How to Improve Employee Retention
— February 21st, 2022
Employee retention is the organizational goal of keeping talented employees and reducing turnover by fostering a positive work environment, promoting a healthy work-life balance, providing competitive pay and benefits, and showing appreciation to employees.
In the US alone, it costs businesses more than $1 trillion a year to replace employees who voluntarily decide to leave their jobs, Gallup found. In fact, according to the same report replacing an employee can cost from one-half to two times the employee’s annual salary.
The Ultimate Guide to Employee Retention
In every business, a certain percentage of turnover will always be present and this isn’t necessarily a bad thing as it opens the door to new talent. However, when turnover is high it takes a toll.
Organizations with high turnover lose what they have invested in recruiting, onboarding, and training employees who leave. That’s not to mention the employees left behind who must pick up the slack. For those remaining, morale and quality of work can take a hit with decreased engagement and burnout common.
What is employee retention rate?
Employee retention rate is a metric that measures the percentage of employees who remain employed over a specific period of time. This does not include new employees who were hired during that time frame.
To calculate employee retention rate, divide the total number of employees at the end of a period by the total number of employees at the beginning of that same period, and multiply the result by one hundred.
How can businesses improve employee retention?
Hire the right people
Strong employee retention starts at the beginning with hiring and recruiting the right people for the job. Before beginning the recruiting process, organizations should make sure they’re sending out a clear message about the role, its responsibilities, and what type of individual they are seeking.
Although hiring new workers takes time, effort, and money, selecting the right candidates to welcome aboard will save employers money in the long run. When employees quit before they’ve even had time to settle into the company, the problem is often one of unclear expectations from the get-go.
Optimize the onboarding experience
The onboarding experience takes more than signing a contract, greeting new colleagues, and taking a tour of the office. Along with introducing the new hire to their work environment, the onboarding process should introduce them to their role and the company.
Some helpful tips for the onboarding process include:
- Set clear expectations for their work and future at the company
- Communicate what they can expect in the first week
- Connect new hires to the team and help them build relationships with coworkers and colleagues
- Provide structured opportunities for new hires to offer feedback on their job, company processes, and culture
Provide ongoing education and clear paths to advancement
Even though employee development requires investment (time, effort, and financing) from the company, if done right these investments will profit the business in the long run.
A carefully thought-out employee development strategy will help employee retention, along with fostering a workforce of more productive and capable workers. It also helps employees feel they’re valued and a crucial part of the company’s success.
Examples of employee development opportunities:
- Task/job rotations
- Workshops/committees/working groups
- On-the-job training
Provide More Positive Feedback
A study in Harvard Business Review shows that the ideal ratio between positive and negative suggestions is 5.6 (positive) to 1 (corrective). Positive feedback should be given frequently to motivate employees and to give them the determination they need to do their best work.
Communications Planning Template for a Hybrid Workplace
Creating a positive company culture
A company’s culture is the shared set of values, beliefs, and attitudes that guide your organization. Negative corporate culture can drive retention rates to the ground and employees into depressive states.
Studies show that at least one-third of job seekers would pass up the perfect job if the corporate culture was a bad fit, and in one survey 72% of workers cited corporate culture as a factor influencing their decision to work at a given company.
How to create a positive company culture:
- Set clear departmental goals
- Promote the organization’s goals
- Develop a shared understanding of cultures
- Allow for humor
- Prioritize respect
Encouraging a healthy work/life balance
To create a positive work environment that promotes workplace wellness and makes employees want to stick around, businesses need to incorporate policies that focus on work-life balance such as flexible work schedules and hybrid arrangements.
Now more than ever, workers want a sense of wellness and balance in all parts of their lives, and a company that acknowledges this will earn their loyalty.
Providing competitive rates
Competitive pay is one of the best ways to attract and retain talent. Companies should regularly benchmark the salaries they offer against the broader market to ensure they are in line with or exceeding employee expectations.
In fact, it can end up costing organizations more money if they don’t offer competitive rates to their workers. It's estimated that losing an employee can cost a company 1.5-2 times the employee's salary. Even if a company isn’t in a position to increase pay right away they should find a way to offer another form of compensation, such as offering a bonus.
Offering employee perks
A recent industry study reported that 48% of employees would weigh company benefits and work perks in their decision to find their next job. From free lunches to increased annual leave, there are endless ways employers can show their employees that they are valued and appreciated.
Implementing some employee perks and benefits will help a business stand out to new employees and encourage the ones they already have to stay.
Employee retention is crucial to the long-term health and success of a company. When employee turnover occurs businesses lose employee productivity, are forced to recruit new workers, suffer from lower morale, and miss out on opportunities.
Thankfully, when organizations invest in things like onboarding, growth and development, wellbeing, feedback, and competitive pay, their employees will repay them with their loyalty.