In the past year, we’ve seen a record amount of turnover. Managing during what’s been called The Great Resignation has been increasingly challenging.
Turnover is an even bigger challenge for small businesses. More than 63% of small businesses said retaining employees is harder than hiring them. Many small businesses have had to reduce hours or shut down because of a lack of staff.
When you’ve got a strong workforce, you want to keep them in place and avoid these problems. So, let’s talk about what drives employee retention rates, how to retain employees, and retention strategies to keep your business running smoothly.
Why is employee retention important?
When employees leave, it creates a cascading effect of problems. The time, stress, and cost of recruiting, hiring, onboarding, and training are high. It can cost between 30% and 50% of an entry-level worker’s salary to replace them. For high-level employees, the cost can rise to as much as 150% of their pay.
That doesn’t include the skills gaps that may occur, the impact on other employees to pick up work due to open positions, and how it affects company culture.
Turnover also affects the bottom line. A Gallup survey
suggests that U.S. businesses are losing a total of $1 trillion annually due to voluntary turnover.
U.S. businesses are losing a total of $1 trillion annually due to voluntary turnover.
Why employees leave jobs
To look at the key drivers behind retaining employees, it’s helpful to look at what compels employees to quit. Some of the top reasons employees quit are:
- Lack of recognition or appreciation
- Job burnout or overwork
- Lack of flexibility
- Lack of career growth
- Missing connection or alignment
- Uncompetitive pay and benefits
These are all fixable items, and most won’t cost you anything.
The key drivers of employee retention
Companies with a high employee retention rate and highly engaged employees focus on a few important methods for retaining employees.
1. Recognition and appreciation
Employee retention starts with creating a healthy work culture and recognizing people as individuals rather than replaceable parts. That means demonstrating authentic appreciation for the jobs team members are doing and recognizing their contributions.
Most feedback employees get is negative or corrective and it carries a lot of weight. Business leaders need to ensure they are also providing positive feedback regularly. A study published in the Harvard Business Review shows a direct correlation between positive and negative feedback
and performance. When team members received a higher ratio of positive to negative feedback, it resulted in high-performing teams. The study shows that the highest-performing teams had a ratio of 5.6 positive comments to each negative one.
2. Work balance
There’s a lot of talk these days about achieving a work-life balance. While that’s important, what’s often overlooked is creating an equitable work balance.
In most organizations, high achievers tend to get rewarded with … more work. If you want to retain your best team members, make sure you aren’t overloading them. Fairly distribute the work across your team.
When employees feel overwhelmed or burned out, they tend to shut down and performance suffers. The flip side is true, too. When employees don’t feel energized and challenged by the work they have to perform, it can lead to disengagement. Find the right balance for your team.
Flexibility in work accommodations has become the norm in 2022, at least as far as employees are concerned. A lot of employees have had the opportunity to work from home or work remotely over the past year, and they decided they liked it.
More than half of employees surveyed by YouGov and Microsoft said they would quit their jobs if their employers won’t offer remote or hybrid job opportunities
Offer employees an opportunity to help design their work schedule to accommodate a better work-life balance. Be open to work arrangements beyond the traditional 9-to-5. Options to explore include remote/hybrid work, flex time, part-time arrangements, and job sharing.
4. Training and development
94% of employees would stay at a company longer if it invested in helping them learn and grow.
Developing your employees is essential to improving their job skills and positioning them for promotions. It also plays an important role in employee retention.
LinkedIn’s Workforce Learning Report
showed that 94% of employees would stay at a company longer if it invested in helping them learn and grow. Gen Zers and Millennials, now the largest groups in the workforce, say learning is the number one thing that makes them happy at work. More than 1 in 4 say lack of learning opportunities is the top reason they’d leave their jobs
Providing ad-hoc, informal, and formal training pays dividends.
5. Organizational and individual alignment
When employees don’t feel connected to their work, engagement suffers. The job can feel like it’s just a paycheck. High-performing organizations work hard to create organizational and individual alignment to give employees a sense of belonging and purpose.
Employees need to understand the company’s goals and their part in achieving those goals. This requires a strong culture along with consistent communication about goals and roles. Employees want to understand how the job they do ties to organizational goals and what they get out of doing the work besides a paycheck.
When goals are aligned, engagement soars. Employees that understand and embrace the mission see greater purpose in their work
and stay longer.
6. Competitive pay plans
Pay and benefits have always been an important part of hiring and retaining employees. With so many workers considering switching jobs right now, examining pay plans is essential.
If you haven’t done it recently, you need to review your compensation plans to ensure you remain competitive. A review should include:
- Industry benchmarks
- Geographic location and cost of living
- Required skills and experience
- Competitor pay and benefits
- Supply and demand
Keep in mind that companies offering remote work can reduce geographical limitations for job seekers, so you may be competing with salary packages from anywhere these days.
Employ a proactive employee retention plan
More than 50% of employees who leave their jobs say their manager or company could have done something that would have stopped them from quitting
. If you’re serious about improving employee retention, there are proactive strategies you can put in place to reduce turnover and improve employee performance.
Look at these key drivers and revisit your employee retention plan today.