What is a Good Employee Retention Rate?

A prospective client boasted to me recently that he had never let an employee go.


At first, I was surprised. Then I was horrified.


He’s a restaurant owner. High conversion is a natural part of his business.


So I looked at his current employees. Sure enough, it was clear that one of them wasn’t pulling their weight.


This client hemmed and hawed. He made excuses. I told him that this employee was either lazy or stealing.


But he didn’t want to see it. He loved his 100% employee retention rate.


I heard from him a few weeks later. He’d caught that waiter on camera pocketing money from a table. Turns out the guy had been doing so for close to a year.


This client wasn’t so in love with that high retention rate anymore.


When someone asks “what is a good employee retention rate,” what they mean is “how do I keep the good employees and let go of the bad ones?”


Here’s how to think about a good employee retention rate.


Measure Success


To retain great employees, you need to set clear expectations.


That means establishing for yourself what success looks like.


It can be different for every business, but whatever it is, make your criteria known and stick to them.


The more clear-cut your measurements of success are, the easier it is to identify who is doing a great job, who needs some help, and who might not be a great fit.


Listen to Your Employees


While my client was wrong to overvalue his 100% retention rate, it’s easy to understand his aversion to something too low.


If your retention rate is something closer to 50%, you’re losing a lot of people. Some of them will be ones you probably don’t want to lose.


If employees are leaving in droves, it’s a sign that something is wrong with their work life.


The easiest way to learn how to retain employees is to ask them what they want and to listen.


I’ve heard many employers protest that “they’re paying more than the market rate,” or “we give great perks.”


But it doesn’t matter if you like what you’re offering them, it only matters if it’s what they want.


Ask your employees what excites them, then do what you can to give it to them.


It Begins Before They’re Employees


If you want to retain great employees, then you want to hire great employees that are a good fit for you.


It starts before you’ve even interviewed anyone.


Maybe that sounds obvious. It’s not.


Too many employers treat hiring like a commodity business. They think it’s a numbers game, or as simple as throwing up a post on LinkedIn.


But hiring a great employee takes knowing why they’re great, and most important of all, why they’re a great fit for your business.


It takes skill, talent, and experience to do it right.


If retention is a problem, either with keeping the best employees or not losing ones that might be a bad fit, it’s often a symptom of a deeper disease that bloomed in the hiring phase.


Make sure you’re hiring the right employees for your business, and that you or the staffing agency you use knows what that is.

Tony Caramatti

Posted in