Employee retention is incredibly important, especially in tough times. Companies need to be constantly looking for ways to improve their retention rates.
There are massive costs to employee turnover, which I’ll discuss more later in this post, both emotional and financial, that can have major effects on employee engagement. This is why it’s important to take retention so seriously.
If you go through all of the trouble of onboarding an employee, integrating them into the team, training them, assuming that they’re a good fit, then it’s in your best interest to keep them in the company.
Consider the costs of losing an employee:
- Costs of hiring (posting a job and conducting interviews)
- Costs of onboarding (time spent by manager training)
- Learning curve (a new employee will take months before they’re as good as the old employee)
- Emotional costs (lower productivity from the rest of the team)
It’s also important for managers to understand that employees are what’s known as an “appreciating asset”, meaning that they appreciate in value over time. The longer someone stays at a company, the more productive and valuable they are.
Many studies show that the costs of replacing an employee range anywhere from 20-200% of their annual salary. Either way, it’s crazy expensive.
Employee Retention Formula
Employee retention and employee turnover go hand in hand, but it’s important to measure them separately. Many companies make the mistake of measuring turnover, and then assuming that the retention rate is just the opposite number, but that’s not always an accurate way of measuring.
Calculating employee retention is actually very easy.
The only thing you need to decide is the time period in which you want to calculate your retention. Sometimes this can be measured monthly, quarterly, or annually. It’s completely up to you which ever one works best for your business.
For example, If you have 100 employees starting the first day of the quarter, and 80 employees at the end of the month, you have lost 20 of employees. Your retention rate is 80 percent.
Officevibe has an employee engagement ROI calculator that you should check out. You can find out what your company could be saving in terms of investing in retention. The numbers, depending on your company size, can be pretty shocking, and will probably convince you that investing in this is worthwhile.
Simple Employee Retention Ideas
If you’ve been a regular reader of the Officevibe blog, then you should have plenty of ideas for retaining your employees.
A point I always make is that most of the things you need to do to retain employees doesn’t cost any money. It’s more about being genuine and actually caring about the person. The most important thing by far is just being there for employees, and acting authentically.
Here are a few simple ideas that you can use to increase employee retention.
1. Offer Amazing Perks
Compensation is a very tricky issue, because most managers don’t have the authority to give employees a raise, even if they wanted to. But it’s not all about salary.
If you’re looking for affordable ways to reward employees, here are some ways:
As I’ve written about before, research shows over and over that money isn’t the most important thing. Instead of offering more money or more expensive benefits like retirement-savings plans, you can be creative and offer other things like unlimited vacations or telecommuting. More than anything, it shows employees that you trust them, and are willing to be flexible to help them.
2. Help With Career Development
According to a recent Linkedin survey that asked people why they recently left their job, the number one answer was to have “greater opportunities for advancement.” Keep employees at your company by clearly mapping out what their future looks like. You can ask them and get feedback into what they would want from you in order to achieve this.
For example, in Officevibe’s employee engagement software, one of the questions we ask employees is:
If the employee responds negatively to that question, we immediately ask them a qualitative follow up question:
This type of insight is crucial to employee retention.
3. Start With Why
Inspired by one of my favorite TED talks of all time, focusing on the purpose and mission of your company can help inspire employees to keep them around.
I’m referring to Simon Sinek’s “How Great Leaders Inspire Action” where he talks about how the common theme in great leaders that inspire is that they communicate their vision.
He talks about the golden circle, and explains that if you want to inspire, you need to focus on why you’re doing it, and not what you’re doing.
In the talk, Simon explains that communicating this way is deeply-rooted in biology. At around the six-minute mark, he says:
If you look at a cross-section of the human brain, looking from the top down, what you see is the human brain is actually broken into three major components that correlate perfectly with the golden circle. Our newest brain, our Homo sapien brain, our neocortex, corresponds with the “what” level. The neocortex is responsible for all of our rational and analytical thought and language. The middle two sections make up our limbic brains, and our limbic brains are responsible for all of our feelings, like trust and loyalty.
When we communicate from the outside in, yes, people can understand vast amounts of complicated information like features and benefits and facts and figures. It just doesn’t drive behavior. When we can communicate from the inside out, we’re talking directly to the part of the brain that controls behavior, and then we allow people to rationalize it with the tangible things we say and do.
The question you need to explain to employees is why are you doing what you’re doing. What’s the bigger purpose?
4. Conduct Stay Interviews
While exit interviews are great for understanding why employees leave, an even better source of learning is understanding what makes employees want to stay?
Ask questions like:
- What makes you stay at this company?
- What would make you leave?
- What would you change about your job role if you could?
- Is there anything you would change about your managers?
Many managers are scared of conducting stay interviews because of what they might hear during them. This is a natural thing to be afraid of, but the information you can get in there is gold.
Managers also might worry about the issue of salary coming up in a stay interview. Like I mentioned earlier, sometimes a raise is out of a manager’s control, so there’s nothing they can do even if they wanted to.
The best piece of advice I can give for this, is be honest. Let employees know that there’s nothing you can do about that, but tell them that there might be something you can do within your power.
Should You Offer An Employee Retention Bonus?
Short answer: Definitely not.
What’s interesting, is that according to a recent WorldAtWork survey, the use of employee retention bonuses is at an all-time high. But companies need to stop doing this, it’s a waste of their money.
Like I mentioned before, money isn’t the main motivator. Most people that quit their jobs quit because of a bad manager, or they’re not a good fit in the team. You can correct these issues before offering more money.
Also, even if you give employees more money, they might still leave anyways. True story, I’ve done this in the past. While I appreciated the gesture from my boss, I was already mentally checked-out, I had plans to leave regardless, and money wasn’t the issue. In fact, I actually took a salary cut at the new job, simply to be in a better environment.
Even if money were to motivate an employee to stay, that would wear off very quickly, because the core issues like a bad manager, lack of career development, etc. would still be a problem.
Also, it’s not a good sign if that’s what is motivating an employee. You want your employees to be motivated by the amazing work you’re doing. If the employee is motivated by money alone, it might actually be better if they left.
Another reason why I’m against retention bonuses is that it might have a negative effect on everyone else. Their coworkers might wonder why they haven’t received any extra money, which in turn will hurt overall morale and productivity.
In 30 years, I have yet to see a retention bonus retain, let alone motivate, anyone. – Kate DCamp, former VP of HR at Cisco
Employee Retention Best Practices
Hopefully, by now you’re convinced of the importance of employee retention, but here are a few best practices to keep in mind to improve your retention.
1. Improve The Hiring Process
You need to start with the basics, and focus on improving the hiring process so that employees fit in well at the company and the job.
A mistake I’ve seen many companies make is that their job descriptions are vague, and they don’t tell you the full story during the interview process. If you can be more transparent and honest with the candidates, you’ll have a much higher employee retention rate.
2. Develop Managers
It’s not for nothing that we keep mentioning and hearing that people leave companies because of bad managers. This seems to be at the root of the problem, and core to what needs to be fixed.
Managers need to be taught, to take it upon themselves to learn, how to help develop their employees. I don’t have all of the answers, but the research clearly shows that career development matters to employees. Have managers focus on that, and retention should start to improve.
3. Create A Culture Of Recognition
According to research by Deloitte, companies that scored in the top 20% for building a “recognition-rich culture” had 31% lower voluntary turnover rates. Their research also showed that it’s more important to receive recognition from peers than it is from managers, so set up a way for employees to praise and recognize each other.
Frequent praise is important, because of the way dopamine levels work in our brain, so every week, take some time to recognize the hard work of everyone on the team.
What Do You Think About The Importance Of Employee Retention?
As you can see, the importance of employee retention is hard to ignore. What are some ways that your company keeps employee retention high? Let us know in the comments below.