Description
Relative measure of the likelihood that employees will stay in the organisation.
Formula
Survey results.
Interpretation
Organisations typically measure likelihood of employee retention using survey results. Each survey will usually have a different set of questions or methodologies for measuring likelihood of employee retention.
The Employee Retention Index measures the extent to which employees intend to leave the organisation. It is based on survey questions assessing an employee’s intent to leave in the next year as well as actual job search behaviour.
Employee retention is thus distinct from employee commitment, which measures attachment to the firm and views of the firm as a great place to work. It is also distinct from employee engagement, which measures the effort and enthusiasm employees put into their daily work.
Employee Retention Index is the predictive metric of future employee separation behaviour, influenced by their commitment, engagement, offer fit and perceived external market opportunities. Thus, declining Employee Retention Index results are likely to drive increased turnover.
Organisations can study undesirable results further to understand whether an employee’s likelihood to leave is driven by issues with offer fit, engagement, etc., and then investigate problem areas further to understand root causes.
Survey results can often be difficult to interpret if they are presented as question-by-question detail without aggregated indices. An index measure such as Employee Retention Index can provide a more strategic view of one major aspect of employee perceptions.
Most employers find that there is no one overall ‘satisfaction’ figure that can take the pulse of the workforce in a way that is actionable by the organisation. Rather, the organisation needs a collection of these aggregations or indices to grasp a holistic perspective of employee opinions and take action to improve the weakest areas.
Data Sourcing
Organisations typically source data for this measure from the responses to one or more questions from employee surveys.
Analysis
Where possible from data sets, this measure can be analysed by a wide variety of dimensions, including demographic, structural, geographic and others. Such analysis is necessary if the employer wishes to make decisions or take action to better understand and improve the likelihood of retention of low-result employee groups.
Note, however, that analysis by employee characteristics is only possible when those fields are captured within the survey itself or when an individual’s responses can be linked back to characteristics in other data sources through an employee identifier.
Limitations
As with all survey-related metrics, the value provided by this measure depends heavily on the effectiveness of survey design and delivery in accurately reporting employees’ opinions. Additionally, all survey measures represent employee perceptions at a point in time and can reflect temporal events (e.g. the receipt of pointed developmental feedback).
Likelihood of retention is but one aspect of the employee’s relationship with and opinions about the organisation. Engagement, commitment, perceived market opportunity, offer fit and perceived manager quality are also important dimensions not represented by this measure.
Targets
Targets for this measure will depend on the scale used for the index or survey question responses. Targets based on benchmark groups will only apply if other organisations use sufficiently comparable survey questions and survey methodology. Organisations would aim for a level of employee retention consistent with its targets for Separation Rate and related measures.