quarterly conversations with someone, such as a team leader or manager, will hold HR in a much more positive light.
A single point of contact
Employees who say they have a single, designated HR contact (even if that contact directs employees to subject-matter experts on topics such as benefits and vacation) are two times more likely to say that HR is a net positive than those who say they have multiple HR contacts. And they’re five times more likely to say that HR adds value than those employees who have no HR contact at all. More might not always be better for HR staff. It might be quality over quantity.
Payroll data gives us a 10,000-foot view of what’s happening in the economy. The voice of the employee brings us to the micro level to help us understand what HR professionals can do to reduce turnover. ADPRI researchers are committed to understanding what we can do to make the world of work better for employers and employees.