A specialist overview on employee retention

As the owner of a business, it’s critical that you know about employee retention and what it takes to keep talented individuals working for your firm or organization. On the other hand, if you are an employee looking to take a step forward in your career or to move into a new job role, knowing more about employee retention might help you to determine what your employers should be doing to keep you satisfied in your work.

What is employee retention?

Employee retention is commonly defined as an organization’s ability to prevent employee turnover, or the number of individuals who leave their job either voluntarily or involuntarily over a certain period. For many years, increases in employee retention have been shown to have a direct impact on business performance and success.

At the most basic level, an organization needs employees that are talented at what they do and that are a good fit for the company. A business cannot expect to grow or thrive if it cannot keep talented individuals, or individuals who integrate well with the company and its culture. The goal of employee retention is to ensure these “right people” are kept on as employees. This is achieved through a series of strategies that an organization will develop to mitigate employee turnover risks, as well as the processes it will put in place to retain critical talent.

Why is employee retention important for organizations?

Employee retention is a constant challenge for HR departments and organizations as a whole in the modern era, but it remains as important as ever for those looking to succeed with their business. The most prominent reason for this is that it is extremely expensive for organizations to replace employees who willingly leave their positions, with experts suggesting this costs more than $1 trillion a year. 

Having a high turnover can also affect an organization’s performance, as talented individuals leave and the work they would normally do themselves either falls to someone else or is not done at all. As a result, it’s possible that there may be a decrease in productivity, and it’s also likely that there will be a decrease in knowledge retention and employee experience.

For some organizations, it might also be difficult to replace particularly skilled team members; as the availability of highly qualified and skilled candidates decreases on the job market, employers may find that they are not able to hire the ideal candidate for the role they need filled. 

Can high turnover ever help an organization?

While most organizations will want to avoid a high turnover and the problems associated with it, there is a chance that some turnover can have positive implications and be of use to a business. For example, a new replacement hire might turn out to be more productive or skilled than their predecessor, and a better fit for the company culture. 

It is also important to remember that some turnover will always exist within an organization, and some organizations will experience fluctuating turnover as part of standard practice. This is especially true for industries that hire many first-time, part-time, and seasonal workers.

What are the benefits of employee retention?

Some experts have suggested that organizations should aim for a 90% target when attempting to retain employees. In reality, the actual percentage varies depending on the company and the industry being discussed. The benefits of retaining employees, however, are considered beneficial no matter which organization is looking to carry it out.

The benefits of employee retention include:

Cost reduction

The costs involved in recruiting and training a new employee is sunk if they leave a job role early. Productivity, team morale, and cohesiveness are all affected by an employee leaving, too, which increases the financial impact. For each employee, total replacement costs can range from 90% of a worker’s salary for someone coming in at entry level to 200% or more for tenured professionals and leadership.

Efficiency in recruitment and training

By retaining employees, organizations will be reducing costs associated with recruitment and will get to experience greater returns on employee training. Recruiting costs that are reduced the better employees are retained include:

• Fees paid to recruiters
• Fees paid to advertise the position or positions available
• Interview-related travel
• Possible signing bonuses

Training can also be expensive for businesses, and if an employee leaves soon after being trained the money will be wasted rather than invested through the individual’s newfound or learned skills.

Increases in productivity

New employees will need time to adjust to their job role. This means it will take more time for them to understand and to produce at a comparable level to their predecessor. Remaining staff members may also have to take on extra work and produce lower-quality results because of this. By retaining employees, this is avoided. Studies have also shown that workplaces with high employee retention rates are usually more engaged and are more productive as a result.

Improved employee morale

Organizations with greater retention also often promote and encourage engagement and connections, helping morale and giving retention rates an even greater boost. 

More experienced employees

The longer employees are retained within an organization, the more knowledge they are likely to obtain and the more skills they are likely to develop and build on. They will also be more likely to have forged strong relationships with clients, customers, and coworkers, adding even more value to their presence within the organization.

A better customer experience

New employees who are less familiar with an organization’s work processes and who are less adept because they have less experience are more likely to make mistakes. This could have its own impact on a customer’s or client’s experience. Meanwhile, retained employees who have been with an organization for a longer period of time will be more skilled in handling customers and clients. They may even be familiar to them and have developed a strong relationship with them.

This benefit covers every stage of a customer’s journey, whenever they have to reach out to an organization for help and advice, or to place an order for something they need. Ensuring this experience is as smooth, comfortable, and convenient for them as it can be, and thereby making it better than the experience offered by a competitor, can often be a differentiator for a brand.

Improved employee experience and satisfaction

Employee retention is inextricably tied to job satisfaction, meaning a worker’s happiness and fulfillment overall, and employee engagement, meaning the level of commitment a worker brings to the role. If an organization’s employees feel satisfied and engaged in their work then they are more likely to stay within that organization.

A stronger company culture

Company culture is not immediate; it develops over time based on the collective traits of everyone in the workplace and depends on interaction between employees. Engaged employees who are satisfied in their jobs and aligned with the company culture strengthen the organizational ethos the longer they remain at the company. Having a strong company culture also increases productivity and improves performance.

Increased revenue

It has been suggested that employee retention can also have a positive impact on an organization’s revenue. Better employee retention does certainly lead to better customer and employee experiences, help to retain the most talented individuals, and increase productivity – each of which are critical for boosting growth and obtaining revenue.

Why do employees leave organizations? 

There are many reasons employees choose to leave organizations, apart from being fired or laid off by the organization itself. Exit interviews can provide insight as to why any one employee might be leaving an organization, but studies have shown that most of the reasons they are likely to say can be divided into four primary categories:

Employee dissatisfaction

This category covers a number of different reasons, from incompatibility between the employer and employee, to the work-life balance available when working for an organization, to a lack of opportunity or professional development and growth where they are currently. Some workers may also simply be bored with their current role and wish to move to something new that they find more exciting.

Better alternatives available elsewhere

Some employees may find a position in another company that offers them something better. Increased financial compensation, more comfortable hours, or a better perks and benefits package might all be examples of this.

A personal change

Not every employee will have planned to stay in one organization for their entire working life. Some may be planning to go back to education to earn a degree, to eventually relocate with their spouse and family, or to advance in their careers elsewhere by using an organization as a stepping stone. Even employees who had been planning to stay with an organization long-term may find that health or family issues force them to change jobs.

Negative experiences

These reasons may happen on impulse, such as quitting in response to being passed over for a promotion, or play out over a long period of time, such as experiencing harassment from a coworker or supervisor.

Telling if an employee is ready to leave an organization

It is possible that some employees will leave signs that they are about to leave an organization. The most obvious of these are resumés left on desks, or an increase in extracurricular appointments that may suggest they are going for other interviews. However, there are also some more subtle behaviors that employers may wish to look for if they believe an employee is thinking of leaving:

• A decrease in initiative or productivity; an employee who is thinking of leaving may no longer put in extra effort, or may seem noticeably less interested in what they do.
• A shift in attitude; negativity about their job, the organization, or even other coworkers in general might signal that the employee is ready to leave.
• Decreased enthusiasm; employees thinking of leaving may seem disconnected from the organizational mission, and less eager to help out with clients or customers.
• Lack of commitment; employees who know they are not staying may put in shorter days, or avoid long-term projects.

Why do employees stay at organizations?

Knowing the reasons employees may choose to leave an organization is important, but so is knowing their reasons for staying in their jobs. 

The first of these may be considered a social aspect of working within an organization. Experts have suggested that employees become embedded in their jobs and the communities created by organizations. As employees participate in both, they develop connections and relationships with their colleagues, and leaving their job would mean rearranging their social and value networks. The more embedded they are and the deeper their relationships are with their coworkers, the more likely they are to stay.

Feeling valued, listened to, and recognised within an organization has also been proven to improve employee satisfaction and therefore retention. Organizations which offer the best employee benefits packages, listen to the wants and needs of their employees (such as by offering remote work schemes), and recognise individuals for their achievements are all more likely to experience high retention.

Employees also want the opportunity to grow within their organization. Workplaces that give them the opportunity to move to new jobs in the same or even different departments, or to earn promotions, are more likely to see employees retained.

10 employee retention strategies

If, as an employer, you are interested in finding ways to retain top talents within your organization, you may think to begin with these ten strategies:

1. Carrying out onboarding and orientation

An onboarding process should teach new employees about their job, but it should also teach them about the organizational culture and how they can contribute, take part, and enjoy being part of the workplace.

2. Offering mentorship programs

Pairing new employees with mentors is an excellent extension of the onboarding process. Mentors can help to welcome newcomers to the organization, offer advice and guidance, and help their mentees with problems or issues that they may be having. In return, new employees may offer a fresh viewpoint for certain issues that mentors might not have thought about before.

Mentorship programs don’t have to be limited to new employees, however. Existing staff members can also significantly benefit from having someone they can turn to for advice, or to act as a sounding board for ideas.

3. Ensuring fair employee compensation and benefits 

Organizations must ensure that they are paying their employees fair, competitive compensation. This means evaluating and adjusting salaries regularly, wherever this is possible.

Providing other forms of compensation, as well as a number of great perks and benefits, is also essential for retaining employees. Bonuses, healthcare benefits, flexible work schedules and remote work options, and good retirement plans are all examples of benefits that are more likely to make the work environment comfortable for employees. Wellness programs, like stress management services, reimbursement for fitness classes, or even full gym memberships all count as benefits that are all employee retention factors as well.

4. Communicating effectively

Employers staying in communication with their employees ensures they feel comfortable coming forward with ideas, questions, and concerns. This allows them to feel valued and heard within an organization, and promotes timely, constructive communication at all levels of work. Employers individually connecting with employees to find out how they feel about their workload and overall job satisfaction also helps this.

5. Offering feedback on performance

In the modern era, more organizations are turning towards regular reviews, rather than just one annual review. These one-on-one meetings can help an employee to visualize their future within the company by laying out their short-term and long-term professional goals. An employer helping them to set out a realistic plan for achieving these strengthens this visualization.

6. Carrying out training and development

As part of offering feedback, employers can also help employees to recognise areas of potential professional growth. One of these may be the need to learn new skills. Upskilling, which is the teaching of further skills to employees, is especially important as technology and work practices change over time. Employees learning new abilities and gaining new competencies helps them to match the requirements of the business.

Employers can invest in training for their employees to help their professional development. Virtual conferences, tuition reimbursement, or paying for continuing education are all examples of how this can be done.

7. Recognising and rewarding achievements

Employees want to feel and know that their work is appreciated. Employers expressing their gratitude for the work carried out can therefore have a significant impact on employee retention. Formal reward systems, recognising specific achievements and incentivizing ideas and innovation may be a way forward with this if an organization has the budget. Compelling recognition programs are an alternative for businesses with small teams and limited budgets.

 Milestones are also important achievements. If, for example, an employee passes a certain number of years working for their organization, this should be noted and celebrated by the team.

8. Keeping a good work-life balance

Good work-life balances are essential for employee health, and maintaining the balance is an important factor in employee retention. Employers should encourage employees to take vacation time and to set boundaries so they are not working when they should be living their own lives. They may also consider giving workers extra time off if they work late or take on more hours than were originally assigned to them.

Flexible working arrangements can often skew the work-life balance, as some employees feel obliged to keep on working even when at home just “because they can”. This does not mean it shouldn’t be offered, however; many employees will wish to work from home at least some of the time in the modern era. Allowing them an option for remote working which works for them, while still reminding them to take breaks, is the responsibility of the employer.

9. Emphasizing teamwork

All employees should be encouraged to take part and to contribute ideas for the organization, and teamwork can be promoted by creating opportunities for collaboration, accommodating individual work styles, and giving everyone room to make decisions and to correct themselves if they need to.

10. Applying effective change management 

Every workplace has had to handle a lot of change in recent years, both good and bad. Employees look to leadership – their supervisors, management, and employers – in times like this for guidance and reassurance. Applying effective change management techniques can help employers to ease their employees’ worries over new changes, and mitigate any potential resistance to these.

Employee retention models

A number of different researchers studying employee retention have developed models rooted in psychology to explain job satisfaction. Over the years, these models have influenced the employee retention approach for many organization’s Human Resource management teams:

• The Hierarchy of Needs; the essential needs of humans (psychological, safety, belongingness, esteem, and self-actualization) and which must be met first. They can also be used to examine and determine the factors most closely related to job satisfaction.
• Job Characteristics Model: skill variety, task identity, task significance, autonomy, and feedback have all been noted as job characteristics that increase job satisfaction. Jobs created with these tasks in mind are more likely to lead to productive, motivated employees.
• Human Motivation Theory: this identifies three intrinsic human needs (achievement, power, and affiliation). Understanding which an employee prioritizes can help employers to increase their job satisfaction.
• Motivation-Hygiene Theory: this theorizes that two primary factors impact job satisfaction. Motivators, which are also called job satisfiers, include recognition, meaningful work, and the chance for personal growth. Hygiene, which might also be called job dissatisfiers, include salary, benefits, and job security. Proper management of hygiene factors can prevent employee dissatisfaction but this does not make it a source of satisfaction or a motivator.

How to improve or increase employee retention

 To improve employee retention, an organization must first ensure that it has hired the right person for the job specified. Defining the job properly, including its responsibilities, required skills, and the overall work environment, and putting this into a job description that attracts the right candidates is crucial. After this, employers should follow the steps we have outlined above to create a strategy which works best for their organization specifically.

Using HR software

Human capital management (HCM) software has an important part to play in employee retention. It’s useful for collecting and analyzing key metrics, managing overarching goals for employee retention programs, and correlating said key metrics to overall business performance. It can also provide analytics that streamline the creation and presentation of reports. 

Altogether, this all helps leaders and management to highlight the impact of investments that increase employee retention. With growth and changes in workforce needs, economic pressures, and market fluctuations, having the right software in place is more important than ever.

Measuring and monitoring employee retention

Measuring employee retention starts when an organization starts tracking turnover and annual retention rates. The most successful programs designed for this will collect and analyze a range of data. This data can include:

• Employee satisfaction
• Employee engagement
• Nuanced retention information
• Nuanced turnover information
• Information on other issues like absenteeism

These measures provide a more detailed understanding of employee retention. In turn, they can then be used to inform recruitment processes and hiring strategies, address cultural and management issues, and improve employee satisfaction and engagement overall. 

Organizations which experience large and expected fluctuations in employee turnover can make adjustments to their retention calculations to account for expected departures. 

Working with us

If you are an employer searching for new talent to fit and to fulfill roles required within your organization, or even if you are a candidate looking to move out of your current position and into an entirely new career, Oakleaf Total Rewards Search will be there to help. Send us an email or your resumé using the contact form below and let us help you maximize employee retention or your own job satisfaction as soon as possible.