In today’s increasingly competitive market, companies can’t afford to have high turnover rates.
If businesses don’t treat employees right, employee turnover can get incredibly costly—and it’ll take more than competitive pay to keep them happy.
This article will help you understand what employees value and why some workers go while others stay.
What Is Employee Retention?
Employee retention is a company’s ability to retain current staff and prevent employee turnover.
In other words, it’s the organization’s efforts to hang on to their existing employees and keep top talent on board for as long as possible.
Employee retention is measured through the retention rate, which is the percentage of people who stayed at an organization during a given period of time.
The purpose of this retention rate is to be as high as possible. For example, a retention rate of 90% means that your business was able to retain 90% of its workers over a specific period of time.
But why does retention matter so much?
Stay with us to discover why a good employee retention program is a must in each work environment.
Why Does Employee Retention Matter?
To understand why employee retention matters so much, take a look at the following graphic.
Let’s talk about the benefits shown above in more detail:
- Recruitment cost efficiency—The whole recruitment process, from new hire onboarding to training, costs companies tons of money. By retaining employees for a longer time, you reduce the amount of money needed to recruit top talent.
- Boosted employee morale—When a team member leaves a company, it may affect loyalty and decrease work quality for team members who remain. Creating a workplace culture that encourages employees to stay fosters greater engagement, builds stronger relationships, and enhances workplace motivation.
- Improved customer experience—Engaged employees are more likely to provide stellar services by making the most of their knowledge and skills.
- Higher employee engagement and job satisfaction—There’s a direct link between employee engagement and retention, as organizations that prioritize retention have highly engaged workers and better employee experiences.
- Sustained productivity flows—Employees who work at a business longer understand the company culture better, have worked on improving the necessary skills to do the job, and generally know how to fulfill the expectations of their roles. Simply put, holding onto employees helps keep key knowledge and skills in-house, giving you a competitive edge.
After reading these benefits, you can see why your retention efforts are not in vain.
With that being said, now let’s discuss the difference between employee retention and employee turnover.
Employee Retention vs. Employee Turnover
The main difference between employee retention and employee turnover is what each one indicates, as well as how they’re calculated.
Retention is the percentage of people who stay with a company over a period of time, usually a year. Employee retention also includes the strategies used to keep employees in the company, such as an improved work environment, team building activities, or salary increases.
On the other hand, turnover is a metric used to measure the percentage of people leaving the company during a set period of time.
There are four types of employee turnover:
- Voluntary turnover, which happens when an employee decides to leave the company, either to seek a new career path or for a reason that’s out of the employer’s control.
- Involuntary turnover, when the employee doesn’t choose to leave the company, but the employer terminates the employment relationship due to redundancy or poor performance.
- Healthy turnover happens when a project ends or the employee is a poor fit for the company. Rather than having the employee consistently performing at a low level, it’s best for both parties to end the partnership.
- Dysfunctional turnover is when a high performer with potential leaves the business of their own accord, which negatively impacts the organization.
Having a high turnover rate can have a negative impact on your bottom line, as it leads to decreased morale, low productivity, and high turnover costs.
In addition, having high turnover negatively affects your brand’s image, making it difficult to attract talented employees.
Meanwhile, environments with high employee retention have more engaged workers who get more done. The longer they work for a company, the better they’re able to perform at their job, which in turn improves customer and employee satisfaction.
Still, why do some employees want to leave in the first place?
Let’s get into it.
Why Employees Leave
According to research, 46% of professionals are looking or planning to search for a new role in the first half of 2023.
Why are so many employees quitting their jobs? Here are the main reasons:
- Low salary: It’s hard to keep employees motivated when they don’t feel adequately compensated. Rising inflation causes employees to need more money to afford living expenses so when a company offers low pay, they feel it’s time to move on to greener pastures.
- The work isn’t challenging: When you know the ins and outs of your tasks and responsibilities, it’s hard to acquire new skills. If there’s little to learn about their role, employees might be ready for a new challenge.
- Feeling burnt out: Burnout is a huge problem for many employees, with 77% of workers saying they’ve experienced burnout at their current job, causing them to leave their positions.
- Strained relationship with management: For many workers, the job or company isn’t the reason they want to leave, but the person managing them. While it’s natural to get along with some people better than others, an employee’s relationship with their manager can seriously affect their overall performance and engagement.
- No clear goals: Employees want to work on meaningful projects with a clear purpose. If your company’s values and mission statements are unclear, then employees might be interested in finding businesses with clearer goals.
- Needing a better work-life balance: An employee’s well-being should be a company’s top priority. Having time for family and friends is a critical component of maintaining engagement. A manager contacting employees outside of working hours may impact their personal time and cause burnout.
Despite all this, it’s not always easy to tell when an employee wants to leave. Read on to discover how to recognize the signs.
How to recognize an employee who wants to leave
You can’t always tell when an employee wants to leave, especially if they act like nothing’s wrong.
Of course, there are some obvious signs, such as a resume left in view or increased activity on LinkedIn but, most of the time, you won’t know until you see their resignation letter on your desk.
Here are the subtle red flags of an employee looking for a different job:
- Decreased initiative: An employee who is normally vocal and proactive but no longer puts in the extra effort is probably thinking of leaving.
- Attitude change: An employee who is considering quitting is easily irritated and is likely to instigate arguments, and has an overall negative attitude.
- They’re distracted: A distracted employee could be a sign that they’re losing motivation to work. Signs could include regularly using their phones or popping out of the office.
- They’re taking more days off: Poor attendance shows that someone wants to leave. They’re taking time off at short notice, most likely to attend interviews.
- Avoidance of social events: A dwindling enthusiasm causes employees to avoid engaging in social events with other team members.
- Lack of commitment: Employees ready to leave find excuses not to take on more responsibilities and projects. They put less effort into long-term initiatives, signaling that they might not be around to finish the tasks.
It’s important to use these cues to either retain top performers or prepare for their loss.
But enough of the negative! Let’s take a look at the reasons why employees want to stay with the company.
Why Employees Stay
Here are the main reasons why employees stay at a company:
- Flexibility—The ability to work anywhere, anytime is a big perk companies need to use to their advantage. Businesses need a tailored approach that meets an employee’s unique time management needs.
- Competitive salary—Good pay and employee benefit packages rank the highest in every employee’s priority list. Offering competitive salaries and incentives such as health insurance will always be a good method to attract and retain the best employees.
- Great company culture—Not surprisingly, employees stay in organizations with positive cultures that are free of drama, where they respect their employees, and promote inclusivity.
- Trust in leadership—Having a good and fair relationship with their managers fosters an environment of trust. With a solid mentor, employees know that managers will have their backs, which in turn leads to low burnout and more engagement.
- Encouragement and recognition programs—Giving employees a meaningful reward for their efforts can boost motivation and ensure a repeat of these positive behaviors. Swag bags, for example, are the perfect way to show an employee your appreciation. Try building one now!
- Growth opportunities—Offering employee training and career development opportunities plays a significant role in retaining workers. It also motivates employees to take your company to the next level.
Many HR professionals find retention a challenge, but with these employee retention strategies, you can keep your employees engaged and happy.
The next step is to ensure your employee retention program actually works. How do you do that?
Keep reading to find out…
Monitoring Employee Retention
The most successful way to ensure your employee retention program works is to collect and analyze a wide range of data, such as employee satisfaction and engagement, absenteeism rates, or nuanced turnover information.
By measuring these key metrics, you’ll get a deeper understanding of employee retention, which you can use to address cultural and management issues and improve your hiring process.
There are several policies you can implement to measure the reasons why people are leaving, like:
- Conducting exit interviews, which provide helpful insights on how to reduce turnover. While some employees might not tell you directly why they’re leaving, it’s still a useful tool to get feedback.
- Analyzing data on reference requests, dismissals, retirements, resignations, etc. to determine patterns and causes of your retention rates.
- Conducting frequent one-on-one employee surveys that measure the employee’s current satisfaction level and their future intentions.
At the end of the day, employee retention begins with you.
It’s important to listen to your employees and create a well-planned strategy that increases retention, commitment, and engagement.
Over to You
Long story short, retention is important and should be one of your top priorities.
As you’ve seen in this article, high retention rates create a more satisfied workforce that wants to stay with your company. Looking for a valuable resource of HR terms, definitions, and tips? Look no further than our very own HR glossary.