This article will discuss why you should track your staff retention rate, how to calculate it, and how to use the information to improve your company culture and bottom line.
Improving your staff retention rate is key to business success. It’s no secret that turnover is expensive for any business, but it can be very hard to pinpoint how much of a financial toll leaving employees take on your company.
How to calculate staff retention
The easiest way to figure out your staff retention rate is to divide the average years worked by the average number of employees in any given time period. For example, if you have 15 people and they stayed an average of 2.5 years, your staff retention rate would be 15/2.5 x 100 = 60%. This figure could be considered good or bad depending on a number of factors. For a big company with expensive hires, this could represent a poor return on their talent recruitment and investment. For a smaller company with limited opportunities for progression and a more casual hiring approach, this could actually be a pretty strong rate.
It’s also worth looking at how retention rates may vary in different departments. You may find the figures are being skewed by extremely high attrition in one area, which means that you can focus your attention more directly on what is happening locally to cause this.
Why high staff turnover is damaging?
One of the most damaging things a business can experience is high staff turnover. When too many employees are moving on too frequently, you’ll face serious challenges. That’s because it takes time and energy to recruit and hire replacements, as well as train them so they hit the ground running. A £30k salary appointment can easily cost you as much to replace. Also, when your employees don’t stay long enough with you, it’s disruptive for the whole team and customers.
Why staff turnover happens
Employees leave their jobs for a variety of reasons, from finding a better opportunity in another company to falling out with their boss or colleagues. Those with children or other dependents may look elsewhere if their employment is not family-friendly enough for their needs. In an ageing workforce, it’s likely that staff will be retiring, often reducing their hours gradually. The pandemic has also left increasing numbers of people with health challenges which may affect their ability to work in the same way. However, more generally, a company’s retention rate tends to be directly linked to employee satisfaction levels. The happier they are, the more likely they are to stay.
What is a good staff retention rate?
You can find on the internet the average retention rate for your sector as a useful benchmark for your own organisation. You can also compare your organisation’s retention rate over time – is it getting better or worse? External factors will also make a difference. For instance, a new employer opening locally who is running a recruitment drive that appeals to your staff or competitors directly targeting your skilled staff in a bid to lure them away. In a tight recruitment market, organisations are competing with each other for the staff they need.
Ways to improve staff retention
Lowering your staff turnover rate even by a small percentage could save your organisation hundreds if not thousands of pounds in costs. Some of the most significant costs might include the administration of a resignation, recruitment and selection costs, agency cover whilst the post remains unfilled and the training of the new recruit. The costs add up even further if the individual fails to pass their probation period.
So, what exactly can you do in order to reduce staff turnover and improve your staff retention rate?
Here are 5 ways to improve staff retention:
1. Recruitment and Onboarding
It’s important to ensure that you are hiring the right people in the first place. Do they have the skills and attributes you need? Are they clear about expectations? Is their employee experience a positive one? A thoughtful recruitment strategy is needed and clear onboarding procedures so that when an employee begins working with you they have a solid understanding of what their new job entails. Make sure you have a process for helping them through their first 90 days too – many companies see an increased rate of staff turnover during a new employee’s first three months on the job. You don’t want to start the whole process again.
2. Pay competitive wages
If you pay below-market wages, then your employees will look elsewhere for employment and simply follow market prices. That doesn’t mean you have to overpay but do make sure that what you offer is at least enough for someone to live on. Most employees want more than just a living wage – but it’s an important starting point.
3. Review your mission, vision and policies
Happy employees feel connected with their company’s mission and vision and have a sense of belonging with their colleagues. Are your policies and practices keeping pace with the needs of a post-pandemic workplace, for example, flexible working and remote collaboration?
4. Take care of your employees and value their contributions
This means giving them a purposeful job they’re well-suited for and showing that you value their ideas. Having regular and meaningful career conversations are important to check in whether you are meeting the needs of each employee and what they want from their working life.
5. Career development
Offering opportunities for career growth is essential. This isn’t just for those with soaring ambitions. Most employees want to grow their capabilities and feel that their contribution is recognised. While it isn’t possible to promote everyone, there are always opportunities for employees to learn. This may be through crafting their job so that they are able to work in new areas, stretch assignments, work shadowing, project work and lateral moves. Create succession plans and nurture employees so that they are able to apply successfully for promotion roles when they do arise. Mentoring, training and development and a diversity strategy are all key elements needed for a career development strategy. If employees feel they have a future in the organisation, and that they are learning they are more likely to stay.
How Personal Career Management can help:
Personal Career Management has worked with hundreds of organisations to support them with the career development of their staff, and improve staff retention. We provide an external perspective for workplace challenges and we train Managers and in-house coaches in how to have a motivating, positive developmental career discussion with every member of staff. Services include:
- Career Conversation Training for Managers and In-house coaches
- Career Conversation Clinics
- Career Webinars and Presentations
- Online Career Development: icareercoach™
- Executive Coaching
How can I find out more?
Ring us on 0345 686 0745 or fill out the contact form below and one of our team will be happy to ring you to discuss your requirements.