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Employee Recognition

Employee Retention: Strategies and Insights

In this guide, you’ll learn the current state of employee retention, what you can do to hold onto your best performers and how you can measure this vital element of your operations. 

Over the past few years, millions of people have quit their jobs. This mass exodus has affected organizations from all industries, in all sectors, in all countries across the globe. 

It all started with the so-called “Great Resignation” which followed in the wake of COVID-19 and its associated lockdowns. Tens of millions of people quit their jobs after the global pandemic, as they sought new challenges, better work/life balances or simply a fresh start.

Even as the world returned to normal, the trend showed no signs of slowing down. With more vacant roles than people to fill them, the balance of power has shifted firmly in favor of employees. But it’s not just the Battle for Talent that employers are having to grapple with. The rise of trends such as “quiet quitting” and “act your wage” show that there’s a growing number of people who are unsatisfied with their working lives. 

Perhaps you’ve already had workers leave, or you’re worried that your top performers might be looking to move on. But with employees re-evaluating their roles, one thing that’s certain is that you’re going to have to up your game to stay competitive in the current market. 

Now, more than ever, businesses need to focus on the all-important subject of employee retention. But what exactly is employee retention, how does it impact your business and what can you do to hang on to your top talent? 

employee retention

In this guide you’ll learn…

What employee retention is

How to spot if you have an employee retention problem 

The benefits of strong employee retention 

Employee retention drivers

Strategies to help you retain your top employees

How to measure employee retention

FAQ about employee retention

What Is Employee Retention?

Before we begin to look at some strategies and insights that can help boost your employee retention we first need to understand exactly what it is. 

Put simply employee retention is a measure of how well an organization can keep a hold of the people who work for it. 
If your employee retention rate is high, it’s a good indicator that your people are happy, engaged and productive at work. However, if your employee retention rate is low, then it could point to wider issues in your organization that could lead you to lose staff and ultimately money. 

Employee retention has become a big deal for companies during the current climate. But even when the labor market isn’t quite as competitive, employee retention should still be a key concern. After all, people are the lifeblood of your organization, and ensuring that your best talent stays in place for longer can have a whole host of benefits for your business.

employee retention

By the numbers: The impact of employee retention on organizations

47% of employees are actively seeking a new role at the moment. 

3 to 4.5 million people a month quit their jobs in the US alone. 

87% of HR experts consider employee retention among the highest priorities.

75% of employee turnover is preventable.

63% of employees leave due to a lack of development opportunities. 

It costs as much as 33% of an employee’s salary to replace them if they leave. 

Why Is Employee Retention Important? 

Now that we understand exactly what employee retention is, it’s time to look at why it’s essential for your business. 

While employee retention is currently a hot topic it’s important to realize that this isn’t just a fad. No matter who you are, what sector you work in or how competitive the labor market is – employee retention can have a huge impact on your organization’s health

That’s because employee retention has a positive impact on just about every area of your business. Whether it’s your bottom line, productivity, morale, or creativity – if your people are satisfied in their roles then the only way is up. 

Here are nine reasons why employee retention is so important. 

1. It Saves Time

If your company is constantly battling with unfilled positions and staff shortages, then your leaders are going to be spending more time recruiting and less time actually doing their jobs. This doesn’t just take its toll on their time, it also impacts your organization’s bottom line. 

2. It Cuts Costs 

Replacing employees who choose to leave their roles isn’t cheap. The costs associated with recruitment are soaring and while the exact figures vary from company to company, current estimates put the dollar value of replacing an employee at between one and a half to two times their annual salary. To put that into perspective –  for a 100-person organization with an average salary of $50,000 and a turnover rate of 20% (the national average) – the cost of employee retention could run to $2 million every year. It’s no wonder then that lower staff turnover leads to higher profitability.

3. It Increases Productivity 

The longer people stay in their roles the better they get to understand your business. With years of service comes in-depth knowledge and experience, both of which are vital to pushing your organization forward. Retained employees are also more engaged in their roles, and that translates into a number of positives including higher output, increased creativity and better productivity. 

employee retention

4. It Boosts Morale 

If your employee retention is poor it means that more of your people will be vacating their roles. But it’s not just the people who leave that will impact your business, it’s the people who stay too. 

No one likes to see their colleagues leave. Whether their concerns are personal (the loss of a valued friend or a trusted leader), or professional (an increased workload or a growing skills gap within the company) when employees aren’t retained it makes people question their own role in your organization. This can send your team morale into a tailspin, something that can have a long-lasting impact on your business. 

5. It Improves Culture

Company culture is the number one topic of conversation in the business world right now. In many ways, culture shares a symbiotic relationship with employee retention. After all, if you don’t offer a great corporate culture then your people are going to leave your organization for somewhere that will. But on the other side of the coin, it’s almost impossible to build a great company culture if your employees are constantly leaving. People are the beating heart of any great culture, and your most experienced employees play an important role in embodying the kind of values that you want yours to demonstrate.

6. It Creates High-Skilled Teams

The longer an employee works with your company, the more skilled they become. That’s because they get exposed to relevant experience that helps them build a toolset that’s specifically geared towards your organization’s systems and processes. During their tenure, your employees will also benefit from training, career development and life experience that will make them better workers. The crucial ingredient in all of this is time. 

7. It Fuels Customer Service

If your business is custom-facing, then employee retention can be even more important. That’s because, over time, your customers build relationships with your employees and that rapport can play a key role in your ongoing success. If your employees leave, it’s those relationships that can suffer. At best it might create a period of instability, or at worst it can mean you lose that customer altogether. It’s no wonder then that high levels of employee retention have been linked to repeat sales and higher customer loyalty.

8. It Helps Attract The Best Talent 

In the current climate you don’t just need to hold onto your top talent, you also need to beat out the competition to attract the very best candidates. With more open positions than qualified candidates to fill them, businesses are having to work harder than ever to attract the employees they need to succeed. It’s a challenge that becomes even harder if your organization has issues with employee retention. Think of it from the candidate’s perspective – why would you want to join a company that other people are trying to leave? But, if you can show them that you’ve built the kind of workplace that people choose to stay in, then you’ll well and truly stand out from the crowd.

9. It Creates a Virtuous Cycle

One of the great things about high employee retention is that it creates a virtuous cycle. What we mean by that is that the longer an employee decides to stay with your business then the more invested they are in it, which in turn means that they will stay on longer. So the investment you put into employee retention now will pay dividends for a long time to come. 

“The greatest leader is not necessarily the one who does the greatest things. He is the one that gets the people to do the greatest things.”

– Ronald Reagan.
employee retention

How To Tell If You Have A Retention Problem 

Later in this guide we’ll look at how you can quantify employee retention so that you can track your progress over time. But if you’re worried about whether your business has a retention problem, here are some of the warning signs that you should look out for. 

Deteriorating behaviour 

A sure sign that you’ve got a retention problem is if your employees’ attitudes begin to change for the worse. Whether they’ve lost some of their enthusiasm, their output has dropped or they’re simply not engaging with their colleagues the way that they used to – when your people stop meeting your expectations it’s a sure sign that they might be getting ready to leave. 

Unexplained absences

If you’re experiencing an uptick in unexplained absences it could be a sign that your employees aren’t as engaged as you might like. This is a definite retention red flag because it means that your people already have one foot out of the door. They may even be using their time off of work to interview for other roles. 

A sudden wave of exits

You can’t avoid the fact that your employees will eventually move on. Whether it’s to retire or to take time out to start a family, at some point everyone leaves. But if you’ve noticed a trickle of leavers turn into a steady stream, then it could be a warning sign that there are bigger issues at play. Every time someone leaves your organization it is an opportunity to learn something. Exit interviews can be a great tool to find out if you have something to worry about regarding employee retention. 

“Businesses often forget about the culture, and ultimately, they suffer for it because you can’t deliver good service from unhappy employees.”

– Tony Hsieh, CEO of Zappos.

What Causes Employees To Leave? And What Makes Them Stay? 

Everyone is different. That means that the motivations behind each employee’s decision to leave will be personal to them. However, there are some common factors that are responsible for many of the retention issues that companies face. 

By recognizing these triggers you start to understand “why” people quit, vital information that will enable you to take steps to address these issues and improve your employee retention moving forward. 

why employees stay and why employees leave

Strategies To Improve Employee Retention 

Every organization is unique. That means that the employee retention strategy that you employ will look different to that of your competitors and contemporaries. But while employee retention demands a personalized approach, there are some common tactics that you can use to improve engagement and encourage your best people to stay in their roles

If you’re looking to improve your employee retention here are seven strategies that can help.

1. Competitive Compensation 

This may not be the most creative of strategies but it is certainly one of the most effective. Offering a salary that is commensurate with the effort and hard work your employees put in is vital to making them feel valued. Competitive compensation is crucial not only to ensuring your employees are happy but also fighting off competition from other businesses that offer better rates. 

Today it’s easier than ever to analyze what kind of rates are the norm in your industry. But when you’re deciding upon compensation it’s important that you also take into account where your people are working and what the current financial climate is. If your employees are going to be happy, they need to be able to afford to live where they work. And, as the cost of living increases, they need their wages to be regularly adjusted in line with rising inflation.

You should also ensure that you regularly review your salary structure and that employees are rewarded with raises every time they progress professionally. This may sound like an expensive solution, but compared to the costs associated with low employee retention, it’s an investment that will pay dividends in the long run. 

2. Embrace Flexible Working 

One of the biggest impacts the pandemic had on the workplace was the rise in remote and hybrid working. Changes that might have previously taken decades to take hold suddenly took hold as social distancing forced people out of offices. 

But while it may have started during lockdown, it’s become clear that remote working is here to stay. As a result, flexible and hybrid working has now become the norm. That means your employees don’t just look for flexible working opportunities, they expect them. And they’re not afraid to leave companies that fail to offer them the flexibility they need. 

By offering options such as remote working and flexible hours, you can significantly improve your retention efforts. Offering flexibility in work arrangements allows your employees to achieve a better work-life balance, accommodate personal commitments, and reduce the likelihood of them seeking opportunities elsewhere. It also demonstrates trust in employees and their ability to manage their work effectively, fostering a positive and supportive work environment that helps retain talent.

3. Recognition And Rewards

It’s difficult to hold onto your best employees if they don’t feel valued. And it’s almost impossible for your employees to feel valued if you don’t take time to recognize and reward their efforts. Recognition and rewards, or the lack of them, is one of the key drivers of dissatisfaction among employees and could significantly harm your retention efforts. 

Even something as simple as a “thank you” for a job well done goes a huge way to making your people understand how much you appreciate their efforts. But by implementing a dedicated rewards and recognition program you can take things a step further and reap the benefits for your business. 

The reason behind the enduring power of recognition and rewards is simple psychology. You see, our brains are hardwired to respond to recognition which is why rewarding employees results in higher levels of motivation, engagement and productivity. It’s a crucial tool in your ability to boost employee retention which is why it’s been a cornerstone of successful businesses for decades. 

Best of all, putting an effective employee rewards and recognition program in place is relatively simple, especially if you use the help of a dedicated recognition and rewards platform like Bucketlist. 

employee retention

4. Create a Great Culture 

We can’t talk about employee retention without talking about company culture. For many, it’s a secret weapon that separates the winners from the losers in the current battle for talent. 

While higher pay, flexible working and rewards all play their role – a great culture is something intangible that taps into your people’s innate desire for purpose. Get it right and they’ll feel like they belong, that their work makes a difference and that they’re proud to be an employee at your company. Get it wrong however and retention won’t be the only thing you have to worry about. 

Creating a corporate culture is about so much more than writing some inspirational phrases in your employee handbook or throwing a few pizza parties. It’s your company’s personality, something that impacts every decision and interaction that goes on within it. They’re something that you need to constantly work on, ensuring that you regularly fuel your people so that they demonstrate the kind of values and behaviors that you want your business to embody.

But all that effort is well worth it. The benefits of a great company culture don’t just end with employee retention, they can impact just about every aspect of your operation. 

5. Beware of Burnout

In our always-on fast-paced world the issue of employee burnout has become a real concern for employers over recent years.

For those who suffer from it, burnout can cause fatigue, insomnia, sadness, anger and irritability. It can even lead to further health issues ranging from alcohol abuse to heart disease. For employers, the impact of burnout on your people can be tough to take. But it can also have a direct impact on your bottom line. Low productivity, high turnover, absenteeism and decreasing performance all add up. So much so that it’s estimated that burnout costs businesses as much as $322 billion every year. And the problem is only getting worse. 

If your people suffer from burnout then there’s a strong chance that they’ll be forced to leave their roles, either to protect their health or to move into a job that’s less stressful for them. Given its impact on employee retention leaders should do everything in their power to reduce burnout and support their people. 

Taking steps to reduce stress in the workplace, encouraging people to prioritize work/life balance and ensuring that people get some much-needed downtime outside of office hours is vital. You should also invest in the wellbeing of your employees with wellness and perks that are specifically geared towards keeping burnout at bay. 

6. Prioritize Professional Development 

Businesses with incredibly strong employee retention recognize the value that should be placed in personal and professional development. Investing time and resources in training and upskilling your employees will not only make them happier and more likely to stay at your company, but it will also make your company stronger as a whole. 

You should ensure that your people have a clear development plan in place so they know where they are working towards in future. Alongside their development plan, they also need access to the tools and resources they need to develop. This could be online training, on-the-job experience, or the opportunity to attend conferences and events. Mentoring is also an important tool to make sure your people have access to experienced support and guidance.

7. Create a positive work environment 

How much thought have you given to the kind of environment that your people work in? Today’s workers are looking for more than just a cubicle or a desk space. They want to work somewhere that they look forward to coming into, somewhere vibrant and filled with personality and the kind of amenities that improve their everyday lives. 

Things like onsite gyms, nurseries, standing desks, relaxation hubs and healthy food options are becoming increasingly common as companies seek to cater to these changing needs. And the impact of doing so can be huge. That’s because candidates value their physical workspace more than they do things like vacation time, so much so that it can actually sway their decision over which company they choose to work for. 

Clearly amenities matter, and employers that take steps to offer their teams great work environments can expect to see an immediate impact on their retention rates. 

Clients do not come first. Employees come first. If you take care of your employees, they will take care of the clients.

– Richard Branson, CEO and founder of Virgin Group.
employee retention

How Do You Measure Employee Retention? 

Hopefully by now, you have an understanding of the importance of employee retention as well as some strategies that you can implement to improve retention levels within your organization. But how will you know if your efforts are working? 

Of course, there will be anecdotal evidence that will tell you if more of your people are leaving or staying in their roles. But at the end of the day, there’s no substitute for cold hard data. Fortunately calculating your employee retention rate is a simple process.

How To Calculate Your Employee Retention Rate 

Your employee retention rate is a formula that gives you a percentage score of the number of people who stay with your organization during a given period. Essentially it’s the opposite of your turnover rate, which is a calculation of the percentage of workers who leave your organization. 

The actual process of calculating your retention rate is incredibly simple.

First, you need to determine what time frame you want to use to measure your retention. Some companies measure their retention annually, others on a month-to-month. The choice is entirely yours, but if you’re focused on improving employee retention then it’s worth conducting this exercise regularly so that you can stay on top of trends and spot whether your strategies are working. 

Once you’ve decided on the time period you’ll be focussing on there are two other data points that you’ll need. One is the number of employees who were present at your company on the first day of that period, or the headcount. The other is the number of employees who were at your company at the end of the period. It’s important to note however that you shouldn’t include new hires in this second data set as it can skew your findings. 

Armed with this data the formula for calculating your retention rate is easy. All you need to do is divide the total headcount at the end of your time period by the headcount that was present on day one, then multiply the result by 100 to deliver a percentage. 

Retention Rate = Final Headcount ÷ Starting Headcount x 100

Let’s say you wanted to calculate your retention rate for the past year. On January 1st your headcount was 200, but by December 31st it was only 190 as a handful of staff had moved on during the past 12 months. If we plug this data into our formula the retention rate would be 190÷200 x 100 or 95%

retaining employees

What Does Retention Rate Tell You 

Once you have accurate data on your employee retention you can develop a deeper understanding of the challenges and opportunities your business is facing. 

Understanding your retention rate will help you to know if your employee retention strategies are working, or if there’s still work to do. It can help you to spot if you have a retention problem, if you need to invest more in recruitment and spot potential staff shortages ahead of time. 

Most important however is that once you’re armed with a deep understanding of your employee retention trends you can allocate the resources and effort that are needed to improve your retention rate. 

So what kind of retention rate should you be aiming for? 

Retention rates vary by industry and the nature of work that is being performed. But whatever sector you work in you should be aiming for a retention rate of 90% or higher. If you fall below that range then it’s time to think about implementing some employee retention strategies as soon as possible. But even if you’re well in the 90% range then you can’t just sit back and relax. Employee retention is an ongoing process, something that needs to be constantly nurtured and maintained to keep it in tip-top condition. 

Frequently Asked Questions About Employee Retention 

What is employee retention?

It is a term used to describe the act of keeping hold of your employees and the strategies you use to ensure they remain in their roles.

What determines employee retention?

There are a variety of factors that influence employees’ decision to stay, but the most common include: feeling valued, receiving competitive salary and benefits, a positive work environment, a thriving company culture and employee rewards and recognition programs. 

How do I calculate employee retention? 

Retention Rate = Final Headcount ÷ Starting Headcount x 100

How can I improve employee retention?

Effective employee retention strategies can include offering best-in-class benefits, competitive salaries, building great work environments, focusing on culture and rewarding staff for their efforts. 

retaining employees

What are the benefits of employee retention?

There are several benefits that are associated with high employee retention. Some of the most prominent include higher productivity, increased profitability, reduced costs, stronger teams, stability, accelerated growth and improved recruitment. 

What happens if my employee retention is poor? 

Organizations that struggle to maintain high employee retention can expect to experience increased recruitment costs, staff shortages, skills gaps, low morale, slow growth and periods of instability. 

The Bottom Line On Employee Retention 

In the current climate, as businesses face an increasingly competitive battle to attract and hold onto the very best talent, employee retention is having its moment in the spotlight. This isn’t a fad or a passing trend, however. Business owners have always known the importance of holding onto their people and the impact that long-standing employees can have on their companies. 

But while the importance of employee retention hasn’t changed, the tools and techniques that businesses can use to improve it certainly have. Today we understand more about the impact of employee retention and the factors that influence it than at any other point in history. And now, thanks to advances in HR techniques and technology, there are also countless tools that leaders can call upon to make an immediate impact on their retention rates. So while the issue of employee retention has never been more challenging, it’s also never been easier to unlock its benefits. 

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