Employees are the tangible assets of an organization. A company spends time and effort training its new employees to become the best. But if the efforts end with the training, employees will start looking for a new, better job. A recent survey found that each month in the US, 3 to 4.5 million employees quit their job. The average employee exit costs 33% of their annual salary.
With demand for top talented employees significantly increasing, employers need to stay on their toes to retain their employees.
One of the ways that companies can retain them is by calculating their employee retention rate. It helps organizations see their turnover rate compared to others within the industry. This also allows them to identify the reasons behind the escalation of their turnover rate and determine high-risk employees. All the information gained from the metrics will help your organization design a strategy to avoid losing top talent.
In this article, we will discuss the different ways to analyze employee retention based on your specific goals.
Before that, let’s see reasons to measure employee retention.
Why You Should Measure Employee Retention
Employee retention metrics give you deeper insights into why your employees stay with your organization and otherwise. By measuring this metric, you can find high-risk employees and patterns that help you predict the future.
Employee retention metric is as crucial as the KPIs that determine your financial performance. Hence, tracking these metrics will help you maximize productivity and minimize turnover.
Three Employee Retention Metrics You Must Be Tracking
Retention Rate Based on Department, Age, Manager
The employee retention rate is the metric that will help an organization understand how well they can retain their employees. A retention rate of above 85% percent is considered excellent. It means you have struck a balance between retaining top talent and recruiting new talent. The retention rate calculated per manager is based on the percentage of employees retained under a manager. Through these individual metrics, you can identify potential reasons for lowering your retention rate. For example, suppose the retention rate is low in a department or under a particular manager. In that case, you can easily understand the lack of good leadership in that area and take immediate action to change it.
Voluntary Turnover Rate
An organization has no control over voluntary turnover, as the employees leave the organization because of their violations. There can be many reasons behind an employee leaving an organization, such as finding a job with better terms, relocating to a different state or country, or starting a family. The ideal rate for voluntary turnover should be less than 10%. If you have seen a significant rise in this percentage, then one of the reasons could be that your employees are seeing no career advancement. One of the ways to figure out their reasons for voluntarily quitting is to conduct regular employee surveys. This can help you measure where and what your employees are dissatisfied with.
Employee Satisfaction Rate
Undoubtedly this is one of the most important metrics in employee retention metrics. Happy and satisfied employees are more likely to stay in your organization longer. Happy employees will be more creative and also highly productive. Your employee satisfaction level will have a direct impact on your organization’s growth and performance. Conduct regular surveys to gauge employee satisfaction and eNPS (Employee Net Promoter Score). Through eNPS, you can track whether your employees like or dislike their experience working with your organization.
Here’s how you can calculate the cost of employee turnover.
Say, you spent $2000 to recruit, and onboard a candidate and you have four people resigning, then your cost of employee turnover is $8000 (2000×4).
In a nutshell,
Organizations save a lot of time, money, and effort by retaining their existing employees rather than hiring new employees. The employee retention metrics are a few of the standard metrics that will help your organization gauge your employee turnover rate, find reasons for the low turnover rate, and eradicate them from the root. Analyze the above-discussed employee retention metrics that help you determine what tricks work for you and what needs to be improved.
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