One of primary challenges HR leaders and employers face in the workplace is developing strategies to minimize employee turnover. This is because retaining employees involves understanding their diverse needs and motivations, addressing issues that affect job satisfaction, and implementing effective employee retention programs. 

However, big data is considered an effective tool in tackling these challenges, as it provides insights into trends, reasons for turnover, and employee satisfaction levels.

In this article, we will demonstrate how using attrition and retention data can empower your business to make informed decisions that enhance employee satisfaction and in turn, reduce turnover rates.

Understanding Employee Retention

Employees are every company’s greatest asset. This is because they bring in skills, creativity and innovation which are critical for the company’s success. Smart employers who know this spend time and resources looking for the best talents who can contribute to the growth and competitive advantage of the business. 

The difficult thing is all this investment can go to waste if HR leaders and managers don’t develop retention practices to prevent their talents from leaving. 

You understand the costs associated with hiring; now consider the significant expenses incurred when losing employees. When this happens, businesses take a financial hit, face disruptions in productivity and potentially lose their best talents to their competitors when they miss out on adopting employee retention strategies. 

Attrition vs Retention

To understand how attrition and retention is measured, you must know the similarities and differences of each. Here we explain each concept.

What is attrition?

Attrition, also known as employee turnover or labor turnover is a measure of the percentage of staff who leave the company during a particular period. 

Read next: What is Attrition Rate? Tools and Tips to Calculate, Analyze and Improve Your Team’s Retention

Turnover is classified into two different types such as voluntary turnover or involuntary turnover.

Voluntary turnover occurs when an employee decides to quit due to: 

• Pay benefits: Staff who feel they are not paid fairly or that some other company will pay them higher, will lead to them being dissatisfied. This eventually causes them to leave. According to a study conducted by the Pew Research Center, 63% of the respondents mentioned low pay as a primary reason for leaving their job. 
• Role mismanagement: This can happen when the employee perceives their job scope to be ambiguous or disconnected.
• Workload: 46% of HR leaders claim that employee burnout could be responsible for as much as half of all workforce turnover. If an employee is overloaded with work, it could cause high stress levels, decreased productivity, and potential resignation. Contrastingly, if employees have limited tasks, they feel disengaged from the workplace and would seek opportunities elsewhere.
• Manager’s attitude: Employees might choose to leave if they struggle with their manager’s ineffective leadership or mismanagement style.

Relevant reading: The Manager’s Guide to Asking for Feedback

Involuntary turnover happens when employees leave a company due to reasons beyond their control. This includes layoffs, restructuring, or termination for performance or misconduct reasons initiated by the employer.

What is retention?

Retention is the ability of a company to keep its staff. In other words, a direct measure of how long each employee stays. 

A high retention rate indicates employees are satisfied with their jobs and are less likely to leave the company. A low retention rate on the other hand, indicates that employees are unhappy with their jobs and are more likely to leave the company. 

Many factors contribute to employee retention, such as offering competitive salaries and benefits, opportunities for career growth, appreciation for employees’ hard work. Encouraging open communication and creating a positive workplace culture are additional ways to improve retention. 

Importance of Measuring Attrition and Retention

Attrition

Identify problem areas and develop targeted solutions

When companies have access to attrition data (that is they can pinpoint departments and roles with high turnover rates), it becomes easier for them to develop targeted solutions to address these challenges and improve retention. 

Inform employee retention strategies

With a better understanding of attrition rates, employers and HR leaders can plan their retention strategies accordingly. They can tailor strategies such as mentorship programs, adjustments in compensation packages, career development opportunities, or work-life balance initiatives to address specific needs and concerns of their employees.

Improve productivity and employee satisfaction

Strategies to counter attrition can in turn help increase efficiency and employee satisfaction. Companies benefit from high productivity and satisfaction levels, and enhances overall team stability and performance. 

Helps manage cost of recruitment

High turnover can be expensive. Replacing a full-time employee can cost anywhere between half to twice the employee’s annual salary. Measuring attrition rates helps organizations understand how much they’re spending on replacing employees and where they can save money by improving retention strategies.

Learn more: The Cost of Recruitment: HR’s Guide to Creating, Tracking and Implementing a Salary Budget

Retention

Ensure knowledge transfer and innovation

As experienced employees leave, they take their knowledge and expertise with them. For example, a sales manager leaving could result in loss of client relationships and sales strategies that were key to the team’s success. An increase in retention rates ensures that these knowledge and skills are passed down effectively, supporting business growth and longevity. 

Boost employee morale

Employee morale is closely linked to employee productivity. Companies can boost employee motivation by implementing effective retention strategies, such as recognition programs that contribute to job satisfaction, and overall happiness at work. 

Develop targeted retention strategies

Measuring retention rates provides insights into the effectiveness of existing efforts and enables organizations to tailor retention initiatives to better meet the needs of their workforce.

Track effectiveness of HR initiatives and company culture

Retention metrics show how healthy the organization is and how strong its culture is. By tracking retention rates over time, companies can see how HR policies, programs, and culture initiatives affect employee engagement and loyalty. This helps HR leaders improve workplace dynamics and keep employees happy.

Using Data to Understand Attrition and Retention

As you know by now, measuring and understanding attrition and retention is crucial for business success. Here’s how you can use data to get deeper insights. 

1. Unveil underlying reasons

Allows to identify trends and hidden factors

Before you go into addressing your attrition and retention rates, you must first discover why employees leave, how long they stay, and what can be done to keep them longer. 

Your data collection process should involve gathering information from employee records, performance reviews, and exit interviews, and further analyzing it using different statistical methods. 

The next thing is to examine this data over time to identify regular patterns in employee attrition and retention. For instance, you might discover that more employees leave after yearly reviews. Perform a deep analysis to uncover the reasons behind employee turnover. 

Perform employee feedback analysis

Performing employee feedback analysis involves looking at employee satisfaction surveys or exit interviews to find common complaints and issues. This way, organizations can focus on fixing the most important problems to keep employees happy and reduce turnover.

Learn more: 20 Strategic Employee Engagement Survey Questions

2. Create targeted solutions and strategies

Segment data for targeted approach

Different groups of employees have different needs and challenges. By segmenting data, you can better understand these specific needs and tailor your strategies accordingly. This is done by grouping employees in various categories such as departments, job role, performance level and demographics. 

Implement proactive strategies through predictive analytics

Another method used in understanding attrition and retention involves using AI tools and statistical modeling to predict which employees might leave based on their past behavior. 

With these insights, you can create proactive strategies such as mentorship, career development plans, and better benefits specifically for identified employees with higher risk of leaving. This helps to prevent turnover and retain valuable talent within the organization.

3. Measure impact and ROI

Benchmark data against industry standards

Compare your company’s employee attrition and retention rates with those of similar companies in your industry. This benchmarking process helps you see if your company is doing well or needs to improve.

Evaluate retention programs 

By conducting a regular review and assessment of your employee attrition and retention programs, you can discover if the initiative is effective. Use metrics like employee satisfaction, engagement scores, and turnover rates to determine which programs are working and which need adjustment. 

Quantify financial impact of attrition

Companies that calculate the financial gains or losses from their retention efforts can allocate resources better and make smart decisions to improve overall company performance.

4. Make data driven decisions

Take the guesswork out of managing attrition and retention

Use data analytics to guide decision-making and develop strategic retention plans. This ensures strategies are based on evidence and are aligned with overall business goals.

Constantly monitor and track effectiveness of strategies

Monitoring and tracking the effectiveness of your strategies involves these two things: 

• Implementing systems for ongoing monitoring of key metrics such as turnover rates, employee engagement levels, and the effectiveness of retention programs.
• Conducting regular reviews and analyses of the attrition and retention data to identify trends and adjusting strategies along the way. 

10 Metrics to Include When Measuring Attrition and Retention

To effectively measure attrition and retention, companies should track certain key metrics. Here are 10 important metrics to consider:

Attrition metrics

Overall attrition rate

This is the percentage of employees who leave a company over a certain period. Attrition rate is calculated by dividing the number of employees who left within a specific timeframe by the average number of employees during the same timeframe.

Attrition rate % = (No of employees who left the organization/Total number of employees) × 100

Calculating and measuring attrition and retention rates helps organizations measure the health of their workforce. A high attrition rate indicates potential issues such as ineffective hiring processes, low employee satisfaction, or a toxic work environment. 

Time to hire

This measures the amount of time taken to fill a vacant position from the moment it is advertised until the candidate accepts the job offer. It is also an important metric used to determine the success of your recruiting process. 

For example, a long time to hire can indicate underlying issues like inefficiencies in the process, trouble attracting qualified candidates, decision-making delays, or poor coordination between hiring managers and recruiters. Fixing these issues can speed up hiring, lower recruitment costs, and improve the recruitment process.

Cost per hire

The cost that goes into hiring a new employee such as advertising, recruitment agency fees, and onboarding expenses is critical. It helps provide an understanding of the financial investment required to bring new talent into the organization.

Turnover by department/team

This metric calculates the attrition rate for specific departments and teams within the organization. It highlights areas experiencing high turnover, allowing HR teams to make insightful decisions.

Retention metrics

Overall retention rate

If a company’s turnover rate shows the people leaving a company, then the retention rate measures the opposite. The retention rate is a determination of how well a company can retain its employees. It is calculated by dividing the total number of employees deciding to stay in the company across a certain period with the number of employees deciding to stay within the company in the same period.

Retention rate % = (Number of employees at the end of a set time period / the number of employees at the start of a set time period) x 100

Length of service 

This retention metric calculates the average duration for which an employee holds their position. Longer lengths of service indicate higher retention rates and greater employee satisfaction.

Employee engagement scores

High engagement scores are often correlated with lower turnover rates. These scores help HR understand how employees feel about their roles and the company, guiding improvements in workplace culture and practices.

Promotion rate

This metric determines the percentage of employees who receive promotions over a specific period, indicating career growth opportunities within the organization.

Read next: The Employee Promotion Guide: Policies, Processes, and Best Practices

Additional considerations

Quality of hire

Another important attrition and retention metric to consider is quality of hire. With this metric, you can assess the performance and success of new hires after they have joined the company. 

Absenteeism rate

Absence rate or absenteeism is an attrition vs retention metric that calculates the total number of days an employee is absent from work. It is calculated by dividing work days missed by total scheduled days. Then the number obtained is multiplied with 100. It is important to note that the number of authorized days off work is not considered when calculating absence rate. 

Build a Thriving Workforce with Omni

Keeping your finger on the pulse of your workforce helps mitigate attrition rate risks such as dips in employee engagement or performance skill gaps. 

Omni centralized and tracks a wide range of employee data, from attendance records to attrition rate, automatically within our platform. Real-time graphs and easily exported reports simplifies employee analytics and cuts down on calculation times and errors, arming you with the data you need to understand the trends within your organization. 

Employee attrition and retention rate can be easily accessed for monthly, quarterly, annually, or any custom range of dates within minutes, making it easier for HR leaders and CEOs to keep track of their churn rate and address pain points at the first sign of trouble, helping to reduce your attrition rate and improve employee retention.

To learn more about how Omni can help you unlock your business’ potential, schedule a demo with our team today.

You might be an HR officer in a large corporation noticing low employee morale and performance despite having adequate staff. Or, you could be in a medium-sized organization grappling with high attrition rates, finding it challenging to attract and retain top talent.

In either scenario, these challenges signal the need to adopt HR analytics while carrying out your duties. Doing so can enhance your HR practices, make informed decisions, and ultimately foster positive employer-employee relationships.

This article delves into the essential metrics for HR analytics, why it’s important for your business, and how to go about implementing it effectively.

What is HR Analytics?

HR analytics is a system of collecting, analyzing, and interpreting human capital data in an organization. Its goal is to help HR teams make better decisions that enhance business results and show the impact of human resource initiatives. It covers all employee and company data, including employee engagement, hiring, retention, skill enhancement, productivity, etc.

HR teams gather these insights from employee surveys, performance reviews, or exit interviews. You can also get them from your company’s HR software or tools for recruiting, payroll, and other HR administration.

When data is readily available, HR teams can forecast employee turnover, answer questions, and offer solutions with concrete evidence. Ultimately, you gain insights that shape your company’s HR practices and implement strategies that support organizational goals.

Read next: 5 Reasons to Switch to an All-In-One HR Software

Why is it important for your business?

If you’re like the 60% of HR leaders from Gartner’s report, developing your team’s effectiveness should be a part of your strategy to improve the future of work in 2024. However, you need to arm yourself with adequate information to excel at this strategy. And that’s the essence of HR analytics. It’s crucial to the success of any organization as it helps to:

Drive decision making

HR analytics provides data-driven insights into various aspects of a company that drive an effective decision-making process. For instance, by analyzing recruitment and employee performance data, HR teams can identify and implement successful hiring practices during recruitment. Also, you’ll recognize high-performing employees and take more efficient steps in solving team-related problems. Generally, HR analytics offers an objective and more precise approach to workforce decisions than relying on your guts or unconscious bias.

Improve return on investment

HR analytics can significantly enhance return on investment by providing valuable insights into workforce dynamics, allowing HR professionals to make well-informed decisions that impact the organization positively.

By analyzing past recruitment data, you can identify effective recruitment channels and hire the right talent for your company. Additionally, you can assess employee engagement and measure performances to anticipate and prevent issues like employee burnout or high turnover. Ultimately, it allows you to create a more positive workplace for your employees.

Provide predictive insights and analysis

HR analytics applies HR data analysis and statistical methods to analyze data, identify patterns, and provide insights into HR and workforce activities.

For instance, HR teams can forecast an employee’s performance by examining past performance and engagement data. This helps the department identify why employees’ morale may be low and recognize top performers with the potential to succeed in critical roles.

Identify areas of inefficiencies

If you observe certain employees falling behind in their tasks, instead of just asking them about it, analyze historical performance data to understand the reasons for any performance gaps. Organize training sessions to enhance skills as necessary.

Also, if your HR processes are inefficient or time-consuming, HR analytics can pinpoint slowdowns, refine workflows, and automate routine tasks to improve and enhance efficiency.

HR analytics spots and rectifies areas of inefficiencies within the organization. It identifies trends causing turnovers and exposes potential issues that may not easily be discovered or resolved.

Enhances employer branding

By collecting and interpreting data, you’ll gain insights that will help create a more productive company culture. When employees perceive the company positively, it often results in lower turnover and attracts high-performing talent.

Consider this: According to Glassdoor, 86% of job seekers review company ratings and reviews before applying. If both current and former employees have positive opinions about your company, it will likely encourage potential talent to apply, thereby expanding your workforce.

What does HR Analytics measure?

In every company, the HR team is crucial for growth. From recruiting and developing talents to monitoring employee turnover, HR professionals constantly shape company culture and performance.

HR data analysis measures different human resource activities, and the right ones for your company depend on what your HR team aims to improve and achieve. Here are some examples of key metrics that you can consider:

Recruitment

When finding, selecting, and hiring qualified talents for a position, HR data analysis tracks metrics that help organizations weigh how effective and efficient their recruitment processes are. The goal is to optimize hiring strategies and identify opportunities to reduce cost of recruitment while boosting recruitment ROI.

Two key recruitment metrics are:

• Cost per hire: This metric measures the average cost incurred when hiring a new employee. It analyzes the efficiency of the hiring process and tracks all internal and external expenses the company incurred to fill a vacant position. This includes money spent on job ads, agency fees, background checks and screening costs, recruitment software costs, onboarding costs, wages of the recruiters who interviewed candidates, etc.
• Time to hire: This metric measures how long it takes for an organization to hire a new employee. It covers the number of days from when a candidate applies for the role to the point the candidate accepts the offer. For instance, if your company takes a long time to hire, the hiring process is slow and inefficient, possibly due to bottlenecks. However, by tracking this metric, HR teams can identify issues in the talent acquisition process and set goals for enhancing efficiency.

Performance management

HR data analysis sets and tracks key performance indicators related to employee performance by evaluating:

• Skills gap analysis: This HR data analysis weighs employees’ current skills and identifies skills they need to improve on to achieve business goals. By measuring this metric, HR teams will spot skill gaps and provide learning opportunities that support employee career growth, boost performance, and inspire job satisfaction.
• Training effectiveness: HR data analysis measures how effective training programs are in improving employee performance. For instance, HR teams measure the extent to which employees partake in and complete training, their skills before and after the training, their impact on company goals, etc. The first step when measuring training effectiveness is to set goals for training programs and KPIs. Such KPIs include employee performance scores, customer satisfaction ratings, or other relevant metrics related to your organization.
• Performance ratings: This HR analytics yardstick assesses the number of employees rated as high, average, or low performers. Its goal is to identify possible gaps in the performance evaluation process and spot areas for improvement.

Employee engagement

HR data analyzes employee engagement to help businesses understand, monitor, and boost the employee experience for better workplace culture and organizational success.

Metrics here include:

• Turnover rates: By keeping track of the percentage of employees that leave your organization during a given time period, you get to identify patterns and prevent future reoccurrences.
• Absenteeism rates: You should also note how often employees stay away from work and their reasons. This HR data analysis will help identify trends and implement strategies that can reduce absenteeism.
• Employee satisfaction survey result: This HR analytics metric shows employees’ level of satisfaction and commitment to their jobs. It measures their productivity to boost employee retention, loyalty, and performance.

Compensation and benefits

HR data also measures compensations in terms of:

• Pay equity analysis: Also known as an equal pay audit or pay parity audit, HR teams use a PEA to identify pay gaps within an organization. It helps to compare pay for employees with similar duties to notice any unfair differences. Furthermore, conducting a PEA during HR data analysis promotes fairness and transparency creating a more inclusive workplace compensation practices.
• Cost of benefits: HR data analysis also tracks employee benefit programs by calculating the costs associated with all the company’s benefits to identify expenses and their impacts on employees. This helps to manage costs effectively and align benefits expenses with organizational goals.
• Benefit utilization rates: HR analytics also lets you keep track of employees who actively use your company’s benefits. It works by dividing the number of employees in the benefits program by the number of eligible employees. With this, you can make data-driven decisions that enhance employee satisfaction through benefit programs.

Workforce demographics

HR analytics gathers employee demographic data from various sources, such as payroll systems, Human Resources Information System (HRIS), employee surveys, and other databases your company uses. The key metrics here are:

• Gender diversity: HR analytics also monitor the gender distribution of employees concerning compensation, engagement, turnover, and other KPIs. By examining this data, you can identify discrepancies and address them appropriately, ultimately promoting gender equality and inclusivity in the workplace.
• Age distribution: This metric collects data on employees’ birth dates and age categories to determine if the company covers all employable ages and promotes an age-inclusive workplace.

Read next: The Difference Between HRIS vs HRMS

Key Steps in The HR Analytics Process

Now that we’ve gotten the basics of HR data analysis established, let’s delve into what you need to implement the HR analytics process in your own organization:

1. Identify goals and objectives

The first step to achieving anything is knowing what you want to achieve. So, consider your company’s HR objectives and why you intend to use HR data analysis for better results. Is it to hire more qualified staff, boost employee engagement and retention, offer more benefits, or improve brand perception? Knowing the objective will help you direct your HR data efforts accordingly.

2. Collect relevant data

Once you’ve determined your objectives for HR data, collect qualitative and quantitative data from relevant sources. This includes your company’s HR software tools, employee surveys, payroll systems, recruitment platforms, interviews and more. The data may consist of employees’ ages, birth dates, and past performance, among others.

3. Clean and organize data for analysis

After collecting relevant data, it’s time to collate and prepare them for interpretation and analysis. So, clean and organize the data by identifying missing values, removing errors, organizing them into categories, etc. This is necessary to get accurate results.

4. Communicate findings and take action

Share the results from the HR data analysis with your team. Then, interpret them to get valuable insights and practical suggestions that can solve specific HR challenges. Take a step further by implementing the insights while considering business goals. This will improve your HR strategies and optimize decision-making.

Leveraging Data to Empower HR Leaders

HR analytics is a powerful tool that can transform the way HR professionals operate. By leveraging data, HR professionals can make informed decisions that drive organizational success. Additionally, implementing a robust HRIS can further empower HR leaders to leverage data and make informed decisions.

With all-in-one HR software like Omni, you can leverage automation and streamline your processes while gaining actionable insights for continuous improvement and team effectiveness.Through leveraging the power of automation, Omni allows HR teams and managers access to custom reports on specific metrics in the HR data analysis process and swiftly address potential issues and drive company performance.

To join the 83% of Omni customers who have unlocked new, actionable insights after using our solution, book a free demo with our team today.