19 Nov Employee Retention: Best Practices & 7 Key Steps for 2022
Employee retention has never been as great a concern for employers as it is today.
Although retaining your talent has always been an important investment of time and resources, the unprecedented external conditions stemming from the COVID-19 pandemic have only amplified the challenges of retaining talent and highlighted the need to look at retention with a critical eye. If you want to improve your organization’s employee retention efforts, knowing how and where to get started is key.
How can you best position your organization to engage and retain employees in 2022 and beyond?
This guide will cover the essentials and our recommended steps for building a well-developed retention strategy.
Table of Contents
- What is employee retention?
- Employee Retention Strategies: 5 Key Areas
- How to Improve Employee Retention: 7 Steps
- Why does it matter?
Defining the Essentials: 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)
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 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)
Best practice would be to track on an annual basis your organization’s retention rate and turnover rate, and the reasons behind them, so that you can accurately measure progress as part of your retention plan.
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.
- 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 is 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.
- 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
A high percentage of employees report feeling dissatisfied with the development opportunities offered by their employers, but learning and development, engagement, and recognition are critically important for long-term retention.
- 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. Only 29% of organizations have concrete development plans in place, but 68% of workers are willing to retrain and learn new skills.
- 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.
- 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.
- 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.
How to Improve Employee Retention: 7 Steps
To begin strategically improving your employee retention rate, we recommend following these core steps:
- 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 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 towards 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!
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. Gartner estimates that a single departing employee costs an average organization $18,591, with recruiting and onboarding being costly expenditures of your organization’s time and resources.
- 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.
- Overall improvements to your bottomline.
- 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.
Employee Retention and the Great Resignation
It is difficult to ignore the massive impacts of what has been termed the “Great Resignation” on employee retention. This unprecedented surge in voluntary turnover is reshaping the U.S. labor landscape. A record 4.3 million Americans quit their jobs in August of 2021, followed by 4.4 million in September.
The pandemic’s immediate effects have in part catalyzed this turnover increase. However, it is crucial to note that the Great Resignation seems to be driven by a complex mix of economic, social, political, and demographic forces, not all of which are directly attributable to the pandemic:
- Rising wages and employee expectations. Salaries and wages have been rising. Coupled with the current impact of inflation on take-home pay and the general atmosphere of the labor environment, many workers are looking for more flexible and higher-paying jobs.
- Pandemic burnout. The pandemic has been a difficult time for employees, especially frontline workers and those whose work could not easily be taken online. Many employees are reevaluating their personal and professional priorities and are exploring new career options.
- A perceived labor shortage driving competition for talent. With 10.4 million job openings recorded at the start of October 2021, recruitment is currently a challenge. This is for a complex range of reasons, but a perceived labor shortage is driving employers to compete more aggressively for talent.
- Socioeconomic and educational factors. The Great Resignation has revealed what some consider to be another emerging labor crisis in the United States: gaps in workers’ technological skills that are necessary for many jobs in a digital economy. High and rising costs of higher education will likely exacerbate this issue over time.
- Generational factors. Older workers are retiring at rates higher initially predicted at the start of the pandemic, meaning many organizations have experienced high turnover among Baby Boomer employees. However, younger employees report feeling the most unengaged, unappreciated, and underpaid at work, where they may meet structures and management styles that were not developed with them in mind.
Additionally, the Employee Retention Tax Credit that was instituted to help struggling businesses retain employees in 2020, has ended earlier than expected with the passage of the Infrastructure Investment and Jobs Act. Organizations taking advantage of this credit may now face additional challenges making up for the lost support.
Clearly, the Great Resignation is complex. The factors listed above mean that retaining employees is more important than ever before for the immediate and long-term health of organizations today.
Want to take a deeper dive? How can organizations respond to the Great Resignation? What actions can HR leaders take to more effectively manage change in a turbulent environment? Jill Krumholz, Co-Owner and Managing Director here at RealHR Solutions, discusses the topic with our friends Jennifer Loftus of Astron Solutions and Ken Cerini of Cerini & Associates in this free webinar:
Employee retention is driven by a complex range of factors but has never been as important for organizations, in all sectors and of all sizes, as it is today. Understanding these factors, the current labor landscape, and how it all comes into play in the unique context of your own organization are important and also can be very challenging.
HR experts can be invaluable partners as you work to improve your employee retention rate. RealHR Solutions is a leading provider of HR consultation and outsourced services. Our experience spans a wide set of HR practices that impact retention, including recruitment, employee coaching, compensation and benefits planning, and more. We 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.
Get in touch today to discuss your organization’s retention goals and needs. We will be happy to help!
And to learn more about driving results for your business through strategic internal improvements, keep exploring with these resources:
- Workplace Training: FAQ and 5+ Top Providers to Consider
- Response to the Great Resignation: Our Perspective
- HR Assessments: Comprehensive Overview and 15 Key Questions
- What, Why, When, and How to Conduct a Pay Equity Audit