There are many factors that influence the success of a business, but one of the most important factors is having a solid team of qualified personnel who are committed to the organization. How can companies ensure their employees remain happy and engaged in their roles?
Assessing a company’s employee retention rate and taking steps to ensure it stays at an acceptable level is one of the most effective ways of ensuring top talent stays on board. It requires some effort to calculate, but it can provide significant benefits to an organization, making it a solid investment of time.
Understanding Employee Retention Rates
The employee retention rate is the percentage of employees who stay with an organization within a specific time frame. It is essentially the inverse of the employee turnover rate, which is the percentage of employees who leave an organization in a specific time frame. Although some turnover is inevitable, companies should aim to attain the highest employee retention rate possible.
Understanding employee retention can help a business in many ways. First, all of the steps that an organization takes to improve this metric demonstrates to employees that their company cares about them. This not only makes them more likely to stay; it also makes them more engaged and can lead to more innovation, all of which can be measured in the bottom line.
It also allows businesses to avoid the expenses and effort required for recruiting and training new personnel, along with the productivity losses that may arise while the company is understaffed.
Calculating Employee Retention Rates
Before a business can calculate its employee retention rate, it must determine the time period during which this metric should be measured. Many companies choose to measure their employee retention rate on an annual basis.
However, experts warn that this is too infrequent and could cause businesses to miss out on a major opportunity to improve. It can also cause the business to overlook some of the nuances of trends and the effects of factors such as performance reviews, contract renewals and seasonal fluctuations.
Some human resources professionals suggest assessing the employee retention rate on a monthly basis. This enables businesses to notice potential negative trends as early as possible allowing leaders to take steps to increase retention.
In addition to the time period being studied, businesses will also need to know two other points of data to calculate their retention rate: the number of employees that the company employed on the starting date of the time period, and the number of those who remained employed throughout the length of the period. New hires who started at some point in the middle of this period should be excluded from the second figure to avoid distorting the calculations.
Once the company has collected the relevant data, calculating the retention rate is straightforward. The number of employees who remained with the company during the time period studied should be divided by the number of employees there were on the first day of the period. Next, this figure must be multiplied by 100 to obtain the employee retention rate.
To get a better idea of how this works, take the example of a company measuring its employee retention rate in the last month. On the first day of the month, they had 90 employees; there were 87 on the last day of the month as three people left for other companies.
Therefore, the retention rate would be (87/90) x 100, or 96.67%.
Predicting Employee Retention Rates
Predictive analytics can be used to predict an organization’s retention rate. It uses machine learning, data and statistical algorithms to identify the probability of future results such as staff retention.
Some of the information that is already stored on an organization’s human resources system can be used in many cases. Some of the data that can be useful for making employee retention predictions includes compensation levels, commute time, time since previous promotion, overall duration of employment and job performance.
These calculations can be quite complicated, so it is best to work with benefits consultants who understand how to get the most out of predictive analytics and interpret the data with a view to increasing retention.
A more simple, albeit less precise, way to predict employee retention is via questionnaires that are designed to better understand employees. These questionnaires can indicate how many employees are considering leaving the organization and the reasons why they might leave allowing companies to create better retention plans.
These surveys can include questions such as:
Questions about intention to leave
- How likely are you to remain with his organization through the next year, on a scale of 1 to 5?
- Have you interviewed for another job within the past three months?
- Do you feel that you have opportunities to grow in your current role?
- Do you feel that your pay is fair?
- Are you satisfied with the amount of recognition you have received from your manager?
- Have you ever been subjected to bullying, harassment or discrimination at work?
Questions about job alternatives
- Rate how difficult you think it would be to find another job as good as your current role on a scale of 1 to 5.
- How likely, on a scale of 1 to 5, would you be to consider a job offer from another company if you received one today?
Questions about organizational commitment
- On a scale from 1 to 5, how likely would you be to stay with the company if another organization offered you a 10% increase in salary?
- On a scale from 1 to 5, how likely would you be to refer someone else to work for this organization?
Questions that can be answered with a simple yes or no, and those that ask for ratings on a scale from 1 to 5, are the easiest to work with when making predictions, but it may also be useful to ask open-ended questions, particularly in organizations with smaller workforces where there may be more time to read the answers and assess their implications.
Businesses could ask what each employee likes the most and least about working for the company. Some patterns may emerge that can guide retention strategies. For example, if most of the employees in one department praise the company’s upbeat office environment but others cite it as a distraction, it may be time to update the distracted team’s section of the office or offer remote working options.
Contact the Premier Benefits Consultants
If your business needs assistance developing an effective strategy to inspire employees to stay with the organization, contact the experienced benefits consultants at Business Benefits Group (BBG) today.