Both attrition and retention reflect the quality of employee experience and engagement levels in your organization. However, high turnover may not necessarily be harmful, or high retention may not be the most effective strategy for your organization, depending on your organizational goals and the business environment.
A careful, contextual analysis of attrition and retention metrics is necessary to derive actionable insights.
Read on to understand how to analyse and manage workforce attrition and retention.
Attrition and Retention in HRM
Per Gartner Research, employee turnover costs an organisation $18,591 per departing employee. With a median turnover rate of 17.8%, the total ranges from $33,000 to $1.7 billion per organisation based on size.
In the context of the turbulent HR landscape triggered by the pandemic, these expenses are rising even more. Enterprises are looking at talent attrition and retention as crucial metrics to drive their HR strategies post-pandemic.
What is Employee Attrition?
Attrition refers to the departure of employees from the organization. It could be due to voluntary resignation or involuntary reasons like death or sickness.
The attrition rate for a specific period is the number of employee departures as a percentage of the average number of employees in the same period. Generally, enterprises monitor monthly or quarterly employee attrition.
What is Employee Retention?
Retention for a specific period is the number of employees that do not depart as a percentage of the number of employees present at the beginning of the period.
It is the exact opposite of the attrition rate. Some enterprises may ignore involuntary departures for this calculation because an improvement in employee engagement may not impact these departures. Typically, enterprises measure retention annually.
How do you Manage Attrition and Retention?
1. Collect In-depth Data
Collect data for a 360-degree attrition analysis. It must include much more than just employee profiles or demographic data. You must collect qualitative information from exit interviews, employee surveys, and social media. Besides, data about employees’ roles and responsibilities, team structure, manager profiles, performance reviews, and career progression are also crucial.
2. Analyze Reasons
Conduct a root cause analysis (RCA) for attrition and retention. Identify the components of your employee value proposition (EVP) that matter the most to your employees and those that need improvement. This analysis must also include benchmarking against competitor employee offerings.
3. Calculate Costs
Quantify the attrition losses in monetary terms to drive top management buy-in for strategic initiatives. Include the direct attrition costs such as recruiting, onboarding, and training replacements and indirect costs such as knowledge and productivity losses.
4. Design and Execute Retention Strategies
Based on the RCA and the cost-benefit analysis, create a roadmap for specific actions for improving the workplace environment and employee experience. Continuously measure retention and attrition metrics to track the effectiveness of your HR strategies.
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Attrition and Retention Analytics
Per PwC’s 20th CEO Survey, 50% of CEOs agree that they use HR analytics to find, develop, and retain employees.
Enterprises are striving to move beyond operational HR reporting to implementing statistical models that can provide a sophisticated understanding of employee expectations and provide accurate predictions for workforce planning.
Why Measure Attrition?
- Benchmark Against Competition
Measuring attrition enables you to understand where your organization stands in engaging and retaining top talent vis-a-vis competitors.
- Manage Workforce Risk
Analyzing attrition trends for various segments of employees helps identify top performers at flight risk and take proactive corrective action.
- Maintain Diversity and Inclusion
Attrition analysis helps you identify potential red flags, say increasing exits among employees of specific underrepresented communities.
Why Measure Retention?
- Improve Recruitment methods
Analyzing the talent retention trends among new hires can help you identify personality traits and other profile parameters that make the recruits a good fit for your company.
- Optimize Hiring and Training costs
Analyzing retention outcomes enables you to determine the ROI on retention initiatives. Accordingly, you can choose to invest between retaining or hiring specific skill sets.
- Improve Customer Experience
Measuring and managing retention enables you to ensure there is no short staffing. It helps deliver timely and high-quality services to your customers.
How to Analyze Attrition and Retention: HR Analytics
1. Create a Context For Analysis
Depending on the business context, you must decide on a specific period and articulate whether the analysis includes voluntary, involuntary turnover, or both. You must also determine if all attrition is to be treated equally or must bifurcate into desired and regretted based on employee performance.
2. Analyze Metrics Across Criteria
Retention and attrition indicators must be measured and dissected across various parameters like,
- By Employee Segment – For example, high resignation rates among mid-level managers may signal overburdening or lack of top leadership support.
- By Demography – A high attrition among a particular age group, say millennials, may provide insights into improving the work environment to engage them better.
- By Performance – Low retention among top performers may indicate an inadequate compensation package or lack of career opportunities.
Combine multiple parameters to generate granular insights.
For example, in the Deloitte Talent 2020 – Employee Perspective report, retention initiatives are analyzed for effectiveness by age groups (Millenials, Gen X and Baby Boomers) and employee segments (Executives, Employees).
It shows that the highest priority for millennial executives is job advancement, while baby boomer executives prioritize health and pension benefits.
3. Leverage Predictive Analytics
While you must conduct forensic analysis of attrition and retention trends, you can also use your data to build artificial intelligence (AI) – based models that help you predict attrition risk.
Metrics such as the average employee tenure, employee net promoter scores (NPS), and employee satisfaction can help better understand employee perceptions about their role and workplace.
What are the Different Attrition and Retention Strategies You Can Adopt?
1. Hire to Retain
Increasingly, enterprises are deprioritizing qualifications and experience as criteria for making hiring decisions. There is an increased emphasis on objective skill assessment tests and personality assessment test scores. Historical retention trend data coupled with these scores can help predict the likelihood of a candidate staying longer with your organization.
2. Create Exceptional Onboarding Process
Onboarding is the first touchpoint for new hires and sets the tone for employee perceptions about the organization. A standardized and seamless onboarding process helps employees overcome anxieties and better connect with the company culture and their teams.
3. Address Burnout
Per Mckinsey’s research, 38% of Indian respondents reported burnout, much higher than the global average of 26%.
Companies that provide flexible timings, remote work environments, and initiatives related to mental health do better in retaining employees. It also prevents ‘quiet quitting‘ in which employees drop productivity to the minimum levels required for their job.
4. Design a wholesome EVP
Analyzing the reasons for attrition and retention helps you design an EVP with the correct weights for financial, non-financial, and career development benefits.
People analytics can help identify training needs and design reward programs to engage your employees. You can also customize your EVP according to employee segments and other parameters.
Enterprises can mature from descriptive to diagnostic and then predictive analytics in a phased manner to strengthen their retention methods and decrease their attrition costs over time. A long-term strategy executed through a cutting-edge HR automation platform can also help you leverage the power of HR analytics for other objectives like performance management and succession management.