PwC Saratoga Finds High Turnover within Key Roles

July 29, 2011 ( – The PwC Saratoga 2011/2012 US Human Capital Effectiveness Report finds that at 7%, voluntary turnover rates continued the year over year decline seen between 2007 and 2009, although the drop was less significant.

Between 2008 and 2009, voluntary turnover results decreased by more than 20%, while the decrease between 2009 and 2010 slowed by slightly less than 3%. Despite these declines, PwC Saratoga projects the overall voluntary separation rate will begin to rise next year when analyzed against historic, current, and projected economic figures such as the unemployment rate and GDP, increasing to 8.7% by 2013.  

When combined with the projected increase in voluntary turnover for the overall workforce, these results suggest that workforce shortages loom for organizations that have not optimized their talent management programs, the report said. Key segments within the workforce such as sales professionals and high performers (defined as the top 20% of employee base) have already begun to experience the predicted upswing.  

Reversing a trend that began in 2007, turnover rates are up for these and other pivotal roles, suggesting that key employee groups are beginning to seek opportunities elsewhere. According to the report, this is important to note, as historical trends show that high performer and sales turnover were approximately one-third higher prior to the recent recession.  

Generation X Now Dominates Workforce  

The report showed Generation X surpassed the 50% mark for workforce representation in 2008, extending its participation to 53% in 2010. Amid Baby Boomer retirements, Generation X has become the largest workforce presence.  

Although the influence of Generation Y is increasing, Generation X outnumbers the relative newcomers by more than five to one. Current economic challenges and the decrease in retirement savings that have affected many workers have slowed Baby Boomers’ workforce exit. Between 2007 and 2008, the percentage of Baby Boomers in the workforce decreased from 44.5% to 39.2% (a decrease of 11.9%). Between 2009 and 2010, Baby Boomers’ workforce share dipped another 2%, from 36.3% in 2009 to 35.6% in 2010.  

However, Generation X will dominate the workforce for years to come, increasingly comprising senior leadership ranks and requiring substantial organizational attention, according to the report. Generation X’s influence can already be seen in average tenure findings.   

Contrary to widely publicized accounts, average tenure has not decreased because of Generation Y’s workforce participation and a perceived tendency to act as free agents who skip from employer to employer. Over the past dozen years, average tenure has actually increased. While results fell between 2006 and 2007 (from 9.5 to 8.4), and then again between 2009 and 2010 (from 10.1 to 9.4), the long-term trend clearly suggests that workforce tenure is on the rise. Average tenure may fall as Generation Y establishes a greater workforce presence, but this group might come to seek job security as it enters a life-cycle phase characterized by starting families and other increased responsibilities.

Change in HR Delivery  

The PwC Saratoga 2011/2012 US Human Capital Effectiveness Report finds that as more and more organizations look beyond the United States to boost revenues, there is a change in how HR organizations deliver their services. Post recession, PwC Saratoga has seen more organizations moving to a global delivery model for HR services. For example, one major global firm has located most of its HR customer service staff in Central America to support the United States, Canada, and South and Central America. This delivery model not only lowers the cost of delivery by removing redundancies, but it also provides a greater level of consistency in service delivery to staff.  

The report explained that previously, when U.S.-headquartered entities expanded outside of the United States, they delivered many centralized services from the United States, supported by generalists/centers of excellence operating in each country or region. These regional delivery models increased HR service delivery costs.  

The cost of delivering HR services varies based on the scope of services being delivered. The cost of delivering HR services for multinational or global firms is the greatest, as organizations operating in a single country tend to have lower costs than those operating in multiple countries. Organizations operating globally have higher costs still; they’re managing disparate labor and employee laws while also dealing with the complexities of international taxes on employee compensation and benefit plans.  

According to the report, global organizations have traditionally used siloed regional delivery models, which in some cases can be rendered duplicative through historic acquisitions whose HR service delivery models have not been fully integrated. These redundancies increase the cost of HR service delivery. This HR delivery complexity is compounded by renewed vigor in cross-border M&A activity that PwC has seen over the last 18 months.  

PwC Saratoga contends the increase in global delivery models within HR and the supporting vendor and technology infrastructure needed to execute on these models will be a major area of focus for HR leadership as the economy improves. The rise of new global delivery model enablers, such as software as a service, improved HR outsourcing, and unified workforce data management services, will help HR deliver its value proposition more efficiently and effectively.