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What Should My Employee Retention Rate Be?

By Leo Ramirez Posted on April 11, 2017

Your employee retention rate is the percentage of employees who have stayed with your company over a certain period of time. It is essentially the inverse of your turnover rate.

It’s fairly easy to calculate this number. Figuring out whether or not your employee retention rate is good, on the other hand, is not always so straightforward.

While measurable statistics are great, measurable statistics without an appropriate standard to measure them against are useless. And measurable statistics that are used to create goals without fully understanding them are a waste of time.

So how do you figure out what your employee retention rate should be?

Find Benchmarks Across Different Industries

The first thing to remember is that every industry is going to have a different average.

The goal retention rate for a retail company that offers primarily entry level positions and a lot of seasonal employment would be a pretty abysmal retention rate for a technical company with positions that require a high level of specialized knowledge and experience.

Both the United States Bureau of Labor Statistics and the Society for Human Resource Management release annual information on the retention and turnover rates across industries. It is important to remember that neither of these resources take into account company size when determining their averages.

A 20% turnover for a large corporation could be hundreds or thousands of people. While in a small, locally owned business fewer than 10 people could account for 20% of all employees.

What’s a Realistic Goal?

When you are setting an employee retention goal, as with any goal, it is important to be realistic. Start with where you are now, envision what your ideal goal to strive towards would be, and then set an achievable interim goal.

Say your current retention rate is 60% and your industry averages 80%. Based on the industry average, a 75% retention goal probably seems realistic. But you’ll have to do some major work to increase your employee retention rate by 15%.

Be honest about how the size of your company impacts your employee retention rate.

Also, look a little closer at the data. Your retention rate tells you how many people are leaving, but it doesn’t tell you WHO is leaving. Obviously, turnover in your lowest performing employees is less of a concern than turnover among your high performers.

After all, if the low performers are leaving you have the opportunity to replace them with someone who is a better fit.

If your top performers are leaving, on the other hand, you could be in serious trouble. In this instance, it’s time to figure out why they are leaving and make the changes necessary to retain your top talent.

One final note, a low employee retention rate may say more about your industry than it does your company. Google, which is well-known for its high employee satisfaction and extra perks of employment has one of the highest turnover rates in America1.

How? The tech industry is extremely competitive. Those extra perks Google is so famous for are necessary to try and keep their top talent.

That said, even if your industry is highly competitive, you can probably do better than you are now.

Don’t Just Settle for Standard

Don’t let your turnover rate become business as usual. Even if you are well within the industry standard, there is always room for improvement.

Has your company’s turnover been 40% for the last 20 years? Don’t settle for that and say, “That’s just the way it is!”

Think of it the way you would think of your sales goals. Do you ever look at your sales for the year and think, “Meh, it’s good enough.”

Of course not!

If your sales numbers are lower than you wanted, you strive to bring them up to goal. If they are at goal, you set a new, higher goal.

Never settle. Instead of accepting the industry standard, lead the way forward. Set the bar higher for your company and you just might set a new industry standard along the way.

Employee retention is important because your employees truly are your most valuable resource. High turnover impacts more than just your bottom line. It can have a negative influence on productivity, employee satisfaction, and overall company culture.


Workplace Culture

Author: Leo Ramirez

Leo is the co-founder and CEO of Encast, an organization dedicated to improving the way CSR professions create, manage, and measure CSR programs. Leo is passionate about the role that culture plays in business success. Leo has launched and managed social ventures, lead multi-disciplinary teams, and built solid relationships with civic and corporate leaders. His 25-year career has spanned executive management, business development, consulting, nonprofit management, technical support and engineering positions with Southwest Key Programs, Oracle, Sun Microsystems, Coremetrics, Trilogy and Apple.

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