5 common drivers of low employee retention.

A company’s employee lifecycle starts with attracting, hiring and retaining team members. The lifecycle naturally concludes when an employee leaves the organization, whether voluntarily or involuntarily. The number of employees who depart over a specific time period defines what is known as an organization’s employee "retention rate." When fewer employees leave, retention rates rise. When more employees leave, however, retention rates decline. And when they decline enough — and stay that way for long enough — that signals that an employer has a serious retention problem.

Many companies set benchmark employee retention rates as a way to track and measure the effectiveness of their retention efforts. A company aiming for an 80 percent retention rate, for example, hopes to retain eight out of every 10 employees over a given time period.

Goal retention rates vary from company to company and industry to industry. For example, if your business is impacted by seasonal fluctuations, you know your retention numbers will swing with seasonal highs and lows. Factoring in this type of variable allows you to build a retention strategy that works for your business. 

However, when the number of people leaving causes your retention rate to drop below the benchmark over a sustained period, it’s time to pull back the curtain and examine why employees are exiting.

why employees leave

The U.S. Department of Labor reports that 38.2 million people voluntarily quit their jobs in 2017. While these employees all had their own reasons for resigning, there are general trends that occur across industries and within companies of every size.

Randstad’s Employer Brand Research 2018 identified the top-five reasons people left, or considered leaving, their employers.

• Low compensation: Pay is important to all employees, but it often becomes more important as workers advance in their careers. Junior employees will sometimes accept a lower-paying position if it means gaining valuable experience. On the other hand, more tenured professionals are going to want compensation that matches their skill level and expertise.
• Limited career path: Knowing a company offers growth opportunities allows employees to envision a longer career path. The prospect of advancement also helps teams focus on the bigger picture and may help them tolerate the inevitable ups and downs of their jobs. When opportunities are limited, high achievers and mid-career employees will often proactively look elsewhere for advancement.
• Work-life balance issues: Whether it be long hours, a long commute, limited flexibility or ongoing stress, workplace pressures that negatively impact personal life can take their toll and inspire workers to search for a “better” situation.
• Insufficient challenges: Employees who feel their skills are not being recognized or utilized can quickly become disengaged and move on. In particular, younger employees may choose to look for a new role rather than seeking out creative ways to identify and solve challenges in their current role.
• Poor leadership: Employees who lack confidence in their supervisors or question their organizations' leadership are far more likely to simply disconnect, or even resign, than try to resolve workplace challenges.

Exit interviews can help you learn what’s behind employee retention rates, and sophisticated analytical tools can even help you predict employee turnover. However, maintaining open and ongoing communication with current employees remains the most effective way of identifying issues before they become larger problems that lead to turnover.

retention vs. turnover: know the difference

At first glance “employee retention rate” and “employee turnover rate” seem to measure the same thing: how many employees stay with or leave from a company. The two measurements are similar, but the Society for Human Resource Management explains there is a distinct difference between retention and turnover rates.

• Retention rates measure the percentage of current employees who exit a company over a given time period. Retention rates do not factor in new hires joining or leaving the company within the time period.
• Turnover rates measure number of current employees and new hires who exit during a specific time period. In other words, a company can experience different retention and turnover rates during the same time period.

By reviewing both measurements, employers can better assess workforce dynamics and develop targeted retention strategies as needed.

At the end of the day, even the savviest employers don’t always see a resignation coming. But by knowing some of the common reasons behind employee departures, you’ll be better positioned to address issues proactively and strengthen your retention rate.

Is compensation affecting your employee retention rate? Get your 2018 salary guide today.