How do you measure your employee retention rate? Do you pretend it’s not happening, or do you actually see the numbers? Putting a number to the issue is the first step in discovering how to fix it!
The Metrics of Employee Retention | Episode 92
Announcer: Welcome to the Epic Company Culture podcast where your host, Josh Sweeney, will give you, the business leaders, HR professionals, and company culture aficionados the knowledge you need to take your company culture to the next level.
Josh Sweeney: Hello and welcome to the Epic Company Culture podcast. This is season three which is all about employee retention. My name is Josh Sweeney and I’m here with my co-host, Crystal Sweeney.
Crystal Sweeney: Hello. Thank you for having me.
Josh Sweeney: Yes, thank you for joining us. Before we get started, I would like to thank Prototype Prime for this amazing podcasting space. The topic of this episode is employee retention metrics.
We love people analytics. Part of what we do is measuring retention and then understanding where in the organization a challenge lies before then going in with company culture initiatives. We’re very tactical in where we’re implementing those initiatives, and to understand that we really got to dig in to the employee retention numbers.
Crystal does a lot of the analytics or some of the analytics right now for that. We’re seeing all kinds of amazing things that just come about in the employee retention analytics. When you just did one of the analytic packages for one of our clients the other day, what did you uncover? What were some things that were surprising in looking at retention numbers?
The Executive Score Card
Crystal Sweeney: Yeah. This was a huge learning experience for me. I typically enjoy talking about people and getting to know people, and I’ve always looked into their personalities and we’ve talked about the work rewards and things like that. But when you’re looking at it as a company and as a whole and you start diving into who do you have working for you, what’s their position, how long have they been there, if they left, how long did they work and why did they leave, it starts to paint a little bit of a different picture, it’s actually painting more of a this is where your company is, this is like your score. We call it an executive score card.
But what I was finding was there were certain departments where they were having a high turnover rate. Specifically for this one particular company it was in their sales department, they would have people that would not even last a month, or there were several that lasted one month or two months. That can get very costly if you’re talking about having to replace somebody that you just put through the whole interview process, you spent time training them, and then they leave within one or two months. I mean, that’s a pretty big expense.
Josh Sweeney: Yeah, definitely, it can get expensive quickly because for somebody who barely stays, you’re looking, you’re probably looking at somewhere around 25-50% of their salary in the hiring cost for somebody to be around a month. Usually around 50% is kind of the bottom of that, and then the longer they stay, the more that increases, the more that cost and the loss happens, and it goes all the way up to 1.5, 1.75 times their salary in order to understand and quantify the loss of an employee.
With the employee retention analytics that we do, we break things into a few different groupings. The first grouping we look at is mis-hires. A mis-hire in our verbiage, in our parlance is somebody who lasts less than 12 months. That’s considered a mis-hire. They just didn’t last very long. The next section that we look at in the cross section is 12-24 months because that’s this crucial window. A lot of the employee retention and turnover rates are happening, are starting to average about 1.8 years … Or excuse me, like a year and eight months roughly.
We’re looking at that as a metric, and in that window we’re looking at work rewards and how we’re incentivizing them, how we’re onboarding them, and other factors. Then we look at the third tier which is 24 plus months, which is all about enrichment for us. It’s about performance and communications and trust and understanding how do we keep this employee for the long term. And each one has a different challenge.
You want to share a little bit about the mis-hires and what we look at from a mis-hire perspective?
Crystal Sweeney: Yeah. When we start looking at those mis-hires, we actually look at the reasons why they left is one of the things. Interestingly enough, for this company, none of them were labeled that they were fired. It was all voluntary leave and it was broken into some subcategories. When you’re looking at that it’s like, “Okay, well they left on their own terms.” What are those? Is it job satisfaction? Did they just abandon the job and just not show back up? And why? Is that something that can be avoided? Is there something that maybe didn’t happen in the onboarding process or didn’t happen even before then in the hiring process to filter those potential people out?
We’re able to kind of look at, okay, well, how are they hiring, how are they filtering these people to get good quality candidates, and then also if they were there for two or three months or even six months and they left, what is it? Is the pay not right? That could be something that they’re not competitive enough in pay. Are they not getting enough benefits? Are the employees not being trained enough and they just feel like they just aren’t going to be able to do the job and they leave?
We’re able to kind of start diving deeper into that with that company and say, “Okay, look, these are the reasons why they’re leaving. What can we do or how can we help move you guys in the right direction to where you’re able to retain some of those new employees?”
Hiring Process Issue
Josh Sweeney: Yeah. I know when we look at mis-hires, the most common scenario we’re looking at is, okay, if there was a mis-hire situation, high percentage of people staying less than 12 months, then there’s some sort of fitment issue during the hiring process, which season two is all about hiring. So if you haven’t listened to season two, go back from this season, listen a little bit about what we do during the hiring process.
But the goal really there is to lower those mis-hires by enhancing the hiring process, maybe adding better culture questions to make sure you’re matching people and culture, maybe adding transparency about the pay and benefits, understanding what the reasons people are leaving within 12 months are, and fixing that mis-hire situation.
The 12-24 Window
The second one we have is the 12-24 month window. That’s the most from all the analytics we look at right now that is the most crucial window. If you can get people past about 24 months, then the retention rate start to really go up drastically from there. From the 12-24 month range we’re looking at work rewards, which you talked a little bit about in previous podcasts, but tell us some of the other things we’re seeing from a work reward perspective when it comes to retention.
Crystal Sweeney: Yes, so I think this 12-24 month period of time is really when you start to build the bonds in your organization. They’ve gone through the training, they’ve gone through the new, I’m the new guy. That’s kind of worked itself out. So now it’s let’s really dive in and get to know each other, how can we communicate better and more effectively, and how can we start using those work rewards and being able to incentivize them to build trust and to really solidify them as part of the team.
Work Rewards Survey
So then we administer those work reward surveys to kind of keep up with how they’re doing, how do they feel that they’re being rewarded. If their scores start to go down, then that’s a red flag that something has changed in their work environment. Maybe a new hire has come in and kind of rocked the boat so to speak. It could be that they’re bored in their job.
Those are things that you need to look out for when we do the work reward surveys to build solutions and to make sure that you’re doing what you can to get them through that whole team building process because you definitely don’t want to lose them after them being there that long and it’d be something that could’ve been rectified.
Josh Sweeney: Yeah, and the things I’m loving about that whole process and from the data side, the people analytics and the numbers is when we start to see … We’ve seen heavy correlations, strong correlations where when those numbers start to go down from those survey perspective, there is a window of time in which that person is very likely to leave the organization. We’re actually seeing a correlation where they were ranking certain things a 5 or their average score was a 4.5 and now it’s a 3 and now it’s a 2 and all the sudden within 30 days of that decline they’re now getting another role.
Predictions and Planning
We’re almost able to predict that drop off and when it’s happening and why it might be happening or even predict that somebody may be leaving the organization very shortly, which saves companies a ton of money because most people know that people actually don’t quit the job the day that they turn in their resignation. They quit the job three to six months in advance and their performance starts to drop off and they’re looking for something else. Well, with some of these where we can actually tell that that’s happening and we can work with the organization, the managers to go in and address that or take action immediately.
Is it Management?
Crystal Sweeney: Well, and sometimes you can and we’ve done this is when we’re doing these reporting, this analysis, we’re able to look at all of the employees that are under a particular manager. I think we’ve said in the past that a lot of times people quit their management. That’s why they quit, is because of a conflict with the manager or leadership.
If you start to see a trend in a particular department, then it’s like, okay, we need to isolate this department as far as the data and figure out is there a common, is there like a common denominator, is there a common issue that it’s … I mean, it might not necessarily be the individual employee. It may be a management style or maybe the manager’s checked out and that’s kind of made the employees under that person as they’re all kind of in a disarray. I think that’s another way of looking at that information to help see what’s going on.
The Way Around
Another thing just I wanted to point out too is some of these work rewards don’t necessarily align with somebody’s position. We had that in our own team, one in particular is the OPPORTUNITIES TO TRAVEL. Sometimes a work reward is just something that’s not built into their job. We have an employee that that is her work reward, but what she does requires no travel at all.
There are ways around that. We figured out that there’s things that you can do to help them travel that’s not … doesn’t have to be job related. It could be just, “Hey, we know that you want to travel and you don’t get to do that with your job, so as an employee bonus, here, let’s give you a bonus so you can go fly somewhere.” It’s things like that, but it’s just definitely looking at those surveys and then figuring out and communicating with the employees like how can we make this better.
Understand the NEED
Josh Sweeney: Yeah, and all of that’s going to impact the employee retention metrics. If we’re understanding what their needs are and we’re making sure to adhere to those needs and understand those needs. That’s going to drive those numbers.
What are some of those numbers? Different examples of employee retention numbers. When we look at employee retention, we do a people analytics project around this.
We’re looking at the number of employees added, the number hired, the number fired, the number that voluntarily leave.
We’re looking at those turnover rates, turnover rates compared to industry average. We see a lot like, if we want to identify a holistic issue. We see that the industry average for a technology company is around 13% in 2018 and that in this organization it’s around 28%. Well, that’s showing a pretty big challenge.
Turnover By ROLE
We also look at the turnover rates by role. There’s a lot of data out there from LinkedIn and other places where we can look at the turnover rates. Say, “Well, is this, is the turnover rate for developers in line with what’s happening globally or nationally? Or is yours, are you just losing developers more quickly or other roles?”
We can look at turnover rate by role, and then we can look at it by department or manager. And that’s where we uncover a lot of those tactical challenges. You don’t really have to spend a lot of money on company culture initiatives that are broad. And try to hit everything. When you’re using the employee retention metrics to identify, oh, we actually have challenges retaining people in these specific areas, these three areas, these three departments or business units are really causing most of the strong pulls in those numbers. Lots of different ways we can look at that to understand what the metrics are around employee retention.
Crystal Sweeney: Well, and even looking at that, if you’re talking about a specific department, if you’re hiring them correctly for the job role that they have, a lot of those individuals are going to have very similar work rewards to each other.
Josh Sweeney: Yeah, definitely.
Quick Fix by Group
Crystal Sweeney: So then if you have a whole group and they’re all about CAREER PROGRESSION or if they’re all about WORK TRANQUILITY, then that’s something that it should easily be fixed. You can implement one thing or two things and it would improve the whole department. If they’re of the similar personality.
I think that actually is super important, especially if as a company is growing. If they’re growing extremely fast, then monitoring that change as you’re growing and as you’re adding more people can help you just keep in touch with everybody, I mean, because growth is hard. It’s painful when you’re growing a company.
K.I.T. Through Merger
When you’re adding people, it’s painful. But you have to. It’s something that you have to do. Why not just kind of keep in touch with your employees the whole step of the way? If you’re merging, if you’ve got a merger coming up and all your employees are happy before and then they’re not; how are you going to know that if you don’t have some sort of survey or assessment program to kind of keep up with that?
Josh Sweeney: Yeah. We would like for you to think about what kind of people analytics projects are you doing. or what kind of measurement of employee retention are you putting in place to understand where your employee retention challenges lie. Thank you.
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