From the course: The Data Science of Using People Analytics

How to measure employee retention

From the course: The Data Science of Using People Analytics

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How to measure employee retention

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- Many leaders I've spoken to tell me one of the things keeping them up at night is how to reduce unwanted attrition. But how do you measure attrition? And what even is attrition anyways? We talked about the concept of early attrition in the Talent Acquisition chapter, which is the percentage of employees leaving within six months or one year of being hired. Generally speaking, attrition occurs when an employee exits a company. There are two types of attrition, voluntary and involuntary attrition. Voluntary is when employees resign and leave. Whereas involuntary is when the company asks the employee to leave. In other words, employees initiate voluntary attrition, whereas the company initiates involuntary attrition. But now that we know what attrition is, how do we measure it? Well, the simple answer is that the attrition rate is the number of employees who left the company divided by the number of employees at the company. This may seem like an easy equation, but as you expand the horizon of time, to say, a year, the denominator can become complex. Let's say you need to report the attrition rate for last year. Do you use the number of employees at the company on December 31st or January 1st? Do you take an average of the two? Do you take an average of each of the 12 months and numbers? Do you take the number of people who have ever worked at a company during the year? These are all reasonable ways of measuring headcount in a denominator. In my experience, the average of 12 months in headcount is common and smooths out the seasonality or fluctuation in workforce size. Here's what that would look like. So the denominator would be the average of the number of employees at the end of each month. So January 31st plus February 28th and so on, divided by 12. As I mentioned earlier, there are two types of attrition, voluntary and involuntary. To get to voluntary attrition rate versus involuntary attrition rate, you would include in the numerator the number of employees who left voluntarily divided by the number of employees who left the company involuntarily. It is important to monitor both types of attrition. While voluntary attrition may tell you about your ability to retain talent, involuntary attrition can tell you performance issues that need to be addressed. Here's a summary of the two types of attrition rates. Voluntary attrition rate is the number of employees who left the company voluntarily over the number of employees at the company. An involuntary attrition rate is the same but with involuntary in the numerator. Employee attrition is one of the concepts in people analytics you'd think will be straightforward to measure, but I've actually seen several different ways of measuring it. And honestly, this gets pretty technical and beyond the scope of this course. But the thing to keep in mind is that most of the time, you as a people analyst, may not get to change how this is measured. So if you're ever unsure, you should always go back to the business stakeholders for clarification. Benchmarking is usually important to the organization too. If that's the case, you want to ensure your measurement is the same as the industry standard.

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