The Skills Retention Rate measures the organization’s ability to retain critical skills over time. This metric helps assess whether the business is effectively preserving the skills that are essential for its operations, even amid employee turnover or changes in team composition.

Formula:
Skills Retention Rate=(Number of Critical Skills Retained)/(Number of Critical Skills Identified)

Example Scenario: Let’s imagine a software development company that specializes in building custom enterprise software. The company has identified a set of critical skills that are vital to its success, such as:

• Python Programming
• Cloud Architecture (AWS or Azure)
• DevOps and CI/CD
• Data Security and Compliance

At the beginning of the year, TechWorks Inc. conducted a skills inventory and found that they had 50 employees who possessed these critical skills.

Tracking Over Time: Over the course of the year, due to factors such as employee turnover and role changes, some of these critical skills were lost. Additionally, new hires or training programs may have helped replenish some of the skills.

Let’s look at the numbers at the end of the year:

• Original Critical Skills Identified: 50 employees with at least one of the key skills
• Critical Skills Retained: 45 employees still possess these skills

Calculating the Skills Retention Rate: Skills Retention Rate=(45/50)×100=90%

What Does This Mean?

A 90% Skills Retention Rate indicates that TechWorks Inc. successfully retained most of its critical skills over the year, but there was a 10% loss in key capabilities. This loss could have been due to employee departures, internal role changes, or a failure to upskill or replace lost skills.

Insights and Actions:

• A retention rate of 90% might be considered strong, but if the lost skills were in high-demand areas like DevOps or Cloud Architecture, it could still create operational risks.
• If the rate drops below a certain threshold (e.g., 80%), it could indicate a need for stronger employee retention strategies or a more robust approach to upskilling and cross-training employees.
• TechWorks Inc. could respond by implementing a succession plan, investing in training programs, or accelerating talent acquisition to fill these critical gaps.

Key Takeaway:

The Skills Retention Rate provides a clear, measurable way to understand how well the organization is holding onto its most important capabilities. By tracking this KPI, businesses can proactively address skills gaps and minimize disruptions to their operations.