What can data tell us about employee retention

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Talent has become more mobile in the wake of 2020’s remote working revolution and 2021’s Great Resignation.

This means your best employees are no longer as limited by geography in their choice of employer. It’s more important than ever for HR leaders to focus on their employee retention strategy.

Having a high employee turnover rate is a problem. Hiring and training new employees can be expensive and time-consuming. Plus, a high turnover rate can be detrimental to company culture and morale. 

Therefore, to hold on to great employees and save expenses, HR should know a lot about employee retention and how to manage it. One survey found that 47% of HR professionals considered employee retention to be their top workforce management challenge.

So, how do we calculate employee retention rate and turnover? And what insights can HR data provide so HR departments can predict when and why employees seek new jobs?

Read on to learn how HR can use data to get useful insights about staff retention. 


Firstly, how do we calculate employee retention?

Retention rate is a simple calculation: It’s the number of employees who stayed for the whole time period, divided by your total employees number at the start of the time period. Multiply the result by 100 and that’s your retention rate.

What this doesn’t give us is the ‘why’. Why are people leaving their workplace? How likely are people to leave?

As HR professionals, we need more insight so we can shed light on the ‘why’ and propose targeted, strategic solutions to prevent staff seeking new workplaces.

Effective people data practices make this task less of a guessing game. Here are the basic metrics you can track to give you the data-driven insight you need. 

This means your best employees are no longer as limited by geography in their choice of employer, and HR leaders are right to focus on their employee retention strategy.


Employee surveys

How do you tell if employees are happy? The obvious answer is to ask your people about their morale.

An increasingly popular measure of employee happiness is the employee Net Promoter System (eNPS). Thought-leader organisations like Apple use eNPS one a quarter, measuring employee engagement and happiness via a confidential survey with questions like: “On a scale of 1 to 10, how likely are you to recommend this as a place for work?”

Perhaps more relevant for obtaining insights about employee retention are exit interviews. These are an opportunity for HR or an external consultant to gather information about why employees are leaving.

Questions like ‘why are you looking for another job?’ and ‘what could we have done differently to make you stay at this workplace?’ allow HR to learn more about why the employee turnover rate is what it is. These interviews often provide specific insights into employee experience and job satisfaction. They’re a useful starting point for working on a talent retention strategy. 

However, employee surveys are only a small piece of the puzzle. We live in a world where 58% of employees say they would trust a stranger more than their boss, so while surveys will allow you to take a snap-shot of sentiment among your people, they should not be solely relied upon as the basis for retention strategy decisions.

Bottom line, happiness and exit surveys rely on the workforce being truthful; they’re an emotive metric. We need better, more objective data.


How reliable is your HR data?

Building a clear picture of retention through (non-emotive) data analytics is made significantly more complex in most enterprise organisations where, according to Bersin by Deloitte, people’s data is collected across up to seven separate systems of record. Where data sets are inaccurate or incompatible, they are often ignored and therefore useless for analytics.

In contrast, data-driven HR performance management systems like XCD’s software bring all this HR data together in one place. Ours generates actionable reports, making people-related data more accessible. This makes it easier to get insights from the data sources which can then be actioned into employee retention programs.

We talk a lot about delivering a ‘single source of truth’ with XCD. Using an HCM solution that incorporates all people data in a single database, users leverage sophisticated analytics reports that highlight insights as the click of a button.


Data you already have

Without reliable data and smart data processes, we’re left making recommendations based on gut instinct. When we talk about XCD’s reporting and analytics tools, we describe how they allow organisational leaders to take the gut out of people strategy decisions.

For instance, a common misconception for employers is that salaries are a key driver of employee churn, while numerous studies suggest that other factors such as job security and flexibility have a greater impact, especially following the Covid-19 pandemic. The factors influencing employee retention span every element of the employee experience, so the more (reliable) data you can incorporate, the better.

Your HRMS will (hopefully) already collect much of the hard data required to deliver objective and actionable insights on retention. Specifically, this employee data might include key metrics such as:

  • Pay history
  • Sick days
  • Benefits 
  • Employee engagement
  • Commute time
  • Performance review history
  • Onboarding time to productivity
  • Turnover cost
  • Average employee tenure
  • Promotion history and internal mobility
  • L&D effectiveness

Analysis of these data will highlight trends. For instance, do poor reviews, longer commute times or stagnant pay history increase an individual’s risk of churn? The more reliable data you have access to, the less likely you are to miss a crucial causative factor in your employee retention investigation. 

Combined with factors like departments or managers, this is a broad and rich spectrum of information to get started with. Analytics can help you figure out what the trends are that lead to employee turnover. Then, oredictive analytics can help human resources staff to predict future retention. 

Let’s look at what we can do with data:


Voluntary vs involuntary turnover

Whether someone leaves of their own accord is an important distinction and will help you nail down the ‘why’ in your retention investigation. A high voluntary turnover rate is an indication that something is going wrong within the employee experience and management. Conversely, a high involuntary rate suggests the issue may sit within recruitment.

Both employee experience and recruitment will have a bearing on both voluntary and involuntary turnover, so the distinction isn’t black and white.


Talent turnover

The basic turnover rate calculation at the top of this article fails to answer one critical question: are we holding on to our best performing people? If the answer is no, then you’ve identified a big problem.

It’s important for HR to make sure that strategies are in place to retain top talent if data reveals that high-performing employees are leaving the company. They might be leaving because they don’t see opportunities for progression, so employee retention strategies should create strategies to combat this.

For example, using one-on-one performance appraisals to discuss development opportunities and promotions can motivate top performers and improve employee engagement. This makes them less likely to pursue jobs with other employers. 


Onboarding effectiveness

Employee retention strategies begin with onboarding. Research by Glassdoor suggests that an effective onboarding process can improve your retention rate by up to 82%. 

The first few months of employment are the most fraught when it comes to the risk of churn, so how effectively you support new hires is a key factory in retention. How does the rate of turnover among new employees differ from the rest of your workforce? It will always be higher, but if the difference is significant, it indicates an issue with your recruitment, hiring, and onboarding process.

Want to make sure you’re boosting your company’s employee retention with a first class onboarding experience? Download our checklist for onboarding remote employees to ensure you don’t miss crucial details. 


Managers matter

We all know the popular saying about how people don’t leave jobs, they leave managers. If your data indicates turnover with a particular manager is unusually high, there’s an obvious problem there.

According to Udemy, 51% of millennial and Gen Zers surveyed have quit a job because of a bad manager (so did 43% of older employees).

Conversely, HR can learn a lot from managers who show a low turnover rate. Their approach may be repeatable and could be applied company-wide to reduce turnover.


Wider trends

There are also wider trends in workforce analytics that professionals in human resources should be aware of. For example, research by Glassdoor shows that January is the most popular month for people to seek new jobs, even though employers tend to post fewer job openings this month.

Being aware of spikes like these allows HR to put additional resources into employee retention strategies around this time of year to motivate employees to stay. 

Read more of our resources on HR reporting analytics below: