Skip to content
Employee Recognition

Tips for Managing Employee Retention and Reducing Turnover

retention

Hanging onto your top talent is one of the biggest challenges that managers face right now. So what can organizations do to reduce turnover? In this guide, we’ll explore some proven strategies for managing employee retention. 

The world of work has changed. In the space of a few years, the tables have turned, putting the power firmly in the hands of employees. Buoyed by a competitive market where there’s a surplus of vacant roles and not enough qualified candidates to fill them, employees are increasingly confident in their prospects.

As a result, the pace of employee turnover has soared, and that means that managing employee retention has become a key concern for organizations. Whether you’re currently struggling to hold onto your top talent or you’re simply worried about the impact that this trend might have on your future, it’s vital that you understand what’s driving today’s employees to quit and what you can do to hold onto them. 

In this guide, you’ll learn…

💭 What is employee retention.

📋The current state of employee retention. 

🤔 Why employees are leaving?

🤝What makes employees stay

💻Strategies for managing employee retention.

📊How to measure the effectiveness of your retention strategy

What is Employee Retention and Turnover?

Before we look at some strategies for managing employee retention, we first need to understand exactly what it is 

Put simply, employee retention is how well an organization can keep a hold of the people who work for it. Employee retention is vital on its own, but it can also be a key indicator of how an organization is performing in certain areas of the business. Typically if you have a high retention rate it means that your employee morale is high, your people are satisfied in their roles, engaged in their work and have bought into the company culture. At the other end of the spectrum, if you have low retention rates and high turnover, it could point to serious problems. 

When we talk about employee turnover, we’re referring to the proportion of people who leave an organization (usually expressed as a percentage) during a given time period. Turnover is a broad term that considers all leavers no matter their reason for exiting. However, it can also provide a crucial metric for measuring the performance of your organization and your efforts for managing employee retention. 

managing employee retention

The Current State of Employee Retention and Turnover 

What employees expect from their employers and indeed from their jobs has fundamentally shifted during the past decade. 

It all started with the so-called Great Resignation that came in the wake of COVID-19. After lockdowns and restrictions ended, workers across the world began to re-evaluate what they wanted from their lives. Many found themselves making big decisions about their careers, their work/life balance and their futures. 

This led to a surge in people quitting their jobs, a global phenomenon that became known as The Great Resignation. But while we’ve firmly put the global pandemic in our collective rearview mirrors, the Great Resignation has never really gone away. 

If anything, the problem is only getting worse. 

In the US alone, around 50.5 million people quit their jobs in 2022 – surpassing the record set the year before. And 2023 looks like it will continue this trend. Indeed, there are currently around 10 million unfilled positions in the United States. 

Employee Engagement 

Typically when we look at the impact of employee retention and turnover, we’re talking about headcount and people physically leaving their roles. However, in the current climate, retention and turnover are also having an impact on employee engagement. 

With trends like so-called “Quiet Quitting” and “Lazy Girl Jobs” dominating the headlines, it’s clear that employee engagement has become intertwined with retention as the reasons prompting some of your people to quit are also prompting some of your people to give you their bare minimum. 

That means employee engagement and employee retention have become two sides of the same coin. Fortunately for organizations many of the strategies you would employ for managing employee retention can also be used to improve engagement, and vice versa.  

The Impact on Organizations Has Been Huge

Alongside unfilled positions and talent shortages, leaders now find themselves investing time they don’t have on a never-ending cycle of recruitment. This isn’t just taking its toll on their time, it’s also impacting organizations’ bottom lines. 

In this increasingly competitive market, the cost of recruitment is soaring. While the exact figures vary, – estimates put the dollar value of replacing an employee at between one and a half to two times their annual salary. It’s a staggering figure, especially if your organization suffers from high turnover. 

So in the current climate, it’s not just the power balance between employee and employer that’s shifted, so has the math. Managing employee retention is now a key business concern and unless organizations take action their managers will be trapped in a never-ending cycle of recruitment, unable to drive performance or affect the kind of change that will drive operations forward. 

managing employee retention

By the Numbers: Why Managing Employee Retention and Turnover is so Important

46% of workers plan to look for a new role in the next six months. 

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

75% of turnover is for preventable reasons.

65% of employees say the pandemic has made them rethink the place that work has in their lives. 

The time it takes to fill a vacant role has increased by 18%

In the US alone, 3 to 4.5 million employees quit their jobs every month. 

How Employee Retention and Turnover Impact Your Organization 

Employee retention is one of the most important factors to your organization’s overall health. When your employees are satisfied in their jobs they aren’t just more likely to stay, they’re more likely to help you achieve your goals. 

From morale to your bottom line, here are just some of the ways that employee retention can boost your business. 

1. Increases Productivity 

Ensuring your employees stay in their roles will also make them more engaged in their work. The benefits of high levels of employee engagement are huge. If your people are engaged in their jobs they work harder, they’re more adaptable, more creative and more productive. 

2. Reduces Costs

Whether it’s recruitment fees, training or simply a gap in headcount – the cost of replacing a single employee can be anywhere up to twice 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. Builds Loyalty 

One of the main benefits of retaining employees is that it builds loyalty. It’s a virtuous cycle that strengthens the bond between employee and employer.

4. Boosts Morale 

It’s not just the people who leave who feel the impact of employee turnover, it’s the people who stay too. Whether their workload increases, they lose valued friends and colleagues, or they start to reconsider their own role within the organization -managing employee retention can have a huge impact on morale. 

5. Reduces Absenteeism 

Another negative impact of turnover is absenteeism. When employees are unhappy in their roles then they’re less likely to want to work. This increases absenteeism which can in turn impact things like productivity, revenue and the overall image of you as an employer. 

6. Improves Culture

It seems like everyone is talking about company culture these days. There are countless theories about how to build a flourishing culture, but the real secret sauce behind the very best in the business is employee retention. After all, people are the foundation of your culture – so the longer they stay in place the stronger yours will become. 

managing employee retention

Why are Employees Leaving? 

Everyone is different, that means that the motivations that are driving your employees to leave their roles will be different from those that are impacting your competitors or other businesses within your sector. 

However, there are some common factors that drive the vast majority of people to quit. These give us an invaluable insight into the employee mindset, and by understanding “why” people leave their jobs we can begin to work out how we can implement plans for managing employee retention. 

Here are some of the most common reasons people leave their roles… 

  • Inadequate salary 
  • Better perks and benefits
  • Work/life balance
  • Burnout, or feeling overworked
  • Lack of appreciation and recognition
  • Limited career opportunities
  • No professional development
  • Bad management 
  • Boredom
  • Toxic company culture
  • Concerns about the company’s future
  • A desire for change
  • More compelling opportunities 
  • No longer aligns with company values
  • Employer brand isn’t exciting enough
  • Personal growth 

Voluntary vs. Involuntary Turnover

Understanding which of these factors are driving your people to quit can help you adopt strategies for managing employee retention. And while you can take steps to drastically improve your retention it’s important to remember that some level of employee turnover is to be expected. 

It’s a simple fact of life that, at some point, your employees will move on. Whether that’s to retire or to take time out to start a family, at some point everyone leaves. The key difference that organizations need to understand then is the difference between voluntary and involuntary turnover. 

Put simply, involuntary turnover is when an employee has to leave their position. This could be because they’ve retired, it might also be because they’ve been fired from their roles. On the other hand, voluntary turnover is when an employee chooses to leave an organization. 


It’s voluntary turnover that has the most impact on an organization. So when we’re talking about developing strategies for managing employee retention and improving turnover, we’re focussing on the reasons why people voluntarily leave their roles and what you can do to address this. 

managing employee retention

What Makes Employees Stay? 

We now know what makes people want to leave, so what is it that makes them stay? Promotions and pay rises are of course a shortcut to keeping your people satisfied, but they’re not the only motivating factors.

In fact, there’s a complex mixture of motivational factors and quality-of-life issues that you need to employ for managing employee retention. These were categorized by American psychologist Frederick Herzberg, who put together the “Two factor” theory. 

In Layman’s terms, the theory lays out two distinct factors that influence employee motivation. When these are in place your people are more likely to feel engaged in their work and stay in their roles. But when they’re absent, that’s when you’ll see your turnover rates start to creep up. 

HygieneMotivators
CompensationResponsibility
Job SecurityJob Satisfaction
Leadership QualityAchievement
Peer RelationshipsGrowth Opportunities
StatusAdvancement
Working ConditionsRecognition

Herzberg’s theory divides employee motivation into two distinct groups. Hygiene encompasses the basic needs that employees expect to be fulfilled. This includes aspects like compensation, security and working relationships. On the other hand, motivators are the aspects of the job itself that impact their happiness. It is their level of satisfaction, their opportunity for achievement and recognition. 

Crucially, however, while both groups are key to motivating employees to stay – they are fundamentally interdependent. That means that the key to managing employee retention is not just to give people a pay rise or motivate them to take more meaning out of their roles, it is to do both. 

How to Improve Employee Retention and Reduce Turnover

We’ve previously written about the strategies that organizations can use to manage employee retention and turnover. This is an excellent place to start as it offers advice on some of the basics that employers can follow to ensure their people are happy, engaged and motivated in their roles. 

However, we also wanted to share some practical steps that employers can take for managing employee retention. These are easily implementable steps that your organization can take to have an immediate impact on your retention and turnover. 

Conduct Thorough Exit Interviews

When an employee does decide to leave, it’s an opportunity for you to learn what prompted their decision and what you could do as an organization to prevent it from happening in the future. Make exit interviews a standard part of your processes so that you can gather as much information as possible and then put it into action to help manage your employee retention. 

Explore Stay Interviews

Exit Interviews are a vital tool, but why wait until your employees leave to ask them what went wrong? You may not have heard of them before, but “Stay Interviews” are one of the latest trends in HR. Sometimes known as Retention Interviews, they are regular one-to-one conversations with your people to find out what is going well, what isn’t and what you can do to make them more engaged in their work. Just like Exit Interviews, it’s an invaluable opportunity to gather insight into how your people are feeling. But unlike Exit Interviews, they actually give you a chance to act on that information so you can keep your employees in their roles. 

managing employee retention

Review Compensation 

One of the simplest steps you can take to have an impact on your retention and turnover is to review your organization’s compensation structure. Whether you do this on your own, or with the help of an outside consultancy, researching the current market will help you to determine if your current structure is in line with industry standards or whether you need to change your compensation to keep up with your competitors. 

Embrace Flexible Working

The world of work has changed. Nine-to-five, Monday-to-Friday is going the way of the fax machine and the Rolodex. Instead, today’s employees expect flexibility, and if they don’t get it with your organization then they’re likely to leave and find it somewhere else. If it’s feasible, consider options like remote work, flexible hours or compressed work weeks. All of these can greatly improve employee satisfaction, boost work/life balance and improve morale – ultimately helping you to manage employee retention and reduce turnover. 

Connect Your People With Their Purpose

People don’t just want to punch clocks and collect paychecks, they want purpose. Your people need to understand that what they are doing makes a difference, whether that’s to the wider world or simply to the ongoing success of your organization. You can achieve this in a number of ways. Perhaps you show them how their role directly impacts the business’s bottom line, or you help them to see the wider impact that their work has. If you want to take this a step further you could even build in some annual volunteer days or support a local charity to make their impact even more tangible. 

Offer Development Opportunities 

Your employees want to know that they have a future at your organization, that they will be able to build their skill set and ultimately climb up the corporate ladder. So an easy win for managing employee retention is to create clear paths for your people to follow within your organization. This can mean offering training sessions, workshops, or even pathways to advancement within the organization. Growth opportunities should be diverse, catering to different aspirations and skill sets.

How to Measure the Effectiveness of Your Retention Strategy

So you’ve decided it’s time to do something about staff turnover and you’ve begun to put plans in place for managing employee retention. Good for you. Now for the tricky part, how do you know if it’s working or not? 

Anecdotally you will hopefully be able to see the difference. Not only will you see fewer people leaving their roles but you’ll also see an increase in things like morale and employee engagement. But to truly understand how effective your retention strategy is, you’re going to want to crunch the numbers so you have actionable insight into whether it’s working or not. 

How to Calculate Your Retention Rate

There’s a simple formula that you can use to quantify your organization’s total retention rate. It’s usually best to do this over a set period of time, typically every year. That way you can collect information from a large enough sample of data and track your organization’s progress. 

Here’s the math…

managing employee retention

This will give you a benchmark that you can track over time. If your retention rate goes up then you’re on the right path. But if it goes down then your actions aren’t having the desired effect. 

Gather Feedback

It’s essential to not only understand the concerns and sentiments of your employees but also track these over time. Whether you get this information via Exit Interviews, regular feedback sessions, one-to-ones or employee engagement surveys – this is vital information that you can use to track whether your strategy for managing employee retention is working or not. 

So create a continuous loop for feedback. Make sure that you’re not only speaking to your employees as often as possible but you’re tracking their responses. Over time you’ll be able to see how sentiment changes, how people’s thoughts and feelings towards you as an employer ebb and flow. Get your retention right and it won’t be long before you start to see your employee engagement soar. 

Putting It All Together

Managing employee retention is not a quick fix. There is no one-size-fits-all solution. Instead, every organization must take a personalized approach that specifically caters to your unique challenges, aspirations and company culture. 

But one thing that’s true for all employers is that the sooner you start, the sooner you can start to solve your retention issues and start reaping the benefits.

The business landscape is in constant flux. And while today’s retention challenges will one day pass, the benefits that come with hanging on to your best employees will never change. Improving productivity, increasing engagement and cutting costs is something we can all get behind. 

So, by investing in managing employee retention now, you won’t just be working to survive the current employment crisis, you’ll be laying the foundations of a culture that ensures you thrive long into the future. 

Related Posts