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McKinsey Study Outlines Gaps in Employee Retention and Recruiting

Written by: PeopleKeep Team
August 22, 2016 at 2:15 PM

Employee retention is often a mystery to human resource managers. What McKinsey Study Outlines Gaps in Employee Retention and Recruitingmotivates one person may have little effect on another. To complicate matters further, recruiting top talent proves to be a challenge in and of itself. Human resource departments all over the world are asking themselves the same question: how can we recruit and retain excellent employees?

A new study by consulting giant McKinsey & Company reveals that big data analytics can help managers determine unique characteristics about their workforce, steering employee retention and recruiting efforts in a more efficient direction.

Knowing Where to Recruit New Talent

Many top companies have a tendency to recruit out of high ranking universities. They assume that only brilliant minds will get into the programs and only the best will successfully make it through. This strategy isn’t a terrible one, but it does mean that you may be missing out on bright talent that didn’t attend an Ivy League school.

At the focus of the study was a bank that traditionally executed this strategy prior to using big data analytics. After creating employee profiles for every person in the company, they found that their most effective employees actually came from institutions that they were not targeting, including five universities and three certification programs.

Eliminating Human Bias in Hiring

As much as hiring managers try to eliminate their own bias while reviewing resumes, it’s usually not possible. Unconsciously, every person has their own background and experiences that color their opinion of qualified candidates. Because of this, some managers have found it helpful to use algorithms to narrow down the applicant pool.

While some businesses may feel concerned that a machine can’t take into account specific hiring goals (which in this study was to hire more women), the reality is that these algorithms are written by humans, and therefore, are complete adaptable to each unique situation. The company in this example found that the algorithm they wrote was able to accomplish their hiring goals perfectly, while finding qualified candidates that would have otherwise slipped through the bias cracks.

Trying to Solve Low Employee Retention with Money

It’s easy to assume that money is a key factor in employee retention, however, more often than not this turns out to not be the case. McKinsey uses an example of an insurance company that was experiencing high turnover. To mitigate the issue, bonuses were given to employees who chose to stay.

Over time, however, the company found was that the employee retention rate was not improving. In order to find the source of the problem, they turned to analytics, creating employee profiles for all of their employees that included information like demographic profile, professional and educational background, performance ratings, and levels of compensation.

After identifying at-risk employees and discussing what would motivate them to stay, the company discovered that bonuses were nearly a non-factor. Instead, personnel expressed a desire for learning opportunities and strong managerial support. Eventually, the company was able to save money because the solutions that effectively improved employee retention were more cost-effective than handing out large bonuses.


While employee retention and recruitment can seem overwhelming at times, analyzing data can help you understand what is happening in your own company. It is important to remember that good records, such as comprehensive employee profiles, can be an effective tool for your business.

Download our employee retention eBook to learn how to keep your most valued employees without breaking your budget.

What are you doing to improve your employee retention strategy? Let us know in the comments below!

Topics: Employee Retention

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