Key Performance Indicators for Employee Retention are one of the biggest keys to the success of a business, especially for small teams where every person really matters. When employees leave frequently, it means more hiring and training costs; it also means losses of experience and a dip in morale for the team. To be honest, replacing staff members over and over again would take heaps of time and money, not to mention zapping everyone of their energy in the process. If you track the right Key Performance Indicators for Employee Retention, you can identify even the possible causes behind any high turnover.
But breaking free from that cycle requires knowledge of the number which is commonly referred to as key performance indicators, or KPIs that let you indirectly know how good things are going in making your team happy and engaged. In this blog, we are going to show you the top KPIs businesses should watch in connection with employee retention. We will also give you some implementation tips that can help you strengthen retention and build a workplace where people want to stick around.
What Are Key Performance Indicators for Employee Retention?
Key Performance Indicators for Employee Retention are measurable values demonstrating the effectiveness of an individual, team, or organization in achieving a business objective. Within businesses, KPIs measuring employee retention are a means to determine how a given company retains workers and what areas need improvement.
By measuring these KPIs, businesses can get a clear picture of the employee retention environment, understand the reasons behind turnover, and strategize various approaches toward bettering retention numbers.
Key Performance Indicators for Employee Retention
Employee Turnover Rate
Definition: The turnover rate is the percentage of employees who leave the company within a specific timeframe. If the turnover rates are high, then there must be problems associated with job satisfaction, company culture, or remuneration.
How to Calculate:
Turnover Rate=( Number of employees who left/Total number of employees at the start of the period) ×100
Why It Is Important: The turnover rate helps you decode how many employees are leaving and whether the company retains its talent. For businesses that also have limited resources, minimizing turnover is imperative so as to avoid the high costs of recruitment and training.
Actionable Tip: In the case of a high turnover rate, it would be prudent to look at exit interviews, conduct surveys for employees, analyze work conditions, and try to make sense of the reasons for the departures.
Employee Satisfaction Score
Definition: Employee satisfaction refers to the happiness and engagement levels of employees concerning their roles and workplace environment.
How to Measure: Calculate employee satisfaction by conducting satisfaction surveys regarding the employees’ feelings toward their work, benefits, team collaboration, and management. The Employee Net Promoter Score (eNPS) is a widely used method for measuring satisfaction whereby employees rate, on a scale from 1 to 10, their willingness to recommend the company to others.
Why It Matters: Employee satisfaction relates directly to retention. If employees are not satisfied with their workplace, they are likely to search for other opportunities. Periodic surveys and feedback will allow you to gauge concerns and potentially resolve them before they become an issue leading to turnover.
Actionable Tip: Create an avenue for employees to share their comments freely. Acknowledge common themes in feedback, then implement changes to address them that will enhance the employee experience.
Hiring Cycle Time
Definition: The time-to-fill metric describes the length of time (in days) that a job is open for selection to when the selected candidate joins the organization.
Why It Matters: An extended time-to-fill metric is a strong indication of inefficiency within the recruitment process. A prolonged hiring procedure can deplete the morale, energy, and satisfaction of the workers involved in the process, all of which have the potential to hurt retention.
Actionable Tip: Sharpen your hiring process by instituting timelines for each step of recruitment and alerting relevant stakeholders at the earliest opportunity. Improving your employee referral program could speed up the time to fill.
Internal Mobility Rate
Definition: The internal mobility rate evaluates the frequency with which employees within an organization are promoted, transferred, or moved to new positions within the company.
Why It Matters: If employees are able to grow and get ahead in the business, they are likely to stay longer. In businesses, career growth opportunities are difficult to come by. The internal mobility emphasis can thus retain such talent for longer durations.
Actionable Tip: Construct a career path, offer training opportunities, and practice internal promotions. That will make them feel valued and motivated to stay long.
Absenteeism Rate
Definition: The absenteeism rate refers to the average number of days employees are absent from work without a valid excuse.
How to Calculate:
Absenteeism Rate =(Total number of absent days/ Total number of employees)×100
Why It Matters: Unusually high absenteeism can be a signal of discontentment or burnout, both of which have ramifications for retention efforts. Identifying the issues prompting absenteeism is essential, as the organization will be able to address the problems before they lead to resignation.
Actionable Tip: Provide options for flexibility and work-life balance plus support systems, with resources for mental health that will reduce absenteeism and improve employees’ lives.
Employee Engagement Rate
Definition: Employee engagement defines the work and the objectives of the company in terms of how employees are involved and invested in their work.
Why It Matters: Engaged employees are more likely to stay because they feel ownership and alignment with the mission. They are also productive, satisfied, and motivated to contribute to the organization’s success.
Actionable Tip: Encourage employee engagement by conducting team building activities, and recognition programs, and keeping them regularly communicated on the company’s goals. A major engagement using surveys or tools such as Gallup’s Q12.
Exit Interviews and Feedback
Definition: Exit interviews are those interviews conducted to obtain the parting views of employees on their grounds of leaving.
Why It Matters: For businesses, exit interviews become one of the most important critical performance indicators because they help identify trends and root causes for high turnover. Knowing why employees leave provides better insight into how retention can be improved.
Actionable Tip: Conduct a formal exit interview for any and all employees going out of the organization. Codify the feedback to identify core overlapping tendencies and fields requiring improvement.
Retention Rate by Department
Definition: This KPI is concerned with the retention of employees in a department, being an indicator of units or teams that may experience higher or lower turnover from the average for the organization as a whole.
Why It Matters: It could be that a department has a special high turnover that does not affect the rest of the company. By tracking retention by department, the business would know whether the issue was systemic or specific to teams.
Actionable Tip: If department-specific high turnover rates are found, work closely with department managers to understand team dynamics and employee satisfaction in those areas.
Cost of Turnover
Definition: This KPI measures the total direct and indirect costs incurred in hiring such an employee are estimated through the calculation of advertisements, recruitment agency fees, and on-boarding expenses of the employee.
Why It Matters: Although hiring costs are a burden to a business, this really comes into play when an employee turns out to be a high flier who cannot be held on and strikes for the other. That means you will now retrain every time a person leaves.
Actionable Tip: Consider initiatives targeted to employee retention through positive workplace culture and engagement and reduce hiring costs over time.
Voluntary vs. Involuntary Turnover Rate
Definition: This KPI measures tracks whether employees leave voluntarily or are involuntarily terminated by the company, thereby revealing the type of employee exit.
Why It Matters: To understand the cause of turnover whether it is due to problems of liking or performance, and thus enhance the fine-tipped targeted retention strategies.
Actionable Tip: Conduct exit interviews and stay interviews to assess the reason of leaving and make efforts to improve employee experience in the selected areas.
How to Improve Employee Retention: Actionable Strategies
Now that we have covered the important KPIs, let’s have a glance at practical strategies that businesses can use for effective employee retention:
Create a Healthy Work Culture
Foster a very open, inclusive, supportive, and transparent culture among employees who will feel valued and respected by management.
Offer Competitive Compensation and Benefits
Businesses can seldom afford to match the pay systems of big corporations. However, they can develop policies about competitive salaries, bonuses, flexible working hours, and wellness programs.
Make the Opportunities for Growth and Development
Encourage the employee to grow their skill set and then promote them within the company. Develop training programs, mentoring, and promotion paths.
Recognize and Reward Employees
In retaining employees, recognition plays an effective role. In regular acknowledgment, describe the great job the employee has done and praise him or her for a specific achievement, be it through a special award, an announcement for the entire company, or just a token of appreciation.
Improve Work-Life Balance
Poor work-life balance results in burnout, which leads to high employee turnover. Work hard to foster an environment of flexibility within employee working hours, and remote working days, and flat-out encourage employees to ‘take a break!’
Hold Stay Interviews
Instead of just focusing on exit interviews in the future, stay interviewers work with current employees to ask why they stay with the organization and what would keep them longer. This proactive initiative assists the organization in identifying retention challenges before they escalate into turnover situations.
Key Performance Indicators for Employee Retention
- Internal Benchmark comparisons for a timeframe instead of only industry benchmarking.
- Enable constant viewer access to dashboards or an analytics tool like Power BI, Tableau, or Google Data Studio.
- Present a complete picture: Take in both qualitative and quantitative data that are, for instance, used in combination survey score with exit interviews.
- Quarterly review of KPIs, coupled with specific action plans.
- Share insights with leadership to shift culture and policy.
Conclusion
Retention of employees is a never-ending process concerning business owners and managers who must put in intentional effort. By keeping track of and analyzing Key Performance Indicators for Employee Retention, businesses can glean valuable insights into what promotes employee satisfaction and address any areas of concern before those cause attrition. Companies can foster a loyal, engaged workforce that is committed to long-term success by promoting a positive work environment conducive to growth opportunities, collecting feedback from employees regularly, and adapting accordingly.
The cost of keeping a productive employee is much less than that of replacing them. Therefore, retaining and developing a strong workplace can be achieved with the right strategies.
