10 benefits of employee retention and its importance
If you’ve ever spent time hiring and recruiting new employees, you’ll understand why it can be so disappointing when a person you’ve nurtured and helped grow suddenly departs. The negative rippling effects can be felt throughout your team and even your organization, especially if you’re experiencing high employee turnover.
On the flip side, when you’re able to increase employee retention, you’ll enjoy a more stable team, consistency in work being delivered, and improved culture. Trust and connection take time to build among colleagues, and there are many benefits of employee retention for your team.
In the wake of the ‘Great Resignation’, what can leaders learn about how to retain their new hires? Understanding the benefits of employee retention and putting a strong retention strategy in place is as important as ever.
The benefits and importance of employee retention
First, what is employee retention?
Employee retention refers to the length of time someone stays with a company. It can also refer to the efforts employers make to keep their staff around more long-term. These efforts are usually ongoing and can adapt to the changing needs and expectations of the workforce. They’re a preventative measure to avoid good employees leaving.
While a certain level of turnover is to be expected, too much turnover can be costly, and hurt employee morale. At a team level, managers can employ different retention strategies and tools to reduce employee turnover and keep their top talent from leaving their team.
The importance of employee retention
Before we jump into the benefits of employee retention, let’s quickly touch first on the importance of employee retention.
Why is employee retention important? When employees leave your organization, it disrupts teams and causes overall productivity to take a nosedive. In fact, according to the 2012 Allied Workforce Mobility Survey, it takes on average eight months for a new employee to reach full productivity.
Employee turnover is also extremely expensive. In the 2020 Retention Report, the Work Institute estimates that replacing an employee costs an organization 30% of the employee’s annual salary—and that’s a conservative estimate.
Clearly, keeping your top performers around is a must. That is why we recommend you bring your attention to the importance of employee retention as you lead your team through big changes.
So, as a manager, what are the best ways to support your team through your company’s internal growing pains—and improve employee retention in the process?
Focus on your people!
In our recent article about improving employee retention, we outline the following steps to improve retention and lower turnover:
- Make work-life balance a non-negotiable
- Identify and invest in your team members
- Set crystal clear expectations
- Don’t forget to celebrate wins
- Focus on helping your employees grow
- Ask your employees what they’d like to see change
- Follow through on their feedback
10 Benefits of employee retention
Companies and managers who are able to retain their talent will experience a handful of benefits, like…
1. Stronger employee loyalty
Long-term employees may feel more confident and calm when your team or organization goes through a change or time of uncertainty. They can also act as company ambassadors and change agents on your team. Loyal employees can help onboard new hires and keep their teammates calm and grounded through change.
People who stick around are demonstrating their loyalty. And, employees can become more loyal to your organization the longer they stay. The employee-employer relationship can develop over time, with each party becoming more committed to the other.
If you want loyal employees, give people room to grow from day one. Offering career development opportunities and creating a plan for growth is key to improving employee retention. Showing that you’re committed to people’s career growth will make them more committed to you.
2. Fewer transitions
Better retention means fewer role changes and personnel shifts on teams. It takes time and effort for teams to form, storm, norm, and finally perform. When you don’t interrupt this process, teams can move through their team development more quickly, and get to a place where they’re able to collaborate and perform at their best.
3. A more developed workforce
The longer an employee stays with your team, the deeper their skills and expertise become. Not only that, they’ll build a deep knowledge of the company mission, business practices, and client base. Experienced employees spend less time learning about the organization, and more time getting meaningful work done.
Make learning a part of the day-to-day. Encourage employees to keep developing their skills and carve out time in their workday to focus only on development. Host lunch and learns and cross-team meetings regularly to keep people aligned and learning from one another.
4. A properly resourced team
When a specialized employee leaves the team, it may take time to find a replacement. As a result, employees who may not have the same expertise are often called upon to fill in the gap.
While there are some positive aspects of taking on ‘stretch assignments’, having to take on another person’s role on top of their own can be stressful and draining. Not to mention, it takes time away from them doing what they do best and focusing on their development.
Your top digital marketer leaves your team. Suddenly, your graphic designer, social media strategist, and content creator are all redirecting their time toward the tasks your digital marketer used to accomplish. While they may be happy to jump in, eventually this will lead to an overall decrease in productivity and job satisfaction as people aren’t applying their core skills and strengths.
It’s important to make sure that teams are properly resourced with the right specializations. Keeping your specialized employees in the company ensures you don’t feel pressed to fill any employment gaps.
5. Improved customer relations
When you have an employee who has worked on your team for an extended amount of time, they tend to have deep expertise in the products you sell. This means that when customers have questions or need support, tenured employees can serve them quickly and efficiently. Building strong customer relationships is an important part of keeping your clients happy, and your business performing.
But this is also important for all the parts of your business model, not just customer-facing departments like sales and success. Your product development team, marketing team, financial team, and even your operations team will benefit from a strong knowledge of your clientele.
6. A healthy company culture
Every great leader wants to have a strong company culture and recognizes the benefits for both their staff and their customer base. A good retention rate is a great measure of strong company culture. Keeping employees around long-term is a sign that your culture is healthy, inclusive, and adaptive. It shows that people have a positive employee experience at your organization.
Not only that, but a good retention rate also nurtures your company’s culture. As people grow individually within your company, this will bring depth to the way your culture expands and adapts. And when new employees join and see that there are many long-term employees around, it’s a good signal to them and will put them at ease.
Remember, a healthy company culture is one that evolves over time. As you onboard new team members, they’ll bring a breath of fresh air to your established norms. One of the healthiest values you can create on your team or at your organization is open-mindedness and a desire to learn and grow.
7. Increased connection on your team
The longer team members stay with a company, the more opportunities they have to connect on a personal level and strengthen their collaboration. As teammates develop trusting relationships and open communication, they get into a groove and start to do great work together. Employee retention helps foster camaraderie among staff and a sense of psychological safety.
8. Better institutional knowledge transfer
Remote and distributed teams are here to stay, and companies are facing major changes in how they share and store their institutional knowledge. They will have to rely less on informal information exchanges, and more on formal documentation and creation of knowledge bases.
Managers and HR professionals alike will be heavily relying on those long-tenured employees to help them tackle this problem. Maintaining a high retention rate will help slow knowledge loss down on your team.
If your turnover is high, and you’ve not had the chance to properly document your team’s institutional knowledge, you’ll be playing catch-up for a while. These troubles will become expedited especially as new folks join and are looking for written guidance.
9. Consistency in process and systems
Creating strong systems and work processes for your team can be challenging in the best of circumstances. And when people are coming and going often, it’s even tougher to maintain a rhythm with your team and keep people working well together.
Once you’ve established your workflows, having the people who contributed to them around to keep up maintenance and introduce new team members to your work methods is really helpful. This will boost team productivity and organization.
10. Increased ramp-up time
Long-term employees can help upskill their colleagues and train new team members as they join. This helps everyone ramp up quickly and increases their ability to deliver faster results. Training and getting new people up-to-speed can mean additional costs for employers. When your current staff is equipped to help out, it means more efficiency all around.
Why employee retention matters
We’ve covered some of the most important benefits that employee retention will have for you, your team, and your company. Besides the above benefits, here’s why keeping a pulse on your employee retention rates matters:
- Turnover costs: Gallup reports that replacing employees costs 1/2 – 2x their annual salary. Filling a role that pays $50k a year can cost between $25k and $100k!
- Domino effect: When one employee leaves, others start to question whether they should, too. Turnover can quickly snowball and have a big impact on the people who stay.
- Employee satisfaction: It’s no secret. When your employees are happy and feel values, they do better work! A focus on retention means working to meet employee needs and expectations, leading to better satisfaction and engagement.
How health benefits affect employee retention
Having a robust and flexible perks and benefits package (both health benefits and personal perks) will go a long way in making your employees happy, and help you reduce employee turnover.
Make these employee retention benefits a reality for your team
While you can never prevent someone from leaving your team, you can try out some employee retention strategies (like running a stay interview, for example) to find out what your team needs. Do your best as a manager to make sure each employee feels seen, heard, and taken care of, and you’ll reap the rewards and benefits of employee retention.
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