Have you ever walked into a workplace and seen more empty chairs than employees? “Wow,” you might think. “Where did everyone go?” Even a few empty chairs can be a sign of an employee retention problem that hinders the company’s progress. When too many employees start finding jobs elsewhere, the organization they’re leaving quickly learns why strategies for employee retention are important.
Some firms neglect staff retention efforts until increased turnover forces them to confront the issue. But wise organizations understand that retaining employees deserves constant attention because it does more than solve turnover problems. As we’ll explain, it also provides solid business benefits than can strengthen your organization.
What Is Employee Retention?
Employee retention is the ability of an organization to keep its employees from leaving. It’s often expressed as a statistic. For example, a firm with a 90 percent annual employee retention rate kept nine out of every ten employees during a year and lost the other one. This is the same as saying their annual employee turnover rate was 10 percent.
People come and go in jobs for many reasons, so a certain amount of turnover is normal. Turnover rates vary within different industries and occupations, but one large survey by LinkedIn found an overall annual global turnover rate of 10.9 percent.
The Scope of the Problem
Other statistics related to employee retention are revealing:
- Organizations are paying a high price for poor retention. The Work Institute found that employers paid more than $600 billion in turnover costs in 2018.
- The same Work Institute report said there has been a 141 percent increase in open jobs since 2009. That means employees who are interested in leaving have many more options than just a few years ago.
- How many people want to leave? A survey in The Washington Post revealed 71 percent of U.S. employees are currently looking for their next job.
- PayScale research found 66 percent of all organizations agree or strongly agree that employee retention is a growing concern.
Why Employee Retention Is Important
High turnover has many costs and consequences. Here are five of the most significant reasons why employee retention is important to your organization’s well-being.
- The hiring process isn’t easy. Think of all the steps involved whenever a position must be filled:
- Updating and posting a job description
- Reviewing resumes
- Screening and interviewing
- Checking references
- Extending a job offer
- Running a background check
- Completing legal paperwork
- Notifying rejected candidates
- Onboarding your new hire
The Society for Human Resource Management (SHRM) found that it takes an average of 42 days (That’s six weeks!) to fill the average position. Of course, other work gets done during that time too, but the hiring process gobbles up plenty of hours—especially if you’re still doing it the old-fashioned way with paper and spreadsheets instead of using an ATS.
- Turnover expenses are higher than you may think. SHRM estimates that replacing an entry-level employee costs 50 percent of their annual salary. That figure rises to as much as 250 percent when replacing leaders or highly skilled employees. A key part of this expense is onboarding, the critical process of helping a new employee learn their job and fit into their new company culture. This calculator tool can help you determine the onboarding cost for a new hire in your firm.
- Losing people means losing knowledge. Whether you call it institutional knowledge, enterprise knowledge, or something else, important information and skills can be lost forever if experienced employees leave without thoroughly transferring their knowledge to others.
- Teamwork is tougher with high turnover. Employees can have a hard time bonding with each other and working productively together if team members keep leaving. And it’s a drain on remaining employees to have to keep training new hires.
- Your loss may be a competitor’s gain. Employees who leave your organization may go work for a competitor who will benefit from their skills and potential—assets you have lost.
Benefits of Employee Retention
Increasing employee retention helps reduce or eliminate all five of the issues above: you’ll backfill less often and save on associated costs, preserve institutional knowledge, foster greater teamwork, and keep valued employees from moving to a competitor. But the potential business benefits don’t stop there. According to PeopleKeep, they also include:
- Greater productivity
- Increased revenue
- Better customer service
- Increased employee engagement
- Improved employee satisfaction
A reputation for employee satisfaction also strengthens an employer’s brand, which boosts their ability to attract and retain top talent.
How to Increase Employee Retention
You might assume that all it takes to reduce turnover is to increase wages, but most employees today want more than money. They also want opportunities to improve their skills, advance in their careers, and enjoy a healthy work-life balance, among other things. So, retaining employees requires more than raises. You need a well-rounded employee retention plan that will help your people want to stick around. Your plan should focus on five areas:
- Work environment
- Development opportunities
- Employee recognition
Ponder and research what’s needed and realistically possible. Then put it in writing. Create an employee retention plan document that includes:
- Turnover rates
- Employee feedback
- Goals and how to achieve them
- Task calendar
This article has more detailed information about how to develop and administer a successful employee retention plan. As you begin, it’s also a good idea to conduct an HR gap analysis. This compares your organization’s current workforce and the skills they possess to the workforce and skills that will be needed to achieve your business goals.
Say Goodbye to Empty Chairs
You’ve put a lot of effort into hiring and nurturing the best people for your organization. A great employee retention plan will give you the best possible return on that investment by creating an even greater workplace that employees want to stay with. When there are occasional job openings, those chairs won’t stay empty for long. Candidates will be eager to join a firm that shows how much it values its people by providing opportunities and rewards that are hard to walk away from.
Author Bio: Kent Peterson is a writer at BambooHR, the leading human resources software solution for small and medium-sized businesses. He has also created award-winning work in television and radio.