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HR Analytics: How to Measure Employee Retention

Retaining good employees is an ever-present concern for employers these days, and with people’s needs often changing during the time they spend with a company, when those needs aren’t met, employees are likely to go elsewhere.

Job seekers aren’t worried about staying with an organisation for decades anymore because the labour market has fundamentally changed. Good jobs are no longer just those with a well-rounded salary and benefits package, they’re the ones that prepare you for the next job up the career ladder.

This means that employers have to stay on top of what keeps employees around long-term or they risk losing out on their best talent. 

While there are plenty of factors that affect employee retention – such as work-life balance and career development opportunities – it’s important to first gain a comprehensive understanding of your people-data so that you can better understand why employees are (or aren’t) likely to leave your organisation.

Here are 5 metrics you should focus on that will help your organisation effectively measure employee retention.

6 employees putting hand together smiling

1. Employee Engagement

How happy and engaged an employee is within an organisation directly relates to how committed they are to their role and the business. However, while an employee might be satisfied with their typical working day, it doesn’t necessarily mean they’re engaged, so this particular metric is key to your people analysis and understanding of employee retention.

By keeping track of employee engagement, your organisation will benefit from having visibility of any glaring issues before they get worse, allowing the opportunity for improvement where it matters most – with your employees.  

How to measure:

To gauge employee engagement levels, your organisation can hold focus groups, send out single-click polls or surveys, hold exit interviews, and track productivity metrics. These measures should be consistent and on-going if you’re looking for the most accurate results.

2. Top Talent Turnover Rate

Your best talent isn’t just your top performers, but those people who have the right mindset and motivation to grow, thrive and empower others around them to put their best foot forward every day.

Being that you want those people to stick around, paying close attention to why any of them are leaving your organisation is important.

When you measure the turnover rate of your top talent, you’re also analysing the current work environment and internal processes, gaining insight into things like whether there’s enough opportunity for training and development, or if there needs to be more recognition of performance in the office.

Top talent can be hard to come by and when there isn’t room to grow, it’s unlikely that they’ll stay, but figuring out your organisations weak spots in these areas and improving upon them can turn it all around.

How to measure:

To calculate your top talent turnover rate you can divide the total number of those in the top talent pool who left in a set period by the average number of employees in that same period. You’ll then multiply that total by one hundred, and the number you’re left with will be your top talent turnover percentage (rate).

5 people sitting waiting for job interview

3. Voluntary and Involuntary Turnover

Employees leave an organisation for different reasons, and while many leave voluntarily others sometimes leave involuntarily.

When voluntary turnover happens, it’s usually because an employee goes to work for another company and has left willingly. On the other hand, when involuntary turnover happens it means that it wasn’t the employee’s choice to leave and that they were likely fired due to poor job performance, absenteeism, or otherwise.

You want to keep a close eye on these metrics because high turnover rates can be an indication of poor performers leaving the company – which can be a good thing – or it can mean that top performers are leaving. If this is the case, it could be of detriment to the company, and an issue that needs a well-implemented and immediate solution.

How to measure:

As you would with your top talent turnover rate, to calculate your voluntary and involuntary turnover rates, you can divide the total number of those who left in a certain period (either voluntarily or involuntarily) by the average number of employees in that period. You’ll then multiply that total by one hundred, and the number you’re left with will be your monthly turnover percentage.

You can alter this equation to fit various the various timeframes you’re looking to focus on, and then compare with industry-standard turnover rates.

Top tip: Keep in mind that turnover rates are related to why employees leave, and retention rates are related to why they stay. While these metrics go hand in hand, it’s key to remember that they are still separate from one another and ultimately measure different things.

4. New Employee Attrition Rate

New employees are typically the most eager to prove themselves worthy of their new positions, so they’ll want to go that extra mile for their business to be successful in their roles.

However, as time goes on and probationary periods come to an end, new hires will be used to their new working environment and can usually tell whether it’s a fit for them and if they’ll want to stay with the company long-term.  

If your organisation is seeing a high turnover rate in its newly acquired talent, then it’s worth taking a closer look to understand why they’re leaving so soon.

How to measure:

Like turnover rates, new employee attrition rates can be calculated by multiplying the number of new employees who have left by your total number of employees. Multiplying the result by one hundred will give you the attrition rate you’re looking for. It’s best to calculate this metric weekly so that you can use it as a moving average rather than calculating it once a year.

Keep in mind that it’s also worth it to check in with new hires and their level of satisfaction on a frequent basis. Applying employee engagement measures to combat any potential issues early on will prove useful in retaining new employees for the long haul.

HR handshake with employee during interview

5. Managerial Retention Rate

When a manager bounces around from one management post – or company – to another in a short time it can be a red flag. Alternatively, it can mean they’re coming in to manage a team, doing their job effectively, and moving on to other industry-related areas that need their attention.

Whether a manager’s retention rate is high or low, it’s always a good idea to find out why. There could be lessons to learn related to tactics that would be useful to employee retention and that could be applied throughout your organisation.

How to measure:

To calculate your managerial retention rate, divide the number of managers on the last day of a given period by the number of managers on the first day. Then, multiply that number by one hundred to get your percentage.

It’s also worth looking into how happy teams are with their managers through one-to-one meetings, surveys, and the like. This way, employees will feel safe providing feedback and you’ll gain better insight into individual management strategies and whether they need improvement.

Knowing how to measure employee retention is key to your organisation’s success and development. High employee turnover increases company costs and often has a negative impact on workplace morale – and no one wants that.

By paying attention to the metrics we’ve covered here, your organisation will gain a better understanding of what’s happening, why it’s happening, and what’s likely to happen next concerning its employees, allowing the opportunity to improve employee retention tactics moving forward.

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