Finding the workers your company needs to excel is only half the battle. Keeping them onboard is the other. Doing so prevents your hiring team from having to carry out the same task over and over, and lowers overall costs in the end.
Employee retention refers to the ability of a business to keep workers within their organization. An employee retention strategy, therefore, covers the efforts and resources businesses devote to retaining their workforce.
A 2017 study found that nearly half of all employees will look for other opportunities within their first twelve months on the job. Compensation and healthcare benefits, moreover, are the most common reasons why people look elsewhere.
Employee Retention and Cost of Turnover
Employee retention strategies are especially important when one considers the cost of turnover. Millennials, who change employers more frequently than other age demographics, cost over $30 billion in annual turnover costs.
Numerous studies have found that the cost to replace an employee can be in excess of double the role’s salary. Furthermore, the more senior the position, the more costly it is to replace, with high-level executive replacement costs as much as 400% of the role’s salary.
While that number may seem outrageous, consider all of the costs associated with replacing an employee. Those include:
- Recruitment costs
- Relocation costs
- Signing bonuses
- Spent resources to cover vacant position’s role
- Opportunity costs associated with reallocating employee resources away from other tasks to fill an open position
In other words, replacing an employee is expensive.
Be Mindful of Your Turnover Rate
Employee turnover rate refers to the percentage of employees who leave a company, voluntarily or involuntarily, in a given time period.
Given the significant hard and soft costs associated with turning over a role in your business, lowering your turnover rate in order to retain as many workers as possible is vital.
As we explain in another post, “Employee turnover rate is the percentage of employees who leave an organization or company during a determined time frame. Employees who voluntarily left, were let go, or fired are often included in employee turnover rate, however, internal transfers and promotions usually aren’t included in the calculation.”
You can read more about calculating turnover rate here which includes our Employee Turnover Rate Calculator.
Creating an Employee Retention Program
An employee retention program is an excellent way to lower turnover. While there is no one-size-fits-all method to create an effective retention program, according to exhaustive research conducted by Harvard Business Review and executive search firm Egon Zehnder International, successful retention programs throughout the business world all:
- Establish clear priorities that inform the way their company will develop future leaders.
- Utilize a careful selection process that invites only the most qualified candidates to participate.
- Implement detailed management strategies for those in their retention programs—how they are developed, incentivized and rewarded.
How to Boost Retention and Manage Your Retention Program
Optimizing your internal mobility programs is an essential part of high retention, sustained success and future growth. Internal mobility refers to the movement of employees across different roles within an organization.
For internal mobility to function properly it must be a foundational element of your corporate culture. In addition, productive internal mobility strategies require effective management and accountability.
Regarding the latter, to assess the accountability of your strategy, ask yourself questions like:
- Is your internal mobility strategy vertically integrated throughout the entire organization?
- Do you have quantifiable goals for internal mobility?
- Do your employees have easy access to opportunities for internal movement?
If you cannot answer these questions affirmatively and point to tangible evidence to support those claims, there is significant room for improvement.
Lastly, utilizing recruitment CRM software for an internal talent pool is also an important way to improve internal mobility.
You can read plenty more about improving internal mobility here.
Finally, here are nine core principles to keep in mind as you develop strategies to lower your Turnover Rate:
1) Hire the Right People
Make sure the roles you create are clearly defined and make sure the people you hire not only fit the role but also fit with your organizational culture. For more, check out our Definitive Guide to Hiring Success.
2) Make Sure Your Compensation Packages Are Competitive
Offering competitive salaries and benefits encourages your workers to stay in house rather than pursue opportunities elsewhere. If you want to attract the best people, you’ll need to offer salaries that equal or match your competitors, especially if you’re located in a geographic location where the cost of living is high.
Don’t forget that compensation extends well beyond salary. Your insurance benefits, paid time off, and retirement package should all be assets to help you attract top talent.
3) Show Your Employees They’re Valued
Celebrate their professional and personal accomplishments and consistently demonstrate you value their contributions to your firm. Something as simple as recognizing and celebrating employee birthdays can boost retention.
According to Harvard Business Review, job search activity increases right before a person’s birthday. Celebrating a worker’s birthday, or accomplishments more broadly, not only makes them feel validated but also demonstrates their value to your organization extends beyond their labor.
4) Be Flexible
Employees’ lives are complex and unique. Offering flexibility encourages workers to do their jobs without compromising their personal lives. It can also boost productivity and lower overhead. Too much conflict between work life and home life is likely to force your team members to seek opportunities with other organizations.
But keep in mind, allowing team members to work remotely requires proper IT training and access to appropriate technology. By having systems in place that train workers to work from home and provide the equipment required to do so, you’ll ensure you are encouraging rather than just permitting telecommuting.
5) Enhance Engagement
Finding ways to accurately gauge the level of engagement of your employees to their work and your company is vital. Engaged workers are likely happy workers; happy workers are likely workers you will retain.
Moreover, disengagement costs your business money, wasting as much as 34% of a position’s salary, according to one report. Effective engagement assessment requires identifying specific goals, implementing quantitative ways to measure progress, clear communication with employees, and a detailed plan of action to reach those goals.
6) Encourage Internal Upward Mobility
As mentioned above, people want to work for firms where they can grow their career and climb the corporate ladder. If team members see plenty of examples of upwardly mobile colleagues and understand what’s required to move up in your company, they’re far more likely to stay.
7) Offer Mentoring
Not a supervisor, a mentor. Assign new employees a mentor that’s worked for your business for a long time and can offer advice and insight and can serve as a sounding board for their mentee.
Effective mentoring requires careful alignment with organizational goals and culture, buy-in from management, feedback from mentors and mentees, and relevant training to facilitate growth, among others.
8) Seek Feedback
Seek out information about what’s working and what isn’t. What can you do to boost morale, etc. Letting workers know implicitly that you value their feedback and will act upon it in and of itself promotes a healthy and inclusive corporate culture, one that people are more likely to remain engaged with.
9) Offer Training
To help facilitate and encourage internal mobility, provide employees training to help them acquire the tools they need to stay interested, stay engaged, and grow within your organization.
This can be as simple as encouraging employees to block off time in their schedules to acquire new knowledge through LinkedIn Learning, or to regularly meet with a mentor. Or, if your company has the resources, you could set aside a personal development budget for everyone, allowing them to identify skills they’d like to learn that are aligned with their personal interests, as well as company goals and needs.
Employee retention is a crucial way to hold onto your top talent and minimize the cost of maintaining your workforce. A thoughtful and proven retention strategy is the essential first step for retention success.
On a related note: if you’re interested in finding out how you can positively impact employee retention by combatting burnout, then check out this recent post.