Yes, Low Retention Rate is HR's Fault

Posted by Kristen Monsey on January 14, 2015

Transportation Terminal

Employee retention is an important metric for many reasons. Not only does it show how successful your recruiting efforts are in finding qualified candidates, but it's also a great indicator of the overall health of an organization. As you can tell by the title, HR is responsible for a great deal of this metric, and therefore the improvement of it. For now, we will focus on what the retention rate can tell us about recruiting efforts.

If your organization has a hard time retaining people for longer than a year after their hire date, you may be hiring the wrong type of candidate. Once you have determined the cost per hire for each position, you realize why the retention rate is such an important metric. Your company could be bleeding money due to an extensive turnover rate. According to a study by the Center for American Progress, the cost of replacing an employee can be upwards of 120% of their salary!

Yes, Low Retention Rate is HR's Fault

Because of the heavy cost associated with trying to replace an employee, it's easy to see that the problem has to be fixed. Low retention rates can lead to low company morale, which will only exacerbate the issue. So, as with any problem, the first step is to identify whether or not your organization has a reasonable retention rate based on your industry's standards. This can vary widely by industry, so it wouldn't be fair for a retail organization that hires seasonal and hourly workers to compare numbers with a government organization for example.

Rather than trying to look at retention rates for all positions across all levels of the organization, it is more insightful to analyze by sections. For example, you can look at the turnover rate for a specific role. If one role in particular is causing heavy turnover every year, perhaps you need to examine the responsibilities of that role. Does that role have unrealistic expectations or unattainable goals? Another way to study the data is to review the turnover by pay grade or even by department. In this way, you can determine if the retention problem is company-wide or if it’s in a certain department as the result of a bad manager.

Ultimately, measuring the retention rate will allow you to pinpoint whether or not the issue is a recruiting one. Recruiting is certainly a great start to finding employees who will stick around, but keeping them around may rely on the strength of the rest of your talent management strategy as well. To quote an article from Forbes, "The best recruitment strategy is a solid retention strategy and this has to start at the top." Think about retention when you plan your recruiting strategy, and you will be on your way to having a company that people won't want to leave!

Click here for the full SmartPaper on the Top 10 Recruiting Metrics HR Should Know About.