Keeping top talent is crucial for fostering organisational development and it's widely known. Acquiring and maintaining new personnel can be expensive and take up time. Additionally, employee turnover can have a detrimental impact on productivity and employee morale.
As a result of the workforce shortage over the last year, leaders have been working hard to prevent turnover. The demand for effective retention tactics has increased significantly.
This article aims to clarify the meaning and significance of employee retention, outline the advantages of a robust retention approach and finally, to suggest strategies for keeping employees on board.
What is a employee retention
Employee retention refers to an organisation's efforts to keep its most valuable asset - its employees! It refers to a company's ability to retain employees and reduce employee turnover, which occurs when employees leave their jobs for other opportunities. Increasing employee retention directly impacts business success because having more or the right number of employees makes it easier to meet business objectives.
Knowing and managing your company's employee turnover rate is critical to stay in business in the long run. Employee retention rates, whether low or high, have a direct impact on the company's overall business. As a result, retaining key employees becomes critical to manage and avoiding high turnover.
Implementing a data-driven staff retention strategy rather than firing point-blank is a good practice. Monitoring employee retention rates regularly can assist organisations in identifying areas for improvement and implementing effective employee retention strategies.
How to calculate employee retention rate
To calculate the retention rate, you should take the following steps:
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Identify the number of employees who stayed with your company during a particular period, such as a year or quarter.
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Divide that number by the total number of employees at the beginning of the same period to get a fraction.
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Multiply the fraction by 100 to get the percentage.
This is what it looks like, expressed by a formula:
Employee Retention Rate = (Number of Employees who Stayed in the Company / Number of Employees at the Start of the Period) x 100.
For instance, suppose a company began the year with 200 employees and ended with 180. In that case, the employee retention rate would be 90%, indicating that 90% of the employees remained with the company throughout the year and the remaining 10% left for various reasons.
A higher retention rate is desirable since it suggests that the company retains its top-performing employees and maintains a productive workforce.
Why is employee retention important for business?
The importance of employee retention lies in its ability to promote organisational health and success. The cost, stress, and time associated with hiring and training new employees can significantly impact business outcomes. High employee turnover can bring about various problems, including high costs, loss of knowledge, and low productivity.
High costs
Replacing employees can be costly, with expenses ranging from 16% to 213% of an employee's salary. In the United States alone, turnover expenses can add up to $1 trillion annually. Advertising your company to potential candidates, conducting interviews, onboarding, and training can consume a lot of time and resources, creating high costs for your organisation.
Loss of knowledge
When experienced employees leave, they take their knowledge with them. If they fail to pass on their institutional knowledge to their peers, valuable information and skills may be lost forever. This can lead to confusion and low productivity among team members left behind.
Low productivity
Furthermore, unfilled positions can cause hours of lost productivity as other employees try to pick up the slack. This can lead to burnout and a decrease in overall productivity. Additionally, it can take a new hire one to two years to achieve the productivity levels of an existing employee, further delaying the organisation's success.
To combat the consequences of a low retention rate, businesses must prioritise employee retention to maintain a stable and productive workforce, save costs, and foster a positive company culture. To achieve these goals, businesses must invest in employee retention strategies to help them retain their top talent, increase productivity, and achieve long-term success.
Top 15 employee retention strategies
Below are some effective strategies that can assist you in retaining valuable employees.
1. Use comprehensive hiring practices
A company can incur significant costs if an experienced employee is lost. In addition to the costs of finding a replacement, the opportunity costs must also be considered. As a result, it is prudent to invest in hiring qualified candidates and appropriate recruitment processes and systems that enable targeting, attracting, and selecting the best candidate for the job.
Companies can ensure they allocate the necessary resources to their talent acquisition efforts by implementing an effective recruitment system to streamline the hiring process. These best practices can ultimately improve employee retention by improving hiring quality.
2. Hire for cultural fit
While many individuals can acquire a particular skill or expertise, not all can seamlessly integrate into an established team or align with the cultural values of a company's workforce.
Recruiting based on cultural fit can lead to sustained employee retention. Such hires will likely blend in faster with the team, promoting a more comfortable work environment and swift productivity restoration. A Harvard Business Review article highlights that poor hiring decisions are among the primary causes of employee attrition, with 41% of surveyed employers estimating that a single erroneous hire can cost their company $25,000 or more.
3. Improve your onboarding process
Retaining employees is closely linked to an effective onboarding process. As much as 40% of employees who did not receive sufficient training leave their job within the first year. Onboarding extends beyond a mere office tour or a few days of training. It is a year-long process that aims to achieve various objectives.
An effective onboarding program reinforces a positive image, defines unambiguous expectations, clarifies policies and benefits, and assimilates new hires into the company culture. It also fosters connections between new employees and existing team members and enables the creation of long-term career plans.
4. Offer flexible work options
Besides remote working arrangements, employees now consider schedule flexibility a critical benefit. Employees who can adjust their work hours to cater to family caregiving, medical appointments, or personal errands are likely to feel more empowered over their workday and attend to their needs effectively, even if the total number of hours worked remains unchanged.
Offering options such as a compressed workweek or allowing employees to complete their work on a self-paced schedule (excluding collaborative activities) can significantly boost satisfaction levels without negatively affecting productivity.
5. Create an emphasis on teamwork
A crucial aspect of employee retention involves strongly emphasising teamwork. Facilitating opportunities for collaboration, including interdepartmental collaboration, can stimulate teamwork and enhance employee engagement. Effective teamwork fosters camaraderie among colleagues, improving overall work culture and driving superior performance.
A culture of good teamwork enables managers and employees to leverage their strengths and weaknesses within departments, thereby strategically balancing the workload.
6. Reward and recognise employees
In the workplace, it's essential for employees to feel valued, and this holds true for everyone. According to a 2022 Gallup/Workhuman survey, employees are 56% less likely to seek new opportunities if they feel recognised for their efforts. However, only 19% of employees perceive their organisation to have a strong recognition culture.
To address this issue, companies must encourage managers to recognise the hard work of their team. Additionally, companies can go beyond this by offering organisation-wide or department-wide recognition to employees who go the extra mile.
7. Improve organisational culture
Although it may appear subjective, its effects on retention cannot be ignored. The company culture significantly influences workplace satisfaction, making it a key driver. While the building blocks of a robust culture may differ somewhat from one workplace to another, strong corporate cultures possess several essential characteristics. These include:
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Clearly defined values that are upheld
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Recognition and respect for employees' opinions
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A strong commitment to diversity, equity, and inclusion
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Supportive leadership that follows through on promises.
8. Drive employee growth
Career growth and development opportunities are critical for employees looking to advance their careers. Businesses can create a more engaged and motivated workforce by providing employees opportunities to enhance their skills and knowledge. This, in turn, can lead to increased job satisfaction and a greater sense of loyalty to the company.
Organisations can offer various development programs such as training, mentorship, or coaching sessions to help employees achieve their career goals. By investing in their employees' development, businesses commit to their growth and success. This can help employees feel valued and appreciated, motivating them to stay with the company and contribute to its success.
9. Always provide actionable feedback
Employee feedback is critical because it helps them understand their performance, including areas of strength and areas for improvement. Taking the time to provide helpful feedback also shows that the company values their performance and growth.
Employees feel supported and guided to make necessary changes when feedback is actionable. In contrast, those not receiving feedback may become confused and disoriented, leaving the company searching for clarity and guidance.
10. Prioritise employee well-being
With the rising cost of living, complicated personal lives, and political and economic uncertainties, it's not surprising that almost half of the employees are experiencing burnout, with little improvement since the height of the pandemic.
While maintaining appropriate workloads, open communication with management and a positive corporate culture are the most effective ways to prevent burnout, employers can also consider offering additional support for their employees' physical and mental well-being.
This may include perks such as gym membership or massage reimbursements, insurance coverage for therapy and mental health treatment, and access to digital wellness or meditation platforms, which can help employees feel more rejuvenated.
11. Provide effective manager training
When employees don't feel supported by their managers, they may choose to leave their jobs. To prevent this, businesses should invest in training their managers effectively to support employee development.
Proper training will enable managers to have difficult conversations with employees, such as informing them about necessary skill development or changes to job processes. Ultimately, employees want to feel cared for by their managers, and providing them with proper training can help achieve this.
12. Encourage employee feedback and engagement
Employee engagement is a key factor in retaining employees. Disengaged workers can lead to lower morale, decreased productivity, and negatively impact your company. Creating an environment where employees feel heard and valued is important to improve engagement.
Companies should provide opportunities for them to give feedback and collaborate on improving workflows and the work environment. However, avoid pushing unnecessary engagement activities with no specific goal or solution in mind. Every workplace is unique, so it's best to ask employees what types of engagement they prefer. This will ensure you create a positive work culture that aligns with their needs and preferences.
13. Reduce employee burnout
According to Gallup's study, burnout is often attributed to overwork and resolved by taking time off or reducing work hours, but this assumption is incorrect. Rather, how employees perceive their workload has a greater impact on their experience of burnout than the actual number of hours worked. Employees who feel engaged, recognised, rewarded, and have flexible options through remote work and reduced hours, report higher well-being.
Gallup identified the top five factors leading to employee burnout:
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Unfair treatment
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Unmanageable workload
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Unclear communication from management
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Lack of manager support
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Unreasonable time pressure
Improving company culture, promoting employee engagement, and ensuring clear communication, consistent management, and transparency can help reduce burnout. Providing wellness offerings and other perks can also contribute to employee retention.
14. Give employees the tools they need
Handling IT issues or working in an uncomfortable workspace can harm employee morale. This can be particularly frustrating for employees who are already overwhelmed with work. Employers should collaborate with their employees to ensure they have the necessary equipment and productivity tools to be as effective as possible. It is especially critical to ensure remote employees can access the tools they need to work efficiently.
15. Gather insights from exit surveys
It's sometimes impossible to prevent employee turnover. Nevertheless, you can learn valuable lessons from employees who choose to depart.
To gain insights, use exit surveys to gather feedback directly from employees leaving. Inquire about why they have decided to leave and any suggestions for improvement. This information can help you enhance the employee experience for those who continue to work at your company.
Get started with professional talent acquisition
Are you struggling to find the right talent for your business? Have you considered expanding your talent pool on an international scale, but are hesitant due to compliance risks and the cost of creating a foreign entity? Look no further than Emerald Technology, a global expansion service that can help you find the right talent and promote retention in your business.
Emerald offers an end-to-end expansion service that can help you find the best talent by providing global talent acquisition solutions. By utilising Emerald's services, you can widen your talent pool on an international scale and find the right candidates for your business.
Furthermore, Emerald provides compliant hiring and payrolling without a foreign entity. This can save your business time and money, as well as mitigate any compliance risks in regions where you may not be familiar with. With Emerald's global footprint of entities, your business can enter new markets and hire international employees no matter where they are located.
Lastly, by using Emerald's services, you can avoid the significant cost of making a bad hire in the recruitment process. Emerald's expertise in recruitment and retention can help your business make the right decisions when hiring.
Don't let the recruitment process hold your business back any longer. Consider using Emerald Technology's services to find the right talent, promote retention, and contribute to the growth and success of your business. Contact us today to learn more.