Beyond Internal Metrics: The Power of External Workforce Tenure Trends
Art nouveau image of workers walking through revolving doors. Generated by DALL•E2.
Most HR Business Partners and People Analytics professionals I know are well aware of the average employee tenure within their respective organizations. Employee tenure is a common KPI in our field, especially since “recruit and retain” has been a ubiquitous workforce strategy during the seemingly never-ending War for Talent. But what about external employee tenure trends? Would these be valuable to track and compare against internal figures?
Yes.
Understanding external labor supply and labor demand is a key step in the Strategic Workforce Planning process, which goes on to align business strategy with workforce strategy. Average employee tenure is a key input for several reasons:
Strategic Planning. This data can help inform strategic planning. For instance, if the average tenure in our industry is declining, it may indicate a trend toward more job hopping, which could have implications for how you approach recruitment, retention, workforce planning, and succession planning.
Benchmarking. Benchmarking has a time and place. In this case, it allows you to compare your organization’s tenure with national averages, industry averages, and occupation averages, thus serving as a litmus test to determine how well your organization is retaining employees compared to everyone else.
Risk Management. High turnover can be costly. More importantly, it could disrupt the organization’s ability to deliver on its strategic objectives. Understanding employee tenure can help identify potential risks and develop strategies to mitigate them.
According to data provided by the U.S. Bureau of Labor Statistics, the median employee tenure is 4.1 years, but this figure varies significantly by industry. Notably, this is down from 4.6 years in 2012.
Some industries, like Telecommunications and Federal Government, have median employee tenures of 7.5 years, which is nearly double the tenure across all industries, almost four times the median tenure of Leisure and Hospitality, and five times that of the Motion picture industry! While this might sound like a success, tenure in the Federal Government has dropped over 20% since 2012 when tenure was 9.5 years. Similarly, Local Government tenure has dropped from 8.1 years to 6.9. AJ Herrmann called out a related trend in an interview with Nick Kennedy regarding the dwindling of workers who are interested in public sector jobs, like police and fire.
Figure 1: Employee tenure data provided by the Bureau of Labor Statistics visualized as a heatmap depicting greater tenure in blue and lower tenure in red.
This data can indeed be useful, but be careful to read it using a critical eye. At face-value, some industries appear to have significantly increased employee tenure. Those industries include Textiles, Petroleum, and Mining. The Petroleum and Coal Products has increased median tenure from 6.4 years in 2012 to 9.8 in 2022, an increase of over 50%. While this looks impressive, remember the impact the pandemic had on energy markets, and how employers reacted to the sudden drop in petroleum demand. Fuel demand plummeted, refineries went dark or significantly reduced output, and a lot of workers lost their jobs. As a result, the BLS data might show increased median tenure because many of those laid-off workers may have been in the organization for only a few years.
Figure 2: Change in employee tenure by industry from 2012, 2014, 2016, 2018, 2020, and 2022 shown as a heatmap. All differences shown are based on the difference between a given year and 2012. Red signifies a reduction in tenure, while blue signifies an increase.
Using external data to inform workforce strategy is an absolute must. Tenure data provided by the BLS is just one example of this. When using this data, it’s important to ingest it with a critical mindset and with awareness of the broader context. Afterall (and many of my professional peers will attest to this), context is king.