Employee Retention – A Key to Business Success

Employee retention is nothing more than an effort to reduce employee turnover. The secret to reducing turnover in your company is to understand what your workforce needs to cause them to stay with you. Common reasons for employee turnover are:

Pay

No career direction

Poor leadership

Lack of training opportunity

Lack of connection with the mission and vision of the business

Each of those reasons is things a business can control with the added benefit of becoming a more successful business. So what are some ideas to help use these to improve your retention?

Pay

Pay is often cited as a chief reason for employee turnover. In the current environment, we see organizations rapidly increasing the pay of new hires while not correspondingly increasing the pay of current employees. A solution to that would be to flip the model. Instead of rapidly increasing salary for new hires, develop a compensation plan internally that 1) rewards high performers noticeably more than average performers, 2) Rewards average performers noticeably more than low performers, and 3) encourages low performers to improve or leave the company by not including them in pay increases.

No career direction

I often hear this from younger or early-career employees. They want a job where they know how to advance, grow, and improve their standard of living. They want to know where the job will take them. Developing career paths or growth plans for the jobs in your company and assisting employees in “climbing the development ladder” will address the needs of those who want more. Simultaneously this will improve the retention of those workers.

Poor leadership

Poor leadership is a major cause of turnover, second only to pay in most surveys. Improving the quality of your leadership by educating, training, and developing the ones you have, ensuring you recruit new ones who fit your culture, and coaching or removing those who don’t meet your standards are good ways to improve the quality of leadership in your business.

Lack of training opportunity

Most employees want to grow and learn new skills. Providing training in your business that both meets the needs of your business and helps your employees grow not only improves your business performance it also reduces turnover. 

Lack of connection with the mission and vision of the business

People want to work somewhere that means something to them. Finding a way to help them understand your business’s mission and vision and get them interested in those can be challenging. Ensuring that these two essential parts of your business success are clearly identified, communicated, and lived will help you attract and retain those who feel that connection. 

The cost of turnover is high. The Society for Human Resources Management estimates that turnover costs 6 to 9 months of an employee’s salary. For a $50,000 a year worker, that equals $25,000 to $37,500 in replacement cost.  Some studies state that the cost is even higher and state that the replacement cost for an employee can be as high as 400% of their salary. In our example, that could be as high as $200,000. 

Changing your focus from recruiting to retention can be both a cost-saver and a business productivity improvement. Ensuring that you have leaders who understand this and can develop and execute the right plans to accomplish this is your next step.