18 Aug Employee Retention: A Handy Playbook for Savvy Organizations
The challenges of employee turnover have become familiar to organizations of all sizes. The perpetual cycle of recruiting, training, and onboarding new talent drains valuable resources and disrupts the flow of productivity. The toll it takes on team dynamics and the bottom line is undeniable. As organizations grapple with these pain points, it becomes increasingly evident that employee retention is a strategic imperative.
In this article, we delve into steps for building a well-developed employee retention strategy. Specifically, we’ll cover:
- Employee Retention: An Overview
- Employee Retention Strategies: 5 Key Areas to Prioritize
- 7 Steps to Improved Employee Retention
Employee Retention: An Overview
Understanding your organization’s retention and turnover is important because it provides valuable insights into the health and effectiveness of your workforce. By analyzing the patterns and reasons behind employee departures, you can identify areas for improvement in the work environment, job satisfaction, leadership, and professional development.
This understanding empowers you to proactively address issues contributing to high turnover rates, allowing you to implement targeted retention strategies, enhance employee engagement, and foster a culture of loyalty and growth. Moreover, a comprehensive grasp of your organization’s retention and turnover dynamics enables you to make informed decisions that contribute to long-term stability, operational efficiency, and sustained success.
Let’s go over some fundamentals of employee retention.
What is employee retention?
Employee retention refers to an organization’s ability to retain its employees over time and minimize employee turnover, whether voluntary or involuntary.
Your employee retention rate, which compares the number of retained employees at the start of a specific time period to how many of those original employees are still there at the end of the period, can be calculated with this formula:
(# of individual employees who remained employed for entire measurement period
# of employees at start of measurement period)
You may be wondering, “What is a ‘good’ retention rate?” While this will look different for all organizations, generally, a retention rate of 90% or higher is ideal.
What is employee turnover?
Employee turnover refers to the rate at which employees leave a company and are replaced by new hires. It is a key metric used to measure the movement of staff in and out of an organization over a specific period.
Calculating the turnover rate will complement the retention rate by showing the percentage of separations in the same period. Turnover rate is often defined as the number of separations, either voluntary or involuntary, divided by the average number of employees during that same time period, and it can be calculated as follows:
(# of separations during the measurement period
average # of employees during the measurement period)
Generally, a turnover rate of 10% or less is ideal, though this varies based on industry, location, and job type.
How can an organization monitor employee turnover?
Organizations can monitor employee turnover patterns by:
- Conducting exit interviews with departing employees to pinpoint areas of improvement within the organization
- Analyzing turnover rate demographics within certain departments, job roles, and tenure levels to reveal commonalities
Employers should also pay attention to signs that an employee may be getting ready to depart their organization, including:
- Decrease in engagement, productivity, and performance
- Frequent absenteeism or tardiness
- Exploration of external opportunities
- Shift in attitude
- Loss of interest in professional development or long-term projects
To effectively address potential turnover, organizations must monitor these signs and create an open and supportive culture where employees feel comfortable discussing their concerns and needs. Prioritizing regular communication, offering growth opportunities, recognizing achievements, and addressing issues promptly are all key strategies to reduce turnover and foster a motivated and committed workforce.
According to the Society for Human Resource Management, your organization should ideally calculate its turnover and retention rates annually, so that it can accurately measure progress as part of its overall retention strategy. An experienced HR consultant can help you with this, providing specific recommendations for next steps to improve your retention strategy.
Why does employee retention matter?
There are a number of reasons why employee retention should be a priority for your organization. An effective retention strategy will result in:
- Reduced turnover and associated costs.
- Turnover drains your organization of talent, institutional knowledge, and money. Employers estimate that the cost to recruit a new employee can be three to four times the position’s salary, making recruiting and onboarding costly for your organization.
- Increased engagement and employee growth over time.
- When employees stay engaged with your organization, they are more likely to grow into new roles, contribute to your culture, and drive greater results for your business.
- An improved employer brand, which can help with recruitment.
- Being known as an organization whose employees enjoy their work and stick around for the long term is a major asset and can create a helpful flywheel effect in which your employee-focused brand helps attract and retain top talent over time.
- Overall improvements to your bottom line.
- Taken together, the benefits listed above result in better overall financial health and resilience for your organization. Money saved by reducing turnover can be more effectively allocated to push the business forward and drive even higher retention.
A robust retention plan is of paramount importance to the overall health and vitality of any organization. By recognizing the value of having experienced personnel, organizations can minimize the disruptions caused by high turnover rates, avoid the expenses associated with recruitment and training, and foster a sense of loyalty and commitment among their workforce. A well-structured retention strategy enhances team cohesion and contributes to knowledge continuity, enabling the organization to build upon its accumulated expertise. Ultimately, a thoughtful retention plan is pivotal in cultivating stability, growth, and long-term success for the organization.
Employee Retention Strategies: 5 Key Areas to Prioritize
What elements of an organization’s operations contribute to retention? What specific strategies can you use to deepen relationships with employees and reduce turnover? We break them down into five key categories:
1. Recruitment and Onboarding
Hiring and onboarding practices are your first opportunities to set the tone for your relationships with new employees, so they play an immediate role in driving retention. Here are some tips:
- Review and improve your employee recruitment, hiring, and onboarding practices to provide enriching experiences. New hires should feel that your organization is thoughtful, welcoming, and caring.
- Eliminate bias from your recruiting process.
- Live your values through the recruiting, hiring, and onboarding process to allow candidates to experience your organization and its culture.
- Offer new hires opportunities to build relationships with colleagues through planned meetings and structured coaching or mentorships.
- Ensure that training is available and that the content is relevant and helps new hires get up to speed as quickly as possible.
2. Employee Compensation
There is much discussion around the role of compensation in shaping the employer-employee relationship and impacting retention. While intangibles like your culture, management philosophy, and an immediate supervisor’s management style have an increasingly large impact on retention, compensation and benefits still also play important roles. Hone your compensation strategy by doing the following:
- Offer salaries and wages at rates as competitive as possible for your organization.
- Take a total rewards approach to compensation. This entails breaking compensation down into its direct components (salaries and bonuses) and indirect components (benefits, culture, work-life flexibility, management styles, etc.) so that you can take a more holistic view of your strategy as a whole.
- Ensure pay equity across your organization. Work with compensation experts as needed to conduct pay equity audits, benchmark your strategies, and develop other compensation improvements. Show employees the steps you are taking to review, adjust, and manage your compensation strategies over time.
- Help employees understand the steps you are taking over time to review, adjust, and manage your compensation strategies. Consider whether compensation will be tied to performance. This can be determined based on a number of factors.
- Offer benefits packages that meet the needs of your employees, offer flexibility, and provide the greatest value, while at the same time watching employer and employee costs. Consider flexible spending accounts to meet the needs of the greatest number of employees.
- Set reasonable expectations around workload and hours. Consider offering benefits related to mental health and/or PTO for personal days.
3. Employee Growth, Engagement, and Recognition
Over 70% of employees view the development opportunities offered by employers when seeking new employment opportunities. Learning and development are critical for engagement, and recognition is essential for long-term retention. Here are some tips to optimize your growth, engagement, and recognition efforts:
- Genuinely recognize and express appreciation for employee accomplishments. Consider creating systems for leadership and peers to submit “bravos,” offering spot bonuses or prizes for major contributions, and building in recognition as an ongoing part of employee-manager conversations.
- Offer learning and development opportunities, and regularly discuss career growth with employees. 94% of employees would remain at their current organization if it offered learning and development pathways.
- Set individualized goals and plans of action during your performance management process, and support employees with the tools they need to achieve them.
4. Company Culture
Your organization’s culture and the workplace environment you foster can play major roles in employee engagement, well-being, and ultimately, retention. Here are some strategies for making your internal culture stronger:
- Actively foster a flexible, diverse, and inclusive culture. Encourage employees to get to know one another and understand each other’s roles and responsibilities.
- Create open lines of communication across the organization. Provide transparency into the reasoning behind leadership decisions that impact employees.
- Develop and communicate your diversity management efforts to reflect your commitment to diversity, equity, and inclusion (DEI) and to creating a culture of respect, equity, and belonging.
- Offer flexible work arrangements to whatever degree you are able. The ability to work remotely full-time or on a hybrid schedule has become a significant driver for many employees seeking new jobs.
5. Organization and Management
How your organization structures its teams and manages employees can also directly impact its ability to retain talent. These elements should be periodically reviewed to ensure they are still delivering maximum value for the organization and employees. In particular, we recommend the following:
- Keep job descriptions up to date to accurately reflect your organization’s positions.
- Consider broadening your concept of employees’ roles by creating a matrix model that taps into employees’ skills rather than the jobs themselves. This has many advantages—it offers greater flexibility and learning opportunities to the employees and also provides many benefits to the employer.
- Empower managers by offering the training needed to support your organization’s retention plan.
- Emphasize goal-setting across all levels of your organization. Communicate organizational, team, and individual goals, track your progress, and celebrate wins.
- Consider conducting an HR Assessment to review and evaluate the ways in which your HR practices may (or may not) be supporting your retention goals.
8 Steps to Improved Employee Retention
In addition to taking into consideration the five key focus areas discussed above, there are core steps you can take to begin strategically improving your employee retention rate. These are:
- Work with an HR professional to develop your retention strategy.
- HR experts can be invaluable partners as you work to improve your employee retention rate. An HR consultant often has experience that spans a wide set of HR practices that impact retention, including recruitment, employee coaching, compensation and benefits planning, and more. They can help your organization develop a comprehensive retention plan of action or dig deeper into the specific areas that need improvement through benchmarking and HR assessments.
- Calculate your current employee retention rate.
- This will give you a starting point on which to build your plan. Refer back to the top of this article to review the retention formula.
- Analyze and benchmark your retention data.
- Review the current state of your retention efforts. For example, who specifically is leaving? Do most employees who resign do so within a particular amount of time/common tenure? When you conduct exit interviews, an important tool for understanding and managing retention, what (if any) trends emerge in their reasons for leaving?
- Consider working with an HR consultant to benchmark your own retention data against that of other organizations in your industry.
- Conduct an employee retention survey.
- Work with your team and/or an HR consultant to create and administer an employee survey asking questions related to retention. Do employees feel engaged at work? Do they understand why certain decisions are made? Do they feel fairly compensated?
- Next, review the survey results. Do employee survey responses reveal particular areas that seem to be driving turnover? For instance, you may identify compensation, inclusion, and career development as key pain points for your employees. These areas of focus will anchor your strategy going forward.
- Audit your current practices in relevant areas.
- Conduct in-depth audits of your practices in the areas of focus that you identified. Consultants and other specialized partners can conduct thorough, impartial audits of your HR practices, compensation strategies, diversity initiatives, and more.
- Use your employee survey data to help inform areas of focus for your audit.
- The results of an effective audit will point you toward specific gaps and shortcomings that can be addressed to drive stronger retention results.
- Set employee retention goals.
- Based on exit interviews, the employee survey, and the results of your audit, set your employee retention goals and create a plan for accomplishing your goals. Plan for incremental changes to your retention rate and build in various deadlines to evaluate success. This will include creating improvement plans.
- Develop improvement roadmaps and assign ownership.
- Lay out plans for addressing the identified issues. Outline specific changes, how they will be developed and implemented, who will own which elements of the plan, timeframes, and any other necessary details.
- Make sure that involved team members understand why and how their help will support the broader retention plan and goal.
- Actively track and review progress.
- Regularly check in with your teams as they progress through the improvement roadmaps. Have a plan in place for measuring the impact of all individual improvements and the broader retention initiative as a whole. As the pieces of your plan come together, remember to recognize and celebrate your teams’ achievements!
A comprehensive retention strategy safeguards against high turnover’s disruptive and costly effects and nurtures a culture of loyalty and growth, ensuring a harmonious journey towards shared objectives. At RealHR Solutions, our consultants collaborate with you to identify your organization’s unique retention goals and strategize to decrease your turnover rates. Our experience working with clients in a range of industry sectors and a broad range of expertise in implementing effective retention initiatives equips us to tailor solutions that resonate with your specific needs. Contact us today to embark on this transformative partnership.
And, to learn more about driving results for your business through strategic internal improvements, keep exploring with these resources:
- 15 Top HR Consulting Firms for Any Organization or Need. When it comes to working with an HR consultant, finding the right fit is critical. Check out our list of the top consulting firms to see your options!
- Employee Recruitment: A Guide to Finding the Best Talent. Finding the best people to fill your open positions can be a daunting challenge. Learn how to ace the recruitment process in this guide.
- HR Audits: Frequently Asked Questions & How to Get Started. Ready to take a critical look at your HR policies, compliance efforts, and other internal areas? It may be time for an HR audit!