How to Measure Employee Retention

By Ian J. Cook

 

Measuring how many employees chose to stay or leave your organization is, on the surface, a straight-forward measure. But for this metric to be valuable in shaping your practices, and therefore worth the effort of measuring, requires some clear judgments about who you want to retain and why.

 

The basic measure of employee retention is often referred to as turnover. This is calculated in the following way:

 

Number of employees leaving the organization

Total Number of employees

 

(Note: Contract or temporary staff are usually excluded from both the top and bottom number. Part-Time staff would usually be included.)

 

Multiplying this number by 100 will express your turnover as a percentage. It is important that you calculate the top and the bottom number over the same time period. Looking at this number quarterly is usually sufficient for most organizations. To get an annual turnover percentage you should average the results for your four quarters.

 

Although this number is fairly simple to calculate it does not tell you anything really useful. The key with turnover is to look at who you are losing, from where and, if possible, why. This is where your measurement discipline starts to focus more on “coding” or describing the information you are processing rather than simply processing high level data.

 

To make your retention measure meaningful you should be able to identify how much of your turnover is:

 

  • Voluntary and involuntary
  • Due to retirement
  • Due to people leaving laterally to other jobs
  • Due to people leaving into promoted roles,
  • At different tenure stages such as less than 1 year, 1-3 years, 3-5 years, etc
  • People identified as critical to the business for their skills or succession potential
  • From different levels within the organization such as entry level, individual contributor, supervisor / manager, executive, senior executive etc.
  • From hard to fill roles
  • From new hires

 

This list is a short indication of what you can look at. Deciding which three to five factors are the most important is where your judgment and organizational knowledge is key. Only once you know what is critical can you design your data collection process to capture this information.

 

The simplest way to capture this information is to include your three to five factors with standard descriptions on the forms required to process an employee exit. This requires the manager to provide this information in order to complete their responsibilities. It will be much harder to gather once the person has left or the final pay check has been written.

 

Your three to five factors, once tracked and used to calculate your scores, will start to show you the pattern of retention within your organization. However they will not answer the crucial question of why these patterns exist. This is best done through employee survey questions or effective anonymous exit interviews. This combination of quantitative and qualitative data will provide the information required to develop and track the effectiveness of your retention efforts.

Ian J. Cook is the director of HR knowledge and research at BC HRMA. Ian is using his global HR consulting experience and business knowledge to grow a function which delivers informative, relevant and timely comment.

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  1. In the article, it says not to include contract or temporary staff…so how is temporary employee retention measured?

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