How to Use Retention as a Hiring Metric

Hiring for growth is the best kind of hiring

At Gun.io, we believe there is one number that is the ultimate measure of how good you are at hiring: employee retention. We define this as the measure of time, in months or years, that someone voluntarily stays with your organization before moving onto another job. There will be circumstances where you have to eliminate a position entirely, or need to ask someone to leave, but those numbers should ideally be as close to zero as possible if you’re already mitigating risk.

Here’s a look at our retention numbers for our most recent years in business:

• 1 yr - 89%
• 2 yrs - 89%
• 3 yrs - 57%
• 4 yrs - 75%
• 5 yrs - 67%

We think the last two years are pretty notable. During what has largely been seen as one of the most tumultuous times in hiring history, we’ve maintained almost 90% of our workforce. In comparison, the average employee retention rate in professional and business services sits at a paltry 35.8%. We must be doing something right if the LinkedIn poachers haven’t been able to lure our incredible talent elsewhere.

Hiring is probably one of the most costly (in terms of time, money, and attention) things that a company can do. And hiring poorly is even more expensive than that. That’s why it’s so important for us to get right–and I’m happy that our numbers are great. In fact, this is how I believe we’ve built such a capital-efficient organization.

Here’s what contributes to keeping our employee retention figures strong:

1. There is a clear plan for every role, including KPIs
2. We use a systematic framework for compensation
3. We engage in Servant Leadership

Clear plan for every role (which includes KPIs)

Every time we hire for a role, we make sure someone in the company has done it first. This allows us to develop realistic KPIs that we can measure the success of the role against. We always set these KPIs aggressively, and everyone knows (including the new hire) if that person is succeeding. This makes compensation and promotions very easy.

“Almost all internal hires are the result of a successful growth experiment, which makes this process easy: we run the test, track what worked, and decide if we should bring someone in to own the work full-time. The KPIs basically write themselves. Thinking ahead six or twelve months takes more effort, but having an idea of where a new hire should directionally grow makes a huge difference in our ability to coach, manage, and support new hires.”  – Faith, Director of Growth Marketing

A systematic framework for compensation

One of the best decisions we’ve made as a company was hiring an HR firm very early on.  From the very beginning, they helped us build a systematic way to handle promotions and compensation. Everything from how to think about equity awards and outlining vesting schedules, to titles and so much more, is basically coming out of a playbook that we’ve developed and applied across our business. This happens for most companies at a way later stage than the one in which we’ve implemented, but it makes ramping and retaining staff so much easier.

"It can be an expensive initial investment to acquire and implement a compensation tool as a young company, but in our experience, it's well worth it. A standard compensation approach that's built upon accurate data saves time — and obviously money — while simultaneously reducing the mental overhead and uncertainty that can come with extending offers to new hires. A reliable and repeatable methodology grants confidence for your hiring team and creates consistency among your team over the long-term.” – Tyler, Director of Operations

Servant Leadership

At the end of the day, every company’s goal is to create revenue. By engaging in servant leadership at Gun.io, we set an overall organizational target, and leaders, along with their teams, get to decide how we get there. Oftentimes, leaders will actually ask their own teammates to co-develop a plan to achieve a team target or an organizational target. This not only gives teammates agency over the work they’re doing, but also builds trust across the board.

“At the Developer Relations team (DevRel) the team has full ownership to drive their goals. Communication is key to getting everyone focused on the goals we want to achieve. To make sure things are going in the right direction it is important to make all relevant metrics visible and to talk about them on a regular basis. The leader is the data-driven enabler that serves their team getting to those goals.”  – Deividi, Director of Developer Relations

Retention brews efficiency

Efficiency is the mark of a well-run company, and on that measure, employee retention seems to be highly correlated with company efficiency. Indeed, as someone matures in their role or matures in the organization through multiple roles, the efficiencies (through relationship building, unique company knowledge, knowledge of personalities, etc.) only build.

We’ve experienced first-hand the numerous benefits of keeping our employees happy, invested, and interested in the work they’re doing. We not only keep growing our company, but also keep adding to an impressive roster of talent that will help us continue that trajectory.