How to reduce absentee costs through analytics

Organisations and HR can move the absentee rate dial down to improve significant bottom line savings

For a large organisation, each percent point drop in absentee rates can mean savings of hundreds of thousands of dollars, if not more. Piyanka Jain explores how organisations and HR can move the absentee rate dial down to improve significant bottom line savings

No one will dispute unplanned absenteeism is a costly problem for any organisation, especially for healthcare organisations providing 24/7 services. Hospitals daily face the trickle-down impact of nurses calling in sick—finding last-minute replacements or paying overtime to cover shifts, training and overseeing substitute workers, and most importantly, ensuring patient safety. According to the Gallup-Heathways Well-Being Index Survey, lost productivity from nurse absenteeism alone costs healthcare companies $3.6 billion annually in US. Put another way, 75 percent of CFOs surveyed by the Integrated Benefits Institute reported absenteeism makes the same financial hit on a company as the employee health plan.

To date, absentee management discussions have focused on data collection, admittedly a stumbling block for many organisations and the first step in addressing the costs of absenteeism. But once an organisation has data—what next? Using data to regularly analyse the reasons for absenteeism allows a company to prevent unplanned absences, not merely track them. Here’s how:

Step 1: track it and report it
As mentioned, the number one challenge in managing absenteeism is tracking. Insurance brokerage Parker, Smith & Feek cites incomplete and decentralised absenteeism tracking as key culprits in the information void. Organisations may track FMLA, for instance, but fail to track other types of absences. And it is easy to see why — the process is cumbersome and requires ongoing management, training and quality assurance. Yet, it is crucial to an organisation’s bottom line.

Absence management systems and claims administration services offer a solution to the data collection conundrum and can deliver a return on investment. Regardless of how data is collected, make sure you have complete records for all employees and their absence and attendance. In addition, integrate this data with employee work history, productivity, demographics, screening and interview results, etc. A myriad of tools can help, including the HR talent tool, the HR transactional system, employee payroll systems, employee benefits administration systems and more.

Step 2: survey employees regularly
Most employers regularly conduct employee satisfaction and well-being surveys. One way to understand if the organisation itself is driving unreasonable absenteeism is by inserting absentee-driver questions in the anonymous employee satisfaction survey: How many days did you take off this quarter? How many were unplanned? Why did you take the unplanned absence? Multiple-choice answers should include options such as “re-organisations”, “stress”, “issues with manager”, “issues with co-worker”, etc. Always leave a blank box for “other” reasons. Over time, comments written in the “other” box will reveal commonalities that allow them to become standard, trackable options.

Making sure the surveys are anonymous will encourage rich — and sometimes sensitive — information from employees. In “The Causes and Costs of Absenteeism in the Workplace,” Forbes reported two of the most common causes of absenteeism include “bullying and harassment” and “burnout, stress and low morale”. Both these issues can be effectively addressed by enabling proper work culture, fostering a collaborative workplace environment, employee appreciation programs, offering employees stress management tools such as yoga and meditation, and more.

Step 3: Analyse drivers of absence regularly
With employee data on absence, presence, history and productivity, along with employee well-being and satisfaction survey results in hand, it’s time to analyse the data to understand the level of absenteeism and identify driving factors.

One effective way of conducting such an analysis is to follow a structured approach such as the BADIR framework, which stands for an acronym for the following five steps:

  1. Narrowing the Business question;
  2. Laying out a hypothesis-driven Analysis plan;
  3. Collecting relevant Data;
  4. Deriving and quantifying actionable Insights; and
  5. Making Recommendations based on the insights to change and affect business outcome.

Your analysis may reveal a Pareto chart of reasons like the one below.

Drivers of absence


Step 4: take action
Once absenteeism drivers are uncovered, it’s time to take action to prevent them. As the Pareto chart illustrates, some reasons are legitimate and unavoidable, such as illness. But other reasons, such as “issues with manager” or “stress due to reorg” provide valuable information and can be reduced if addressed, managed and/or mitigated by HR tools including improved communication and manager training.

For a large organisation, each percent point drop in the absentee rate (defined as total absent days to total number of days available for all the employees) can mean savings of hundreds of thousands of dollars, if not more. A healthcare organisation could reap even greater financial rewards because of the cost of temporary replacement labour, especially to cover for care-giving employees. Moving down the dial bit by bit on the absentee rate would mean significant bottom line savings.

Getting started: resources
Any HR professional with a medium to high analytics aptitude with easy access to data and a good understanding of data-to-decision frameworks like BADIR should be able to do such analysis regularly as part of their workflow. A free analytics aptitude test is available and my book, Behind Every Good Decision, covers the five-step BADIR framework in great detail. You can also download a free chapter from the book and the whitepaper on BADIR framework.