For businesses to thrive, they need to cultivate a safe and rewarding work environment, making employee retention a key differentiator in today’s competitive landscape.
The Bureau of Labor of Labor Statistics reported that 2.9% of the entire American workforce quit their jobs in August 2021. This percentage equated to 4.3 million individuals and represents the highest month ever recorded to date.
The “Great Resignation” shocked many employers because it was contrary to traditional management’s relationships with labor markets. Therefore, a company’s ability to hold on to its talent is of utmost importance.
Learn the definition of employee retention and the benefits and cost savings of low employee turnover. In addition, you will learn how to accurately calculate your business retention rate and develop a strategy to monitor and improve the length of time your employees remain within your organization.
What Is Employee Retention
Employee retention refers to the organization’s ability to prevent employee turnover. The retention rate is the percentage of employees who remain with the organization during a fixed period.
Individuals may resign from their employment due to a variety of different factors. When looking at retention, we focus mainly on the voluntary reasons an employee has left an organization.
Retention strategies tend to focus on preventable turnover. The first step to building a system for retaining employees is to discover the reasons behind their leaving during their exit interview.
Voluntary resignations can include the following:
◦ No clear path to advancement
◦ Low morale
◦ Feeling overworked
◦ Low pay
◦ Lack of benefits
◦ Unhappy with management
◦ A need for better work-life balance
◦ Dissatisfaction with company culture
◦ The desire to make a change
Exit interviews provide valuable insight into your employee turnover. Recording and categorizing these reasons can help you determine if your employee retention strategies need improvement.
Costs of High Turnover
Gallup estimates the cost of employee turnover to be more than $1 trillion annually to replace individuals who voluntarily leave. The costs associated with recruitment, training, and loss of productivity equate to one-half to two times the position’s salary.
Losing highly productive employees can lower morale and decrease efficiency, especially if the increased workload falls on the remaining team members. This vacancy can easily affect your bottom line.
Benefits of Employee Retention
Besides the high cost of turnover, retaining good employees has other benefits. Here are a few examples:
◦ Higher employee job satisfaction – this goes hand-in-hand with employee retention. Worker happiness and fulfillment affect the individual commitment to their team and organization.
◦ Better customer experience – employees who have been with a company a long time will develop relationships with specific customers. These individuals are more familiar with troubleshooting and more able to implement the company’s core values.
◦ Lower recruiting costs – by focusing on retention, recruiting costs a business will have to eventually pay are lower. Expenses include recruiter fees, airfare, and accommodations for the potential candidate, and training and onboarding once hired.
Calculating Employee Retention Rate
Employee retention rate is the percentage of workers a company can keep consistently, long-term employed within a fixed time period. This rate is different from employee attrition, as the attrition rate shows the percentage of employees a company lost and did not replace.
Some experts believe that a worthy goal for a retention rate is above 90%, and this number will vary across different companies and industries.
Improving Retention Strategy
Developing your retention strategy for your company should be at the forefront of your goals. Besides more apparent techniques like hiring people who want to stay longer and performing exit interviews, here are some brief points you can incorporate into your retention strategy.
◦ Promote from within – many surveys revealed that employees leave due to feeling stalled in their careers. Lack of salary increase, training, and skill development impede career advancement. Promoting from within rewards current workers and makes them feel valued.
◦ Provide childcare – the pandemic has made childcare a family problem and a business issue. One survey found that 20% of workers had to cut back or leave their occupations due to a lack of childcare. Set your business apart and provide a childcare subsidy, remote team abilities, or a flexible schedule to allow various drop-off times.
◦ Implement internal rewards – everyone from the CEO to the interns craves validation. Not just from a direct manager, but shout-outs to co-workers, project leaders, and service providers can increase hard work and make individuals feel recognized and appreciated.
◦ Earn the trust of your employees – employees perform better when they trust the people who are giving them their work. Building personal connections, creating transparency, and radical candor in communication are great ways to build trust. Also, implementing an unlimited PTO policy is a strategy many companies implement to instill confidence.
◦ Encourage feedback – you don’t have to wait until an employee’s final day to receive feedback. When employees don’t feel their complaints are addressed, they assume the company is not interested in improving. Ask your employees for their opinions on a specific project or the business as a whole. Sometimes, being heard can go a long way to encouraging great employees to stick around.
Creating a successful employee retention strategy takes significant effort. A great place to start is to identify the most pressing issues and where you can make the most impact out of the gate.
Also, add your own unique strategy points. Perhaps your culture would benefit by allowing individuals more creativity and less micromanagement, or maybe they would benefit from more training.
The data suggest that the labor shortage will increase rather than decrease, and retaining your best employees will become harder and harder. Adding just a few key strategies will enable your company to attract and keep top talent while building employee engagement and preventing unwanted turnover.
How FINSYNC Can Help
FINSYNC allows you to run your business on One Platform. You can send and receive payments, process payroll, automate accounting, and manage cash flow. To learn more about how we can help your business start, scale, and succeed, contact us today.