Retention

Employee Satisfaction KPIs

30/09/2021
8 minutes read

With discussions around company culture, work-life balance, and mental health at the center of the workplace, it should come as no surprise that understanding and responding to employee satisfaction is at the forefront of HR strategy.

But with something as broad and ambiguous as satisfaction, where do you begin?

Firstly, it is important to have a concrete definition of employee satisfaction to work from. Generally, employee satisfaction is defined as the level of contentment employees feel with their job. This encompasses satisfaction with daily tasks, team members/managers, satisfaction with organizational policies, and the impact of their job on employees’ personal lives.

While having a concrete and all-encompassing definition is great, its comprehensive nature means that measuring employee satisfaction is more complicated than simply asking your employees “are you happy.” Rather, you should work to construct a data-collection process that captures the many facets that comprise employee satisfaction. According to research by Edmund Thompson and Florence T. T. Phua, we should be measuring job satisfaction at a cognitive, affective, and behavioral level to fully understand its nuances and impact on employees’ personal and professional lives. Other research has broken employee satisfaction down into a two-factor model that outlines and measures the components contributing to both satisfaction and dissatisfaction.

 

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Regardless of how you look at satisfaction, there is no doubt that the concept is complex. The good news is that there are established metrics that can gauge the various nuances of employee satisfaction and all its facets. These metrics are trackable and actionable, making them a great place to start when setting employee satisfaction KPIs. Their measurable nature also makes them great for conducting an initial employee satisfaction audit so that you can understand how you are currently performing generally and in specific areas. Understanding and improving these key areas not only helps create a better working environment - which leads to happier and more productive employees - but it also has a positive impact on your employer brand through an inside-out approach. The latter can ease recruitment efforts through increased brand awareness among candidates, which can prove to be a significant advantage in the hunt for scarce talent.

But before you jump into the KPIs, there are some key questions you should ask yourself. For example, is your organization prepared to act on these results? Is your survey constructed in a way that ensures reliability and validity? How likely are employees to actually respond? Think about additional potential obstacles to your data collection and how you can overcome them. To help you get started, check out this article to learn more about common issues when administering surveys and how to overcome them.

Lastly, it is important to remember that satisfaction is not  solved by a few one-off initiatives. Therefore, your organization will need to continuously dedicate sufficient time and resources to tackle employee satisfaction head-on.

Okay - let’s finally dive into exactly what these KPIs look like and how you can act on them.

Employee Satisfaction Index

ESI is probably the most obvious employee satisfaction KPI there is. However, it cannot be used as a standalone measure since it consists of self-reported satisfaction ratings rather than the latent behavioral components employees exhibit at work. However, that does not mean the ESI questions should not be included in your feedback surveys - it just means that it needs to be combined with additional measures.

Absenteeism

Job satisfaction is a primary motive for people to show up to work every day. So, if you notice that your employees are taking more unexpected leave than usual, this may be an indicator of dissatisfaction. It also creates bottlenecks for other team members, creating additional stress and dissatisfaction by association. You can calculate absenteeism by dividing the total number of absent days per employee by the total number of working days. You then multiply this by 100. In Europe, absenteeism rates range between 3%, while they are just under 3% in the US.

 

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Vacation Days Used

Coming off the discussion of absenteeism is the other extreme where employees do not take any time off at all. Employees should still feel comfortable taking sick days and vacation, which is why “perfect attendance” may also be an indicator that they lack psychological safety or feel too overwhelmed to take time off. So, look a little closer at work-life balance indicators if your absenteeism is extraordinarily low

Employee Net Promoter Score (NPS)

This KPI sheds light on the satisfaction and loyalty of your employees. It can be measured with a simple question such as “how likely are you to recommend your workplace to a friend?” This is typically measured by a ten-item scale where answers 0-6 are considered negative, 7-8 are considered passive, and 9-10 are considered positive. To calculate your NPS, you would subtract your number of positive responses from your negative ones and divide that number by the total number of responses. Generally, a score between 0.10-0.30 is acceptable, but anything under 0.10 would be considered a cause for concern.

Turnover Rate

Given that satisfaction is a driver of retention, taking note of your turnover rate is a rather straightforward measure of how satisfied your employees are with their position. However, calculating retention rate does not reveal underlying drivers behind abnormally high or low numbers. So, you will need to dig a little deeper to find the factors that influence your score.

 

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Internal Promotion Rate

Another key driver of employee satisfaction is the opportunity for professional growth and development. A key indicator of growth and development opportunities is your organization’s internal promotion rate, which can be calculated by the number of promoted employees divided by the total number of employees over a given time period. Most organizations have an internal promotion rate of around 8%. So, anything higher than this shows your organization’s ability to retain high performers which can speak volumes about their satisfaction at work.

90-Day Failure Rate

If an employee feels that they were not properly onboarded (from both a task, cultural, or psychological perspective), they are more likely to pull out early and seek employment elsewhere. This is why a significant portion of turnover happens within the first few months at a company, making your initial hire failure rate an important indicator of your onboarding quality. High initial failure rates could also indicate mis-hires, revealing that your recruitment process may need to be re-evaluated.

Online Company Ratings

Lastly, sites such as Glassdoor can be a quick and face value indicator as to how your past and current employees feel about you as an employer. It is not an exact science, but looking at your company’s reviews semi-annually can give you a ballpark range as to how you are perceived. Since these ratings and reviews are anonymous, it may reveal sentiments that your employees are hesitant to share in the workplace.

Many of these KPIs can be measured through organizational data (i.e., absenteeism, retention, etc.). However, to actually act on these metrics, you will need to understand their drivers. For example, does lack of work-life balance force employees to skip out on vacation or leave the organization prematurely? Or maybe a toxic feedback culture contributes to low levels of psychological safety? 

 

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That is why it is important to combine readily available organizational data with proactive data collection. One of the most common ways of collecting data is a quantitative survey. However, as mentioned earlier in this post, there are some downfalls when it comes to relying solely on quantitative surveys. For example, you may experience low response rates, response bias, or poor results due to survey design. 

If you are nervous about these issues interfering with your results, one solution could be to consult with an external organization to help you audit and act on your employee satisfaction. However, this is often time-consuming and resource-intensive, which is why many organizations opt to complement their quantitative surveys with alternative collection methods such as qualitative one-on-ones or focus groups. These combined with quantitative surveys can paint a vivid and compelling picture of your employees’ content with your organization. 

Now you should be equipped with the insight necessary to kickstart your employee satisfaction audit and action points. If you would still like to learn more about employee satisfaction, retention, onboarding, company culture, and more, head over to our Resources page.

We wish you the best of luck in implementing your initiatives and laying the groundwork for a better place to work!

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