Employee Retention Rate: How to Calculate It and Simple Strategies to Keep It High
It can be frustrating when employees leave your company.
On the one hand, it’s to be expected that people will move on, and it can be satisfying to see them further their goals. On the other hand, great workers are hard to find. The pandemic’s Great Resignation makes attracting quality talent even more of a challenge. And it costs the company time and money to source, hire, and train new staff. So, it’s incumbent upon managers to keep staff members engaged, motivated, and willing to stay. In other words, you need to keep the employee retention rate high. We’re about to explore the best ways of scoring high, and keeping it there.
What is employee retention and why is it important?
Employee retention is the number of workers who stay on the job over a period. It’s one of many metrics companies use to monitor employee satisfaction. If an employee retention rate is low, it’s an indicator that further research is needed to figure out the reasons why.
Retaining employees is about more than the expense and effort of training them, although that’s a big part of it. It’s also about keeping employees engaged and happy in their roles. Employee morale is usually affected by the departure of a company star. When someone leaves, it usually falls on those who remain to pick up the slack. And if a low retention rate is routine, it can impact your ability to attract talent. When prospective employees Google your company—and they will—they’ll wonder why so many people stay for a short time.
A low retention rate also erodes a company’s stability and consistency. It’s true that the nature of some industries lends itself to regular staff departures. The hospitality sector has a notoriously low retention rate. Call centers do too. But that doesn’t mean managers have to accept it. In fact, it’s an opportunity to determine the reasons, analyze them, and take steps to plug holes that are leaking employees.
What is a good employee retention rate?
A good employee retention rate is one that’s better than you had last quarter. It’s proof that things are heading in the right direction.
Ninety percent retention is the average of all industries in the United States. That calculation includes federal government workers (98%) as well as call and contact centers (55–70%).
How do you calculate the staff retention rate?
Let’s use a hypothetical company. Although Boaty McBoatface is so five years ago, it’s also unforgettable, so we’ll call our company Cally McCallface (CMcC). As the Manager of CMcC, you need to decide what time frame to analyze. You’ll also choose whether you’ll look at the overall employment picture, or perhaps just new hires, to judge how implementing better tools has affected onboarding.
Let’s look at all employees over a typical month. On the first of June, you had 50 people. On the 30th, there were 44 of them left. The calculation, (44/50) x 100 = 88%, puts your company at a retention rate of 88% that month.
In July, you started with 44 employees but hired two people for a total staff of 46. Two others left for new jobs, bringing the total staff back down to 44. But the retention rate went up: (44/46) x 100 = 95%. Yay!
What is the attrition rate in a contact center?
The attrition rate is the flip side to the retention rate. Attrition is how often employees are leaving your company. When you improve the employee retention rate, the attrition rate automatically improves as well. While you’d like your company’s retention rate to be high, it’s best if the attrition rate is low.
To calculate the annual attrition rate for Cally McCallface, divide the number of employees who left the company by the average number of employees over that year, then multiply by 100. To get the average for the year, take the number of employees the company had to start the period and add it to the number they finished with, then divide by 2.
You started 2021 with a staff of 50. Over the year, 16 left, but you also hired 8, meaning you finished the year with 42 employees. That gives you an average of 46 employees for the year, and an annual attrition rate of roughly 35%. (50+42=92 then 92÷2=46 then 16÷46= 34.8%)
A 35% attrition rate for the year is average for a medium-sized call center. But who wants to be average? Certainly, not you.
What are the benefits of employee retention?
Savings: It’s expensive to replace people. Some estimates show that replacing a departed employee can cost as much as 50% of their salary.
Productivity: Employees forge working relationships that fracture when someone leaves. Learning how to communicate with someone new takes time and often puts a dent in productivity. Add in what’s not getting accomplished while others are filling the exiting employee’s shoes, and you have a recipe for lower productivity.
Time: Preparing job descriptions, soliciting resumes, screening them, interviewing candidates, hiring, and onboarding new hires—all these time-consuming tasks involved with recruiting replacements can be avoided with good employee retention.
What are the strategies for employee retention?
Look for ways to improve both rates, so Cally McCallface can stay competitive and meet or exceed growth targets.
Employees move on for a variety of reasons. Some, you can’t do anything about, like an agent moving across the country with their family or another personal or professional factor. Others are within your control.
Compensation and benefits are important, but a good workplace culture also ranks higher on many employee must-have lists. Valuing your employees’ input about job-related issues makes them feel their effort is worthwhile. Recognition is meaningful too, along with feeling supported by management. Many workers also need to see the next possible step to keep them motivated in their current role.
“Think about it from an agent perspective and ROI,” says Dianna Borries, Training and Development Manager with Heartland Dental. The company sought employee feedback and found that “Agents were frustrated at not being able to find the information they needed.” Borries and her colleagues researched available tools to replace the patchwork of Post-It notes covering desks and computers. They chose ProcedureFlow to simplify their processes and turn them into user-friendly hyperlinked flowcharts that can be easily accessed by all employees.
Borries notes that people want to do a good job. But they need to be given the proper tools to do it. “We started a marketing campaign about ProcedureFlow early on. People were excited about it and saw how it would make them better at their jobs. We call ProcedureFlow an interactive flowchart on steroids,” she says.
In the first 90 days after implementing ProcedureFlow, Heartland Dental’s retention rate for new hires grew to 85% from 80% the previous quarter. ProcedureFlow turns a company’s processes and expert information into an accessible, easy-to-use management tool. It creates standard operating procedures that people actually enjoy using.
“Training used to take 94 hours,” says Borries. “Now, it’s shorter, by 45 hours, that’s a full week!”
How to avoid becoming a statistic of the Great Resignation.
Research conducted on the Great Resignation shows that employee retention rates in all Western countries will remain low (and therefore, attrition rates high) in the short term, for most industries. To help avoid becoming a statistic in this growing trend, consider taking a deep dive into establishing employee engagement and job satisfaction throughout your organization.
Choosing a partner like ProcedureFlow to manage your processes will help improve the overall employee experience. Your staff will want to stay. As a result, your organization will reap the benefits as the employee retention rate starts to rise, and the attrition rate starts to fall.
Request a demo and see how you can get started with ProcedureFlow today.
Written by Lisa Brandt.