Retention Rate 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 is also a great indicator of the overall health of an organization. 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, it’s no wonder that the retention rate is such an important metric. Your company could be bleeding money by an unnecessary amount of turnover. The cost of replacing an employee can be upwards of three times their salary!
Rather than trying to look at retention rates for all positions across all levels of the organization, it will be more insightful to analyze by sections. For example, you can look at the turnover rate for a specific role. If one role is causing turnover every year, maybe you need to take a look at the responsibilities of that role. Are there unrealistic expectations or unattainable goals? Another way to look at the data is turnover by pay grade or even by department. In this way, you can determine if the retention problem is company-wide, if it’s in a certain department because of a bad manager, etc.
For most companies, everything still comes down to the bottom line, which is why “Cost of Hire” remains one of the most important metrics to track in HR’s recruiting efforts. So many times, we hear that the cost of hiring someone is more expensive than a full year’s salary for that position, and often this is certainly the case. That is why it is crucial to know exactly how much it is costing your organization to hire each position, and where you may be losing money. HR needs to be able to show executives cost-effectiveness when it comes to a recruiting strategy. Cost of hire takes into account a few different sub-metrics, which of course will vary based on the position being hired for.
The most common ones are the following:
• Advertising costs
• Job board subscription costs
• Relocation assistance
• Referral bonus
• Travel expenses
• Agency fees
• Recruiter labor
• Additional staffing expenses
After the cost per hire has been determined with the above metrics in mind, HR will be able to show how much money they are saving the company by reducing the time to fill, or perhaps convince executives to increase the recruiting budget because of the cost of lost productivity.
Sourcing channel or source of hire simply refers to the efficacy of the different job boards or media a company uses to publicize its current job openings. The reason for tracking this metric is simple – there are hundreds of options for sourcing candidates, but depending on your industry or your specific organization, certain sources will prove to be more effective or provide higher quality candidates than others. Once you know which sources provide the greatest number of candidates, you can start looking at which sources produce the best quality candidates over time. Then you can focus your energy and resources on these channels.
66.3% Source effectiveness should take into account the following data when ranking each source:
• Applications received
• Number of applications that screened in
• Number of applicants hired
• Screened-to-hired ratio
• Percentage of total hires
Companies with smaller budgets will find this especially helpful so they are not wasting time or money on expensive job boards when perhaps they receive their best candidates from employee referrals or social media sites.