What is a Healthy Retention Rate?

A comprehensive guide for HR professionals to understand and manage employee turnover, optimize retention rates, and enhance workforce satisfaction.

As an HR professional, you've likely encountered the age-old question: "What is a healthy retention rate?" You understand, perhaps better than anyone else, that the heart of a thriving organization beats in the rhythm of its staff retention. Yet, measuring this 'rhythm' and defining what is 'healthy' is far from easy.

Why? Because finding a one-size-fits-all answer is like trying to capture a rainbow. Every organization is unique in its culture, goals, and challenges. This means that a 'healthy' retention rate for one may not be the same for another.

Many times, you've probably tried using the typical industry benchmarks. However, when you walk into that executive board meeting, those benchmarks often fail to hold water. Suddenly, you are bombarded with questions: "Is this benchmark relevant to us?"; "Does it consider our unique context?"; "Are these numbers based on our historical data?"

Before you know it, your well-prepared presentation feels undermined. Everyone concurs that staff retention is crucial, but no one can agree on what constitutes a 'healthy' rate for your specific organization.

So, what's an HR leader to do? It's time to roll up your sleeves. Be ready for deep dives into your organization's data, exhaustive spreadsheets, and intricate analytics. Yes, it might be a bit messy, but as you'll discover, it's the key to truly understanding what a 'healthy' retention rate means for your organization.

Key areas to understand for managing a healthy employee turnover rate

What is the cost of employee turnover?

As an HR leader, recognizing the hidden costs associated with employee turnover is a pivotal part of your role. This understanding not only reveals the financial impact of turnover but also illuminates the strategic direction needed to enhance employee retention. Let's take a deeper dive into these costs.

Cost to hire

The direct costs related to turnover typically arise from the hiring process. This begins with the costs associated with job advertising across various platforms, which may include job boards, social media, and the company website. Additionally, you may need to pay external recruitment agencies to source and screen potential candidates.

However, direct costs extend beyond these external expenses. Internal resources are also heavily invested in the hiring process. This includes time spent by your HR team and hiring managers in sorting resumes, conducting interviews, finalizing hires, and executing the onboarding process.

In addition, each new hire requires training to get up to speed with their role and the company's culture. This training, whether formal or informal, consumes resources and adds to the cost of hiring.

For large organizations where hiring is a frequent event, these costs can accumulate significantly. Therefore, efficient HR practices and a proactive approach to retention are crucial to manage these costs.

Lost productivity

The indirect cost of turnover, often less visible but substantial, stems from the loss of productivity. When an experienced employee exits, their replacement, despite their qualifications, will require time to reach the same level of productivity.

This productivity gap is particularly noticeable when the outgoing employee is a high performer or holds a specialized role. During the period the new employee takes to adjust, the company may face a slowdown in project completion, service delivery, or customer response times.

In addition, the remaining team members often need to take on additional responsibilities temporarily, leading to increased workloads and potential overwork or burnout. This indirect cost, therefore, extends beyond the single role and impacts the entire team.

Loss of knowledge

The loss of institutional knowledge is another significant cost associated with employee turnover. With each departing employee, there's an irreplaceable loss of specific know-how and insights gathered over time. This knowledge, deeply embedded in their experience with the organization, involves a nuanced understanding of business processes, client relationships, and team dynamics.

While knowledge management practices can capture part of this information, much of it remains tacit, or 'know-how,' which isn't easily transferable. As a result, when an experienced employee leaves, this institutional memory walks out the door with them, creating a challenging void to fill.

Overall, comprehending these costs associated with employee turnover helps illustrate the true significance of retention and the value that long-tenured employees bring to an organization. It also underlines the importance of effective onboarding, employee engagement, and retention strategies in mitigating these costs.

Analyze your turnover rate

While understanding the costs of turnover lays the foundation for effective retention strategies, a more granular examination of your organization's turnover rate is equally crucial. Simply monitoring your turnover percentage isn't enough. To gain a comprehensive understanding, a detailed analysis of the profiles of departing employees, the reasons behind their exits, and the timing of these departures is required.

Who leaves and who stays

Differentiating between the employees who leave your organization is essential to appreciate the true impact of turnover. An employee's departure isn't uniformly damaging; the specific individual and their role in your organization significantly alter the effects.

The concept of 'regretted' versus 'unregretted' turnover is critical in this analysis. 'Regretted' turnover refers to scenarios where a top-performing employee, integral to your team's success, chooses to leave. This departure can create a substantial void in your team, potentially impacting productivity and morale.

Conversely, 'unregretted' turnover, such as when a consistently underperforming or disruptive employee departs, might actually improve team dynamics and performance. Recognizing the difference and implementing targeted retention strategies can dramatically improve your overall turnover health.

Why do they leave

Understanding the drivers of employee turnover is another essential layer of your analysis. The reasons for employee departures can be numerous and multifaceted, often correlating with their tenure.

New employees might leave due to mismatches between their expectations and the realities of the job, or if they receive a more appealing offer elsewhere. Tenured employees, in contrast, might exit due to stagnation in their roles, unmet career progression expectations, or dissatisfaction with their compensation or work-life balance.

Conducting exit interviews and soliciting honest feedback can help uncover these reasons. This information can then inform the development of strategies aimed at addressing these issues and enhancing overall job satisfaction, thereby potentially reducing turnover.

When do they leave

Lastly, analyzing the timing of employee departures can illuminate further insights. Are there specific times in the year when turnover spikes? Are there correlations between turnover and specific company events or periods of increased workload?

If employees leave in large numbers after bonuses are paid or equity vests, it could suggest that these financial incentives are the primary ties holding them to your organization. If departures increase following high workload periods, it may indicate underlying issues with burnout, work-life balance, or job design.

Understanding these patterns allows you to proactively address these problems, develop preventive strategies, and foster an environment that encourages retention.

Overall, a deep-dive analysis of your turnover rate, examining who leaves, why, and when, equips you with the insights needed to mitigate turnover effectively. It allows you to spot trends, understand underlying issues, and formulate targeted interventions, forming a critical part of your role as an HR leader.

What is a good retention rate?

Establishing a 'good' retention rate is a complex task due to the numerous factors involved.

However, as an HR leader, this understanding is vital to determine the success of your retention strategies. While industry benchmarks serve as a useful starting point, understanding the nature of your organization's turnover, including 'regretted' vs. 'unregretted' turnover, is essential to contextualize this comparison.

Compare with your industry

Benchmarking your retention rate against industry averages offers a valuable perspective on your organization's performance.

Industry norms for turnover and retention rates are influenced by factors such as the nature of job roles, demographic profiles, and market competitiveness.

Analyzing how your organization compares to these benchmarks can indicate whether your retention strategies are working or if there's room for improvement.

According to LinkedIn data, the turnover rate across all industries is 10.9% with variation depending on the industry:

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Turnover rate

Technology & software


Retail and Consumer Products


Media and Entertainment


Professional Services




Financial Services and Insurance




Regretted vs unregretted turnover

As previously discussed, not all turnover is detrimental.

'Regretted turnover' when high performers leave, impacts your organization negatively.

Conversely, 'unregretted turnover', where underperformers or disruptors leave, can enhance team dynamics and overall performance.

Interestingly, certain companies like Amazon, Twitter, and Tesla have strategies to encourage a certain level of turnover. They push for high performance and make changes that foster a competitive work environment, resulting in 'unregretted turnover'.

While such strategies might bolster business performance, they can negatively impact employee morale and engagement, leading to higher turnover rates.

It's therefore crucial to strike a balance that suits your unique organizational culture and values.

How to use employee surveys to reduce turnover

Now that we've shed light on the costs associated with turnover, dissected its analysis, and considered the elements of a 'healthy' retention rate, let's focus on a practical tool in your arsenal for combating high turnover: employee surveys.

These are far from just rudimentary questionnaires; if leveraged correctly, employee surveys serve as a rich wellspring of insight into your team's sentiments, experiences, and desires. They can be instrumental in fostering a culture of continuous improvement and high employee engagement, thereby contributing to lower turnover.

Use frequent pulse surveys

Among the variety of employee surveys, pulse surveys stand out as an incredibly useful tool. By conducting these short, focused surveys on a regular basis, you can keep your finger on the pulse of your organization, hence their name.

Pulse surveys give you a real-time glimpse into the state of employee morale, job satisfaction, and perceived productivity, helping you pinpoint strengths and identify areas in need of attention. For instance, solutions like Sparkbay can be invaluable in facilitating these surveys, given their user-friendly interface and robust analytics capabilities.

By creating a cycle of regular check-ins, you ensure that minor issues aren't left unattended until they escalate into significant problems causing regretted turnover. Moreover, it reflects your commitment to employee well-being, which can significantly enhance your organization's retention capability.

Act on feedback

Gathering feedback from employees, while important, is only the first step in a longer journey. The power of these surveys lies in the actions they precipitate. Thus, converting this feedback into tangible change is paramount.

Simply generating colorful reports for management presentations won't suffice. Your role as an HR leader involves dissecting this feedback, extracting valuable insights, and translating them into concrete actions that address employee concerns and enhance their experience.

Platforms like Sparkbay not only simplify the survey process but also provide intuitive tools for data analysis and visualization, enabling you to better interpret and act on feedback.

When employees see their feedback leading to meaningful changes, it validates their contributions, instills a sense of being valued, and encourages further engagement. This not only enhances job satisfaction but can also significantly reduce regretted turnover, leading to a healthier retention rate.

Ultimately, the effective use of employee surveys, facilitated by platforms like Sparkbay, can be an essential part of your strategy to reduce turnover. They empower you to proactively address issues, foster a positive work environment, and engage your workforce in a continuous improvement journey, reinforcing their commitment to your organization.

Final thoughts

In conclusion, while the concept of a 'healthy' turnover rate is multifaceted and differs from one organization to another, understanding the costs involved, analyzing your turnover, benchmarking against industry norms, and actively utilizing employee feedback can equip you as an HR leader to make informed decisions.

By adopting a balanced approach that values both business performance and employee satisfaction, you can foster an environment where your employees feel valued, leading to a lower turnover rate and a healthier organization.

Understanding and managing employee turnover is a complex task that demands a multifaceted approach.

As an HR leader, you need to recognize the costs involved, deeply analyze your organization's turnover, and benchmark against industry norms. Beyond mere understanding, acting on employee feedback and making tangible improvements are crucial.

A balanced approach that values both business performance and employee engagement is key to fostering a work environment that values and retains its employees. The journey towards a healthy turnover rate isn't always easy, but with the right strategies and actions, it can lead to a more engaged, satisfied, and productive workforce.

If you're interested in learning how Sparkbay can help you prevent new hire turnover, you can click here for a demo.