Business Leadership Today

How To Measure Employee Retention Strategies (4 Tips)


Matt Tenney, Author of Inspire Greatness: How to Motivate Employees with a Simple, Repeatable, Scalable Process

In March 2022, 4.5 million Americans quit their jobs. This amounts to roughly 3.0% of the workforce. These workers either left their jobs for other jobs or left the workforce entirely.

Companies have been struggling to hire and retain talent in a very competitive job market over the last year due to The Great Resignation, but it now seems the turnover tide is turning. 

In June of 2022, American companies laid off around 32,517 workers. This number is expected to grow as the economy grows less certain. With workers once again concerned about job security and the possibility that job offers could be rescinded, it is expected that workers will increasingly stay put.

While The Great Resignation may have transformed into “The Great Uncertainty,” employers are still looking at ways to retain highly qualified employees. 

Forward-thinking organizations who fully grasped the implications of The Great Resignation (and what it tells us about how well we’ve been engaging employees) are reexamining their retention strategies to determine what’s working, what isn’t, and where improvements can be made. 

To craft and implement retention strategies that are sustainable requires frequently measuring the success of employee retention strategies to determine how well those strategies are actually working.

When organizations use employee retention metrics and key performance indicators (KPIs) to track employee retention, they can predict which employees will likely leave. They can also help organizations identify strategies and practices that aren’t serving employees or creating positive employee experiences. 

In this article, we’ll explore four ways to measure employee retention strategies in your organization to ensure they are working. 

  1. Average Length of Employment
  2. Retention Rate
  3. Turnover Rate
  4. Employee Engagement Surveys

1. Average Length of Employment

The average length of time employees stay with an organization is another good way to measure retention strategies, and it is tracked by the U.S. Bureau of Labor Statistics

This statistic helps organizations get an idea of how they compare to other organizations in the same industry. It can also help organizations see how rates of retention have changed over time.

Average length of employment can be calculated by dividing the total number of years of employment for all employees by the total number of employees. 

For example, an organization with 1,000 employees who have worked there for a combined total of 4,000 years, would have an average length of employment of four years.

4,000 / 1,000 = 4 years average length of employment

2. Retention Rate

Employee retention rate measures the rate at which workers stay with an organization. 

To calculate an organization’s retention rate, divide the number of employees who have remained with the organization for a specific period of time by the initial number of employees for the same period of time, and multiply that number by 100.

(Remaining employees during a set timeframe / Initial number of employees during the same time frame) x 100 = Retention rate

If you wanted to calculate your organization’s retention rate for the year 2021, and it had 1,000 employees on January 1st of that year and 900 employees on the last day of that year, December 31st, the employee retention rate would be 90%.

(900 / 1,000) x 100 = 90% yearly retention rate.

Though it is typically calculated annually, employee retention rate can be measured annually, quarterly, or even monthly.

Since retention rate measures the retention of employees who worked on the first day of the time period being measured, employees hired within that measurement period or new positions that were added after the start of the measurement period should not be counted.

3. Turnover Rate

According to SHRM, “retention rate… measures the retention of particular employees over a specified period of time and complements the turnover rate metric, giving a more complete view of worker movement than calculating either metric alone.”

While calculating retention rate can provide helpful insight into the stability of the workforce, it is limited by the fact that it does not track the rate of employees who joined and left during the measured time period. 

Turnover is the number of employees who voluntarily or involuntarily leave a job during a certain time period. 

While employee retention rate alone is more limited in what it tracks, employee retention rate and employee turnover rate when used together can give deeper insight into how well an organization’s retention strategies are working.

Employee turnover rate is defined as the number of employee departures divided by the average number of employees during that same time period. This is done by dividing the ending number of employees by the initial number of employees, and multiplying by 100: 

(number of separations during the specific time period / average number of employees during that same time period) x 100 = Employee turnover rate

The resulting number can then be divided into voluntary and involuntary separations to measure the percentage of employees who left by choice, were fired, or laid off.

Voluntary turnover is when an employee’s resignation is based on their, rather than their employer’s. An employee accepting a position with another organization, relocating, changing careers, or leaving the workforce entirely are examples of voluntary turnover.

To calculate voluntary turnover rate, divide the number of employees who left voluntarily during a given timeframe by the average number of employees during that same timeframe and multiply by 100.

Involuntary turnover occurs when employees are terminated for a reason, including poor job performance, behavioral issues, violating policies, or layoffs. 

To calculate involuntary turnover rate, divide the number of employees who left involuntarily during a given time period by the average number of employees in that same time period) and multiply by 100.

4. Employee Engagement Surveys

Surveys that measure engagement can help organizations determine how well they are achieving strategic goals and guide them in setting retention strategies. 

According to Gallup’s research, organizations with high levels of employee engagement can see roughly 50% better employee retention than organizations with low levels of employee engagement.

When organizations gain an understanding of employee perceptions and learn which perceptions are good predictors of future turnover, they can develop strategies that improve retention.

For example, an organization’s Employee Net Promoter Score (NPS) can provide insight into how likely, on a scale of 0-10, an employee would be to recommend working at their organization to a family member or friend. 

Engaged employees are more likely to recommend working for the organization. This measure can provide valuable insight that can help leaders reduce turnover.

Matt Tenney has been working to help organizations develop leaders who improve employee engagement and performance since 2012. He is the author of three leadership books, including the groundbreaking, highly acclaimed book Inspire Greatness: How to Motivate Employees with a Simple, Repeatable, Scalable Process.

Matt’s ideas have been featured in major media outlets and his clients include numerous national associations and Fortune 500 companies.

He is often invited to deliver keynote speeches at conferences and leadership meetings, and is known for delivering valuable, actionable insights in a way that is memorable and deeply inspiring.

Others Recent Articles and Podcast Episodes

Struggling to retain good employees?

Get a free video training that will help you cut turnover in half in just a few months.