Measuring turnover and retention

Employee turnover and retention rates affect every organisation’s performance and its ability to achieve its strategic goals.

 

By understanding the reasons why staff leave, employers can devise initiatives that reduce turnover and improve employee retention.

 

This document forms part of the NFCC’s Talent Management Toolkit, which is built around the stages of talent management as defined by the Chartered Institute of Personnel and Development (CIPD).

 

The CIPD states:

Talent management seeks to attract, identify, develop, engage, retain and deploy individuals who are considered particularly valuable to an organisation. It should align with business goals and strategic objectives. By managing talent strategically, organisations can build a high-performance workplace, encourage a “learning” organisation, add value to their employer brand and improve diversity management.

This document will help you retain individuals by effectively measuring employee turnover and engagement. It will also provide guidance to identify and implement relevant retention tools for your service.

 

Why measure employee turnover and retention?

Measuring employee turnover and retention has many benefits. For instance, it can:

  • Help identify issues and determine action plans for improvements
  • Inform decision-making, which will improve retention and ultimately save money
  • Put a cost on employee turnover, which can feed into a business case and help reduce costs
  • Help inform policies and activities to support employee engagement and retention
  • Provide excellent insight to the health of your teams, departments and the organisation as a whole

 

All turnover data and resulting retention activities should form part of the Service’s Workforce Plan. Please see NFCC Model Workforce Planning Policy for more details.

 

It is essential, therefore, for organisations to find winning employee retention strategies to keep their top talent from leaving.

 

Definitions

Employee turnover

 

Employee turnover refers to the proportion of an organisation’s employees who leave over a set period (often measured on a year-on-year basis), expressed as a percentage of the total workforce. The term generally encompasses all leavers – voluntary and involuntary – including those who resign, retire or are made redundant. It is also possible to calculate more specific breakdowns of turnover data, such as redundancy-related turnover or resignation levels, the latter being particularly useful for assessing the effectiveness of people management practices.
Voluntary turnover This is when an employee voluntarily leaves a company. Usually, employees will have a notice period, which they will have to work before leaving the organisation. However, some may stop showing up or leave their workplace after resigning and not return.
Involuntary turnover When an organisation asks an employee to leave, this is known as involuntary turnover. Common reasons for involuntary turnover include behavioural problems, structural reorganisation, under performance or redundancy.
Retirement Although retirement is typically considered voluntary, it is not always included in the analysis of employee turnover rates. However, it’s important to account for these kinds of changes, since it’s likely that the retiree’s post will need to be filled by a new employee.
Internal transfers Internal transfers happen when an employee is promoted or moved to another position within the same organisation. While the employee may still be working for the same organisation, and so has not truly ‘left’, these kinds of changes need to be included in the employee turnover rate because that employee’s former position will likely have to be filled with a new employee.
Employee retention

 

Retention relates to the extent to which an employer retains its employees. It may be measured as the proportion of employees with a specified length of service (typically one year or more) expressed as a percentage of overall workforce numbers.

 

 Measuring employee turnover

To inform the design of targeted retention initiatives – and build a business case for implementing them – you need to measure the levels and costs of employee turnover. This can be a powerful tool to gain the support of the senior leadership team for resourcing and retention activities.

Organisations may track their turnover rates on a month-by-month or year-by-year basis, and it is usually expressed as a percentage of employees overall, as outlined below.

 

The total figure will include all leavers, including those who retired or left involuntarily due to dismissal or redundancy. It makes no distinction between functional (that is, beneficial) and dysfunctional turnover. It could therefore also be useful to calculate a separate figure for voluntary turnover (resignations), as such departures are unplanned and often unpredictable (unlike planned retirements or redundancies) and can have an especially adverse impact on the organisation.

 

If you have particular areas of concern, for example where turnover is higher than in other areas, it may also be helpful to consider some of the more complex employee turnover metrics. These could include investigating specific characteristics, such as:

  • Seniority
  • Experience
  • Different teams/functions/areas
  • Locations/sites/stations

 

 Measuring employee retention

A stability index indicates the retention rate of experienced employees. Like the turnover rate, this can be used across an organisation as a whole or for a particular part of it. The usual calculation for stability index is:

 

Steps to improving employee retention

Many organisations believe they don’t have a problem with staff retention. However, the Association for Talent Development points out that not all staff turnover is the same. For example, within the fire and rescue service, it could be worth looking at operational and non-operational workforces separately.

 

1.    Look at the data Data can come from a number of sources, such as exit interviews, equality, diversity and inclusion (EDI) data, surveys and so on.

·         What is the data showing?

·         Where are the specific issues?

·         Who is leaving?

·         Are there any common themes?

2.    Consider the impact that employee turnover has on the organisation ·         What are the costs?*

·         Does the turnover affect the organisation’s ability to achieve its objectives?

·         Does it pose any reputational risks?

·         What experience is lost? Is it lost in business-critical roles?

·         What is the impact on engagement, culture and morale?

3.    Investigate why people leave The reasons behind turnover may highlight issues within the workforce. However, be mindful that individuals may be reluctant to voice criticism of their managers, colleagues or the organisation generally, preferring to give some less contentious reason for their departure.**
4.    Feed data and actions into the Workforce Plan Workforce planning enables managers to ensure the service has the right people, with the right skills, at the right time to meet future demands. Turnover and retention data will help identify what actions are required to ensure the service has enough skilled people to meet the needs of its community.
5.       Take action Determine the actions that will have the most positive impact on the specific issues within the organisation. Assign owners and regular review dates (see retention tools below).
6.    Review and monitor results Ensure that all actions are regularly reviewed. Consider the following:

·         Are the actions having the desired impact?

·         What is the data telling you?

·         What adaptations need to be made?

·         What else needs to be done?

·         What support is needed to achieve the outcomes?

 

 * Costing employee turnover

The costs associated with employee turnover due to resignations rather than redundancies can be estimated by calculating average hiring costs incurred, for example:

  • The cost of related administration
  • Recruitment and selection costs
  • Covering the post while it remains vacant
  • Induction training for the new employee
  • Additional training/support costs

 

This figure can then be multiplied by the relevant turnover rate for that staff group to calculate the total annual cost of turnover.

 

Many of these costs involve indirect management or administrative staff time, but direct costs can also be substantial, particularly when using advertisements, agencies or external assessments in the recruitment process.

 

More complex approaches give a more accurate and invariably higher estimate of total costs. For example, these could include estimating the relative productivity of new employees during their first weeks or months as well as that of the leaving individual during their notice period (both likely to be lower than the productivity levels of established employees).

 

This data can be used to develop a costed retention strategy that focuses on the particular issues and causes of turnover specific to the organisation.

 

** Investigating why people leave

Employee turnover can have a negative impact on an organisation’s performance. By understanding the reasons behind staff turnover, employers can devise recruitment and retention initiatives that increase employee retention.

 

Some of the main reasons people leave a job include:

  • Poor salary and benefits
  • Lack of training and development opportunities
  • Dissatisfaction with management
  • Not getting along with colleagues
  • Commute time
  • Lack of work–life balance
  • Poor culture
  • Not feeling valued

 

How to determine why employees leave

Most organisations conduct exit interviews to try to ascertain the reasons behind departure; however, employees can tone down or even fabricate their reasons for leaving. Individuals may be reluctant to voice criticism of their managers, colleagues or the organisation generally, preferring to give some less contentious reason for their departure. Other ways to find out why employees leave – and why they stay – are outlined below.

 

Exit interviews When exit interviews are used to ask why someone is leaving, exit interviews should be confidential and their purpose explained. Some services offer leavers the opportunity to do the interview with their line manager, a member of human resources (HR)/organisational development (OD) or the EDI manager. However, using an external provider or online survey to conduct exit interviews will help capture more accurate data about why people are leaving, as individuals are more willing to be honest when their anonymity is guaranteed.
Questionnaires to recent leavers Send an anonymous online questionnaire to those who have left within the last six months.
Attitude/staff engagement/pulse surveys It’s also important to consider the experiences of those still employed by the organisation. Confidential attitude surveys for current employees, including questions about their intentions to leave, will identify potential retention issues before they happen and help to minimise the negative impacts of employees leaving.
Ongoing engagement interviews Ongoing engagement interviews with staff can give leaders insight into their team’s motivations, goals and outlook. This information can help managers find internal opportunities for employees that align with their personal career goals while also supporting the organisation’s objectives.
Ask current employees why they stay Ask those who stay what keeps them there. Uncover what they find motivating, take genuine steps to fix what’s broken, and continue to develop what you’re doing right.

 

 Retention tools

In addition to basic pay and benefits, organisations should consider the following practices, all of which have been shown to play a positive role in improving retention.

 

Be flexible
Wherever possible, accommodate individual preferences on working hours, location and time. As part of this, it’s also important to monitor workload and ensure it’s manageable within working hours, enabling a good work–life balance.
Treat people fairly
Perceived unfairness, for example in the distribution of rewards, approach to promotions and so on, is a major cause of voluntary resignations. Develop a work culture that encourages diversity and creativity, and put in place effective EDI policies that support all employees.
Pay attention to employee well-being
Support managers to help their teams thrive and manage issues such as workplace stress and absence. Ensure policies and support are available.
Enable career development and progression
Maximise opportunities for employees to develop their skills and careers. It’s also important to understand and manage people’s career expectations. Where promotions are not feasible, look for sideways moves that will allow employees to gain different development experiences. This can also benefit an organisation’s succession planning.
Consult employees
Ensure that employees have a ‘voice’ through various mediums, such as regular performance conversations, attitude surveys, forums, working groups and grievance systems.
Learning and development
Provide individuals and managers with opportunities for development, not just for their current role, but as a means to develop and progress in their careers more generally. All employees should have a personal development plan, and new and existing employees should be made aware of opportunities for growth and development. Not only does this ensure happy and engaged employees, but it will highlight a productive future within the organisation for those considering their options.
Rewards and recognition
Recognising and rewarding employees has been proven to improve organisational culture, enhance team efforts, increase community satisfaction and encourage certain behaviours. However, employee reward and recognition is often overlooked by managers and leaders. Refer to the NFCC Recognising and Rewarding Employees guide for more information.
Brand, attraction and recruitment
Organisations need to strike a balance between attracting prospective employees and managing talented individuals and teams effectively once they are part of the workforce. It is thus critical to ensure that messages about brand and values promoted in the recruitment processes align with staff experience. Strengthening your proposition and implementing a values-based approach to recruitment can be effective.
Employee engagement
Employees who don’t feel engaged by their work are more likely to walk away from their jobs. Establishing mentoring programmes, open communication, employee engagement surveys and employee reward and recognition schemes can help bring disinterested workers back on board.
Creating opportunities
Employees who feel trapped in their current positions have fewer incentives to stay engaged in their work. Providing opportunities for advancement internally rather than always hiring from outside can encourage experienced workers to stick around for longer.
Recruitment practices
Review and refine your recruitment processes so you’re sure that the people you hire will be a good fit for the position and your internal culture. This, in turn, will have a positive impact on retention.

 

References