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Importance of Employee Retention

27 Aug 2021

A happy woman smiling from behind her work desk at the office.

What Is Employee Retention? 

Employee retention refers to an organizational goal, the idea is to ensure that talented employees continue working for a company, on a long-term basis. Employee retention is focused on reducing turnover, by creating a positive workplace culture that promotes engagement. Retaining the top talent relies on employee recognition, offering benefits, a competitive salary, and ensuring a healthy work-life balance.

What Is Staff Retention?

You might also hear employee retention referred to as ‘staff retention’, both terms have the same definition. When employees choose to stay at a company, instead of pursuing other jobs, this relates to staff retention. Essentially retention is the process that organizations use to keep their staff.

What Are The 5 Drivers of Employee Retention?

1 . A flexible workplace

One of the key drivers of employee retention is workplace flexibility, but what exactly does this mean? Flexibility is used as a general term to discuss conditions that differ from the conventional ‘9-5’ structure. Workplace flexibility might mean the freedom to choose working hours, remote work options, part-time roles, or flexible scheduling. The idea is that staff members have the freedom to choose where, how, and when they complete their work tasks.

According to a Forbes study, 70% of employees felt that flexible work makes a role more appealing to them. Additionally, 30% would favor flexible work over a pay rise, (Forbes 2021). When employees have job satisfaction they are far more likely to stay in a role, helping companies to reduce turnover and improve employee retention.

2. Staff benefits

Staff benefits are one of the most important drivers of employee retention. According to Caboodle, ‘75% of employees reported they’re more likely to stay with their employer because of their benefits program.’ Common employee benefits include annual and sick leave, retirement plans and contributions, childcare benefits, bonuses, and healthcare benefits.

Other desirable employee benefits include wellness packages and life insurance. Workplace perks can take many forms, from discount programs to free healthy snacks. Providing workplace benefits helps your employees feel valued, which improves employee well-being and retention. With the right benefits you’ll enhance your employer value proposition and stand out from your competitors.

3. Career development opportunities

Career development opportunities play a key part in employee retention. If an employee feels that their role lacks progression, they are unlikely to stay. Career development opportunities might include extra training or sponsorship for educational courses. Employers might provide mentorship schemes or skills-based workshops. 

Supporting staff to establish career goals is a fantastic way to boost retention.When you take an active interest in your employees and their goals you’ll improve loyalty and engagement. Even small gestures can make a difference to create a healthy and supportive company culture.

4. Positive workplace culture 

A positive workplace culture has been associated with increased productivity, increased staff engagement, and improved employee retention. A poor company culture can disengage staff members, meaning that they are more likely to move on. But what exactly makes a positive workplace culture?

Workplace culture refers to the character of the company, it incorporates elements like work practices, attitudes, goals, behaviors, and company values. To create a positive culture, businesses should focus on the following:

  • Create a purpose-driven environment.
  • Employees should feel they are contributing to something meaningful.
  • Encourage positive relationships and communication between all colleagues and managers.
  • Avoid a hierarchical culture and focus on equality and empowerment.
  • Foster a culture of inclusion and diversity.
  • Put schemes in place to support employee wellness.

5. Employee recognition 

There’s a clear link between employee recognition and employee retention. According to Data from The HR Technologist, ‘63% of employees who are recognized are very unlikely to look for a new job.’ Unless employers recognize their staff, employees are unlikely to feel motivated, productive, or happy. Businesses need to implement employee recognition programs or use employee recognition software. Efforts like these can serve to improve retention rates and keep current employees happy.

Why are employee retention strategies important?

Employee retention strategies are important for several reasons. Firstly, high turnover rates can be incredibly costly. Data from Gallup concluded that voluntary turnover costs companies in America a trillion dollars every year. Research concluded that ‘the cost of replacing an individual employee can range from one-half to two times the employee's annual salary,’ (Gallup, 2021). Failing to focus on employee retention will have a negative impact on your bottom line.

The average recruitment process can be incredibly lengthy, there are so many processes involved from reviewing resumes, to interviewing new hires, reference checking, and onboarding new employees. Data from The Society For Human Resource Management discovered that ‘the average time it takes to fill a given position is 42 days,’ (SHRM, 2016). It’s in the employer's best interests to avoid high turnover rates to save time and retain productivity levels.

Employee retention is about choosing the best employees for the job and then ensuring that they are in it for the long-run. Not only do companies need to find people with the right skills and experience, but new hires who suit the company culture. Bad hires can have an adverse effect on company culture and on employee morale.

What are the top reasons employees leave their jobs?

The pandemic left many people reevaluating their lives and their happiness. In 2021, many workers are leaving their current roles in search of more fulfilling positions. During this time, employers are needing to re-think their culture, and their employee retention strategies. So what are some of the top reasons that employees leave their jobs?

1 . An overwhelming workload.

2. Lack of recognition.

3. Lack of flexibility.

4. Overbearing bosses.

5. Poor relationships with co-workers.

6. No development opportunities or career progression.

7. Poor company culture.

8. The work doesn’t feel meaningful.

9. Low salaries & lack of benefits.

Lowering employee retention rates means focusing on these key areas, seeking to make long-term improvements across your organization.

When Do You Need Employee Retention Strategies?

Companies should implement ongoing long-term employee retention strategies. With retention strategies in place, you’ll avoid expensive downtime and high turnover rates. Since turnover can negatively affect company culture, it’s easy to see why long-term retention strategies are so important.

When unemployment levels are low companies need to put more effort into improving their employee retention strategies. During periods of low unemployment, employees have the power to pick and choose their preferred companies. The top talent can afford to shop around, compare and research. Apps like Good&Co help prospects to search for jobs with the right company culture for them. In 2021, candidates are not just looking at job benefits and salary, they are assessing how companies match their values.

When you’re experiencing high turnover rates, you’ll need to revamp your employee retention tactics. Companies should collect feedback to figure out why their current employees are seeking to move on. Exit interviews can be helpful to gain useful insights, and enhance your staff retention strategies.

How Do You Maintain Employee Retention? 

Employee retention is no quick fix, once you’ve got strategies in place you’ll need to maintain your success and progress. For a few ideas to maintain employee retention, try these:

Long term changes

The key to improving employee retention is to focus on long-term changes. When it comes to staff retention, conditions are changeable over time. Perhaps employee wellness is part of your retention strategy? If so, it’s not enough to offer just one well-being workshop, and leave it there. You’ll need to provide ongoing wellness programs, to continuously support your staff. 

Improve your strategy over time

Once you’ve got your employee retention strategies in place, ensure that you evaluate your successes over time. Seek to assess the effectiveness of your strategies, and make improvements where you can. Analytics can help businesses to examine their successes and build on their weaknesses. Many top companies use analytics for performance and retention, including Sysco Best Buy and Google, (Harvard Business Review, 2010).

Ask staff for feedback 

To maintain employee retention it can help to ask staff for feedback. Ask your current employees what they like working for the company, and what they dislike. Anonymous feedback can be useful to find out how your staff really feel. When employees leave the organization, exit interviews can be helpful to gain key info. Example exit interview questions might be:

  • What made you seek employment elsewhere?
  • What does your new role offer that you are lacking here?
  • How do you think our company could improve job satisfaction?
  • What did you think of our company culture?

When you collect feedback from your existing employees, it’s useful to focus on the theme of company culture. Improving your culture is a key aspect of retention.

Improve your company culture 

A positive company culture can help to reduce staff turnover, businesses that want to retain employees should seek to make continuous improvements. While you’re considering company culture it’s also vital to focus on diversity and inclusion. Creating a diverse and inclusive company is essential from a social justice perspective, and it also affects how your candidates perceive the company.

Research from Glassdoor concluded that ‘more than 3 out of 4 job seekers and employees (76%) report that a diverse workforce is an important factor when evaluating companies and job offers.’

Maintaining employee retention is an ongoing commitment, it’s about establishing patterns, and assessing these trends. Have your turnover rates been high lately? If so, examine your data to figure out the determining factors.

How can you retain more employees?

To retain more employees, focus on offering workplace perks and benefits. When the top candidates compare companies, workplace benefits are a key determining factor. Even businesses with smaller budgets can offer desirable workplace benefits, a few inexpensive ideas include:

  • The freedom to work remotely.
  • Pet-friendly work environments.
  • Free yoga classes.
  • Casual dress codes.
  • Group social events.
  • Games room (inexpensive games).
  • Mentoring programs.
  • Free workshops.
  • Birthday gifts.
  • Small incentives and prizes.

As you can see not all workplace benefits have to be expensive. Even small startups can offer some attractive perks to retain the best people.

5 Employee Retention Strategies  

There are plenty of employee retention strategies that can reduce turnover and improve your bottom line. Here are five of the most effective employee retention strategies.

1 . Wellness support 

A growing number of employees are experiencing burnout and workplace-related stress. Many factors contribute from a heavy workload to long hours or lack of job satisfaction. Besides offering healthy workplace conditions, employers can retain their staff by providing wellness support.

Healthways and Gallup created a definition of well-being measurement. They concluded that ‘the five essential elements of well-being are purpose, social, financial, community and physical, (Gallup 2021). Companies can use workplace well-being software, based on these elements. A few examples of popular workplace well-being tools include Wellable and Wellness 360. From fitness programs to mental health workshops there are plenty of ways to support employee wellness.

2. Rewards Systems

Rewarding and recognizing your employees is a key employee wellness strategy. Employers might incentivize staff using special prizes or discounts. Equally, it’s enough to provide plenty of praise and celebrate the achievements of your staff. To support your employee recognition strategy there are many software tools that you can use. Try tools like Kazoo or Motivosity.

Helping your staff to feel valued is all about creating a positive company culture. When your employees feel recognized and appreciated you’ll improve retention as well as creativity, wellness, and your bottom line.

3. Prioritize a healthy work-life balance

A lack of work-life balance is one of the top reasons why employees leave a company. To address the issue it’s important to promote a healthy work-life balance. There are plenty of ways that you can do so, including:

  • Offer flexible working arrangements.
  • Discourage excessive overtime.
  • Offer support with working from home.
  • Make allowances for commitments outside of work.

4. Help your employees grow

Staff are likely to leave a company if they feel that there is no room for progression. The best employee retention strategy is helping employees to grow. There are many ways to support career development. You might pay for training opportunities or short courses. Mentorship programs can help employees to develop within their roles, and keep on learning. 

Provide regular one-to-one meetings with your staff. You can use these meetings to ask them about their career goals. Help employees to design a roadmap to achieve their goals within your company.

Ensure that you provide feedback on employee performance. Constructive criticism can be helpful, (so long as this feedback is approached in the right way). Supporting career development is a great way to reduce staff turnover.

5. Positive leadership styles

To improve staff retention, focus on positive leadership styles. Overbearing bosses and micromanaging is the fastest way to high turnover rates. To keep staff happy companies need to create a respectful culture. 

One effective leadership style involves encouraging autonomous teams. By definition, ‘Autonomous teams are workgroups granted the organizational latitude to establish their own internal goals and work practices,’ (Ivey Business Journal, 2013). Autonomous teams allow your staff more responsibility and freedom, as a result, you’ll experience improved productivity levels and creative outcomes.

Positive leadership styles can lead to higher levels of job satisfaction. Research shows that other key factors of job satisfaction include: ‘respectful treatment of all employees at all levels, compensation and job security,’ (SHRM, 2021).

6. Meaningful opportunities 

According to Mckinsey, ‘people who live their purpose at work are more productive than people who don’t. They are also healthier, more resilient, and more likely to stay at the company.’ Employees want purpose, fulfillment, and meaningful work. Unless employers support these needs they’ll lose out on the top talent.

Organizations should start with the purpose of their business, think about how your company is contributing to society, and help your employees to engage with these values. Focus on your existing CSR strategies, how these could be improved, and how could you involve your employees in the process?

Improving your CSR strategies is also helpful to widen your reach and improve your reputation. Modern consumers actively seek out socially responsible brands that support good causes.

Conclusion

Employee retention is drastically important to avoid expensive turnover and productivity lulls. Unless you focus on staff retention you’ll experience high turnover rates which can disrupt your company culture and morale. 

There are plenty of employee retention strategies you can explore including workplace benefits, wellness programs, flexible conditions, and career development opportunities. Retaining the top talent is about using analytics to your advantage, and helping your employees to find meaning.

To maintain employee retention it’s vital to make continuous improvements and use data from your exit interviews. In 2021 a positive company culture is the key to success and growth. Improving your company culture will support retention and ensure that you have happy and healthy staff. The well- being of your workforce is crucial to support long-term productivity and growth.

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