In an increasingly competitive and fast-paced labor market, businesses must understand why some employees leave and others stay – not only for the sake of the bottom line, but also to retain top talent. Understanding what employees value, assessing the financial impact of retention and turnover, and controlling and improving employee retention are all strategic advantages. Do you understand what employee retention is and how it may affect your business? In this post, we define employee retention, explain how to measure it effectively, and offer strategies for improvement.
What Is Employee Retention?
Employee turnover, or the loss of organizational talent over time, is a significant issue for most businesses. In 2019, more than 42 million Americans left their employment willingly. If current trends continue, more than one-third of all employees will willingly leave their jobs by 2023.
Employee retention is described as an organization’s capacity to prevent employee turnover or the number of people who quit their position voluntarily or involuntarily in a certain time period. Increasing employee retention has a direct impact on the performance and success of a firm.
Why Is Employee Retention Important?
Employee retention has emerged as an essential component of current human capital management initiatives. According to Gallup, it costs firms in the United States more than $1 trillion each year to replace employees who voluntarily leave their positions. High turnover, some of which could have been avoided with prior management intervention, also reduces revenue, productivity, employee experience, and knowledge retention.
Employee Retention: What You Can Do
Hiring the appropriate individual is the first step toward improving employee retention. This necessitates identifying the job itself — responsibilities, requisite skills, work environment — and crafting a job description that attracts qualified people.
When an organization hires a new employee, orientation and onboarding are critical to making them feel at ease. Employee retention, engagement, and dedication have all been found to rise with a well-planned and coordinated onboarding program. Furthermore, competitive remuneration and employee benefits are important not only for attracting but also for retaining the best and brightest. Competitive bonuses, paid time off, health benefits, and retirement plans are also available.
Finally, employees cherish meaningful employment that allows them to put their skills and abilities to good use. Other important factors of employee retention include career development and advancement opportunities, as well as an appreciation for their achievements.
What Are Some Employee Retention Strategies You Can Use?
Every organization seeks to keep its human assets for as long as possible. This increases productivity ensures continuous business flows and lowers the cost of rehiring. That is why most organizations prioritize retention. However, in a competitive employment environment, employee retention might be difficult. By using the proper strategies, you can retain your top performers and build a staff that is loyal, engaged, and results-oriented. It’s important to remember that retention strategies will vary from employee to employee.
So, what are the various strategies available to ensure maximum retention? Keep in mind that your high-performing employees are unlikely to share the same motivations as your mid-performing employees. Poor achievers, on the other hand, require entirely different retention strategies.
Top performers’ Employee Retention Strategies
Did you know that high achievers are likely to be 400% more productive than their average-performing counterparts, according to McKinsey? While this number varies for each organization, it is undoubtedly worth paying special attention to retention strategies for this group.
#1. Assign them difficult tasks.
You can keep your top performers interested by providing them with new goals to strive for on a regular basis. This strategy also helps people advance in their jobs by allowing them to learn new skills and attain new goals. Top performers will be more loyal to your organization as a result of the favorable impact on their overall employability.
#2. Provide them with cross-disciplinary training.
Once an employee has mastered one skill, you can expose them to cross-skilling prospects. This ensures that the employee does not jump ship in quest of their “dream job” and has the opportunity to laterally shift to a similar capacity within the organization.
#3. Create and carry out a succession plan
Succession planning builds a talent pipeline by preparing today’s top performers for future leadership positions. Involving this employee group in your succession plan can help with retention because they know where they are going in the organization.
Employee Retention Strategies For Average Performers
In most businesses, average performers make up the bulk of the workforce. As a result, they are also accountable for a significant percentage of your productivity. For example, if you own a car dealership, the typical salesperson will bring in at least 50% of overall sales, but the top-performing group may bring in an additional 40%. As a result, retention strategies for this market sector are equally important. It should be noted that these strategies can be combined with those for high performers.
#1. Provide customized benefits and bonuses
Personalized benefits can be a fantastic method to keep your employees because they provide them with a sense of security about their future and a higher quality of life. Conduct surveys to determine the most popular perks and increase your investments in these areas.
#2. Ensure they are reporting to the correct manager.
Employees will feel demotivated or even dissatisfied with their jobs if management is inadequate. This is especially true for mediocre workers, who frequently lack the trait of self-motivation that distinguishes high-performing employees. Conduct anonymous pulse surveys to gather employee feedback on their supervisors.
#3. Implement a social recognition system to identify them.
The efforts of employees who perform mediocrely should not be overlooked. You can make people feel appreciated in the workplace and thus less inclined to quit by using a social reward and recognition program.
Poor Performers’ Employee Retention Strategies
Employees who are underperforming may have hidden potential that is not being fully utilized. They may be working in the wrong department when their talents lay elsewhere. Alternatively, they may just require further training. A wave of turnover among low performers can have a detrimental impact on company culture and result in hefty rehiring costs. You should take the following precautions to avoid this.
#1. Determine the source of low performance.
Below-average performance can be connected to job disengagement in numerous circumstances. You must identify and fix these trends before it is too late. Measure productivity on a regular basis and conduct an employee engagement survey anytime productivity falls below a certain threshold.
#2. Address skill deficiencies right away.
You may ensure that your poor performers stay with the organization for a longer period of time by giving them the opportunity to refresh their skill set. The fact that the organization is invested in its success is likely to improve its commitment to the organization. However, be certain that these employees can be trained. Even the most basic degree of training should improve their overall effectiveness in the organization.
#3. Create precise job descriptions in order to hire the proper personnel.
Some employees will come to your organization with very different expectations than what the job entails. A software developer, for example, may wish to build goods, but in practice, they will wind up producing code for someone else’s design and feature ideas. Make these elements clear in your job description and during onboarding to avoid a drop in performance that leads to churn.
Benefits of Employee Retention
Employee retention is critical as organizations fight for top talent. While some experts believe that a 90 percent retention rate is a fair target, the reality is that it varies by company and industry. However, the capacity to retain employees is universally advantageous for a variety of reasons. The following are nine of the most significant advantages:
#1. Cost-cutting.
Every year, firms in the United States spend hundreds of millions of dollars on recruiting and training new employees. If an employee quits too soon, those costs are incurred. Productivity, team cohesiveness, and morale suffer as well, which has a financial impact. Total employee replacement costs can range from 90 percent of a worker’s income for an entry-level employee to 200 percent or more for tenured professionals and leaders.
#2. Efficiency in recruitment and training.
Companies that focus on employee retention save money on recruiting and get more out of employee training. Fees paid to recruiters or to promote the post, interview-related travel, and possible signing bonuses are all part of the recruiting expenditures. Then there’s training, which can be costly as well. If an employee leaves too soon after being employed, the money is squandered.
#3. Increased Productivity
Employee turnover reduces productivity since it takes time for a new employee to catch up and produce at the same level as their predecessor. It also has an impact on surviving employees, who are forced to take on greater work and may generate lower-quality output as a result. High-retention workplaces, on the other hand, tend to have more engaged workers who are, as a result, more productive.
#4. Improving employee morale
Employee retention programs that are successful foster greater connectedness and engagement, which boosts morale and, as a result, retention. A steady stream of departures, on the other hand, has a depressing effect on workplace morale, with side effects such as lower work quality and more workers deciding to leave.
#5. Employees with prior experience.
It goes to reason that the longer employees stay with a company, the more involved, knowledgeable, and skilled they become. They have also developed beneficial ties with consumers and coworkers. When an employee leaves, the organization suffers an opportunity cost in terms of the potential value the employee may have provided.
#6. Improved customer experience.
Inexperienced and less skilled new hires may be more prone to errors that harm a customer’s experience with the organization. Employees who have been with a company for a long time are more likely to be adept at interacting with customers and have strong relationships with them. This is true during all stages leading up to a signed contract, as well as after the sale, when a consumer may contact customer support. A better customer experience can also serve as a significant brand differentiator.
#7. Improved Employee happiness and experience.
Employee satisfaction — worker pleasure and contentment — and employee engagement — the level of dedication people bring to their employment — have a symbiotic relationship. Employees that are satisfied and engaged are more likely to stay with a company, and companies with high retention rates frequently have higher levels of employee satisfaction and engagement.
#8. Improved business culture.
Corporate culture evolves throughout time as a result of the accumulated traits and interactions of employees. When engaged employees who are aligned with an organization’s culture remain, the organizational ethos is strengthened. A positive organizational culture boosts productivity and performance.
#9. Increased Revenue
Employee retention isn’t simply about lowering expenses; anecdotal data suggests it can also boost income. Employers with higher retention rates provide a better customer and employee experience, retain experienced top talent, and are more productive, all of which contribute to growth.
Employee Retention: Measuring and Monitoring
Tracking turnover and annual retention rates are the first steps in measuring employee retention. However, the most effective employee retention programs collect and analyze a wide range of data, including employee satisfaction and engagement, more nuanced retention and turnover data, and other concerns such as absenteeism. These metrics provide a more in-depth understanding of employee retention, which may be used to guide recruiting and hiring strategies, address cultural and management challenges, and improve employee happiness and engagement. Examining these retention indicators from many perspectives also allows the company to focus its retention efforts on top people.
Some firms that see big, predictable changes in departures, such as those with large seasonal or contingent workforces, may adjust their retention calculations to account for those projected employee exoduses. HR and company management can analyze specific features of their turnover rates, such as manager, longevity, and high and low performers, just as they can with retention rates.
Employee Retention FAQs
Why is it important to retain employees?
Employee retention can save a company’s productivity. Workplaces with high retention rates tend to hire more engaged employees, who get more done as a result. Engaged employees are more likely to develop customer relationships, and teams that have had time to gel are also more productive.
What are the 5 main drivers of employee retention?
5 drivers Influencing Employee Engagement and Retention
- Allow for fulfillment. We all take our employees for a reason.
- Provide opportunities for advancement.
- Employees who are responsible should be given more authority.
- Encourage collaboration.
- Support success through process and workflows.
