%201%20(1).png?width=195&height=40&name=Aura%20Color%20Logo%20(2)%201%20(1).png){kind=small}
.png?width=24&height=25&name=Group%20(1).png){kind=small}
A Newsletter from Aura Workforce Analytics
💡 The Great Resignation, alongside increasing frequency of ‘job hopping’, has changed the game for employers, driving up recruitment-related costs and requiring transformation of retention strategies.
💡 Although tracking employee numbers enables a rudimentary understanding of the growth of a company, deeper analysis of attrition rates and hires / exits can yield valuable information about employee turnover and a company’s ability to retain talent.
💡 Among large payment companies, we see that although Mastercard is growing the most in relative & absolute terms, American Express has slightly higher attrition and absolute hiring needs, translating to a larger impact on their P&L.
💡 Although tracking employee numbers enables a rudimentary understanding of the growth of a company, deeper analysis of attrition rates and hires / exits can yield valuable information about employee turnover and a company’s ability to retain talent.
💡 Among large payment companies, we see that although Mastercard is growing the most in relative & absolute terms, American Express has slightly higher attrition and absolute hiring needs, translating to a larger impact on their P&L.
Last week, we introduced Aura Workforce Dynamics, our upcoming product feature that follows real-time workforce ‘signals’ which may influence company performance, as part of Aura’s panel of workforce analytics tools. We are really excited about the interest that this is receiving and are looking forward to sharing more in the coming weeks.
In today’s article, we examine the recovery from the Great Resignation (a.k.a. Big Quit or Great Reshuffle) in large payments companies in 2023 through the lens of Workforce Dynamics. Although Mastercard’s workforce is growing the most, American Express likely has the highest recruitment costs, driven primarily by attrition and subsequent replacement costs. This example analysis demonstrates how a data-driven approach to understanding workforce shifts can uncover valuable insights with important implications for investors and competitors.
What is the Great Resignation? Why does job hopping matter?
The Great Resignation caused shockwaves in the global economy from 2021 and beyond. This refers to the widespread phenomenon of employees voluntarily resigning from their jobs, especially in the United States. Annual quits reached all-time highs of around 3% of all employees, far above the pre-pandemic 2019 average of ~2.3%.
This record wave of departures was fueled by a number of factors triggered by the COVID-19 pandemic, during which attrition was well down. Such factors included a reevaluation of work-life balance, job satisfaction, and demand for hybrid / flexible working, paired with ample opportunities to increase compensation in a healthy job market. The labor market was subsequently forced to adapt and reconsider retention strategies, flexibility options, and progression pathways.
Alongside this trend, we are seeing ‘job hopping’ increasing further in frequency, which is likely to remain an ongoing trend. According to the Employee Benefit Research Institute, the proportion of workers 20 years and older spending a year or less at their jobs in 2022 was at its highest since 2006 at 22%. This is reflective of a growing emphasis on personal development and career advancement, as individuals view job hopping as a means to acquire higher salaries, better benefits, and more fulfilling work.
In pure P&L terms, however, these shifts also mean significant costs to companies to replace these employees, beyond investments in workforce growth or costs of making employees redundant. Such costs include costs of recruitment (job adverts, internal / external recruiter costs, screening / selection process), potentially increased wages, and costs to train replacements (structured training resources, opportunity cost from lost productivity). Ultimately, a company should aim to minimize unnecessary turnover above what could be considered ‘healthy’ or positive, like attrition of under-performing employees.
Attrition & job hopping in major payments companies
American Express, Mastercard, and Visa are three of the largest incumbent payments companies in the world, with relatively stable business. Tracking the workforces of these companies in real time can enable parties of interest, such as investors, to understand changes in hires and exits/attrition, signaling strategic moves that may not yet have been publicly announced or known by those outside the company.
We analyzed publicly available data on current & past American Express, Mastercard, and Visa employees, including subsidiaries – note that these figures may underestimate the actual employee figures, as our outside-in sources rely on online profiles being up-to-date and therefore may not have complete coverage.
As you can see, Mastercard has grown the most in both absolute & relative terms, seeing around 6% growth according to Aura data. This is in comparison to around 3% growth for Visa and a reasonably stable workforce at American Express (+1%).
On the basis of these figures, it may seem that the cost of recruitment may be proportionally higher for Mastercard compared to the other companies – however, this only shows part of the recruitment picture. In addition to these new roles, we can assume that a majority of exits were unplanned attrition from roles requiring replacement, such as the above job-hoppers. Therefore, we need to also analyze hires & exits within each company by function, to understand which hires were likely replacements for exits, rather than investments in new roles. In the case of exits / attrition in particular, online public profiles are even more likely to be updated with a delay, as some candidates only update their profiles when they’ve received a new job.
This figure tells a different story to the above. While Mastercard grew the most in absolute terms, the actual number of hires that American Express needed was the most, especially to cover exits from the company. Tracked attrition for Q1-3 2023 as of November (again, likely an underestimate) suggests that around 4% of employees exited each of these companies respectively (American Express the highest), and presumably many of these needed to be replaced.
According to the Society for Human Resource Management, the average cost-per-hire was around $4.7K, and around $28K for executive hires. Using these figures, this suggests around $15M, $6M, and $5M in recruitment costs purely for replacement hires for American Express, Mastercard, and Visa respectively – although these figures sound small in the scale of these large companies, they represent a point of inefficiency and potential area for optimization, especially in light of job hopping trends today.
This highlights the importance of real-time tracking of attrition and hiring trends, as it may uncover interesting and/or meaningful signals that could influence competitive decision-making and investor appetite.
We are extremely excited to introduce Aura Workforce Dynamics to our roster of workforce analytics tools. We believe that this adds an entirely new dimension to how parties track and meaningfully predict company performance and efficiently capture value.
Matthew Chan
Product Economist, Aura
.png)
.png)
