When evaluating the quality of a company on the back end, do you look at the number of employees it has, or the number it retains? We'd argue that employee retention is a much better metric because it illustrates how well the company takes care of its staff. For example, a company like Amazon employs around 1.1 million people in the United States alone. However, it has a weekly turnover rate of about three percent, which is much higher than the industry average of around 1 percent per week. Basically, Amazon brings in a lot of talent, but many of these people wind up leaving for various reasons, so is it really that great to work there?
Employee retention is an essential part of any successful business, but many companies don't focus on it as much as they should. Roughly half of all organizations globally have trouble retaining their top talent, so this issue is pretty universal. Fortunately, there are many ways that a business can keep the employees it has to reduce turnover. Let's dive in and see what those methods entail.
What is Employee Retention?
Employee retention is the process of retaining employees at a company, thereby reducing turnover. Employee retention is also a metric that shows how long an average worker stays at a job. So, if a business has a retention rate of one year, that means most employees work there for about a year before leaving.
Employee retention strategies are the systems that companies use to keep employees longer. We'll discuss these strategies more in-depth later, but they can include increased wages, benefits, and communication.
What are the Benefits of Employee Retention?
As you can imagine, cycling through employees regularly can cause various problems and headaches within a business. So, a focused employee retention strategy can yield some incredible advantages, such as:
- Lower Costs - Replacing a skilled employee can cost as much as 200 percent of that person's salary. Overall, it's cheaper to retain the employees you have than find and train new ones.
- Better Company Culture - If workers see a high turnover rate, they're likely waiting until the moment they can leave too. It's hard to get attached to a job when your co-workers are getting replaced regularly. Employee retention allows teams and departments to form relationships and bonds that will help everyone be more productive.
- Improved Productivity - Not only can employees work better when they're in a stable environment, but a low turnover rate means better consistency as well. If new people are getting trained often, there are more chances for errors from new hires. Also, if the training is not enforced equally, some people may receive incomplete information, leading to issues down the line.
Overall, employee retention is highly beneficial no matter how you look at it. From a financial standpoint, it's better for the company's bottom line. From a workplace standpoint, retaining high-quality employees makes everything run smoother. So, why do so many businesses struggle with this process? Let's look at why employees leave and how companies can incentivize them to stay.
What are the Top Reasons Why Employees Leave a Company?
Knowing why employees leave a company is crucial to determine the driving factors that can weaken employee retention. While each situation is unique, there are some striking similarities across industries and job positions. Here are the top five reasons why someone might quit.
1. Higher Salary/Better Benefits Elsewhere
No matter what, the cost of living will go up over time. Rent, utilities, and food prices are higher today than they were 20 years ago, regardless of politics and world-changing events. So, workers need to be able to take care of themselves and their families. Ideally, they can earn enough from a single job, which is why there is such a push for a higher minimum wage.
The main reason why someone quits a job is that it doesn't pay enough. Either the wage is not enough for the person to pay their bills, or an employer is asking too much of them for what they're getting paid. So, if an employee can find another job that pays better, there's not much of an incentive to stay where they're at.
Benefits are also another driving factor. Health insurance is a significant expense for most people, and even those with insurance might be paying hundreds of dollars per year. So, if a company is offering high-quality insurance plans for less money, that may even be worth a small pay cut.
Other benefits can include 401ks and other retirement benefits. Workers know that Social Security won't be able to support them, so they need to save for retirement. If their job can help them save (i.e., through contribution matches and other programs), they're more likely to stay.
2. Lack of Challenges Within the Company
For many years, people saw their job as just a way to make money. It didn't matter if you were working in a factory, cleaning up garbage, or performing repetitive tasks all day. As long as you got a steady paycheck, that's what mattered.
In modern times, employees want their jobs to have value beyond money. So, if they're not feeling fulfilled, they'll likely try to find a job that scratches that intangible itch. Similarly, many workers don't want to participate in a job that seems unethical or "scammy." Fewer people are willing to put their morales and scruples aside for a paycheck.
So, how does that affect employee retention? Companies that don't offer challenging and rewarding work might see higher turnover. This is part of the reason why Amazon, which has relatively high wages, sees such high turnover. Workers are simply putting products into boxes to be shipped - hardly fulfilling work.
This gap is especially pronounced if the work is challenging or laborious and the pay isn't high enough to warrant such an effort. If employees are straining themselves for a job that doesn't pay well, they're far more likely to leave as soon as possible.
3. Lack of Encouragement or Recognition
Another workplace shift that has been happening is a focus on communication and recognition. Workers want to feel appreciated and recognized for their efforts. Everyone can get a paycheck, but a pat on the back can also go a long way. That said, some companies try to trade one for the other - it doesn't work like that. Recognition is nice, but it doesn't pay the bills. Instead, employees need encouragement on top of their earnings.
Recognition also has to be authentically earned. If supervisors or managers are just handing out compliments and prizes all the time, these acts will seem meaningless and transparent. A "good job" feels less encouraging if you're getting it for just showing up or doing the bare minimum.
The other side of this is better communication between employees and supervisors. Also, this communication has to go both ways for it to mean something. If managers are just talking to employees but not listening, workers will feel unappreciated and be less loyal to the company.
Fortunately, technology makes it easy to provide this feedback and recognition. Platforms like Structural provide a network where supervisors can check in on employees and engage with them regularly. By incorporating one of these systems in the workplace, it's much easier for workers to feel valued and appreciated. We'll dive into this process later in the article.
4. Lack of Career Advancement Opportunities
In 1983, the average employee tenure for men was about six years. By 2000, that number had dropped to just below five. While it's still hovering around the five year mark, this trend illustrates the fact that many people don't stay at a job for too long. That said, many people would likely be okay staying with the same company if there was room for advancement.
Companies that have a clear workplace advancement process are much more appealing to employees. For example, they could start out as a shift worker, then move up to supervisor, then manager, then department head, and so on. So, those who want to move up within the company can, thus encouraging them to stay.
Unfortunately, few companies outside of big corporations have such opportunities available. Even then, competition can be fierce, and some workplaces may engage in cronyism and favoritism. When that happens, workers are much more likely to leave because they don't believe they can advance, regardless of their skills or loyalty.
One alternative to a promotion system is one that offers lateral movement. In this case, workers can apply for other positions within the company that may offer similar salaries and benefits but new responsibilities and tasks. Lateral movement can help employees figure out where they fit in best within the company, making them happier and more likely to stay.
5. Harsh or Negative Work Environment
As the saying goes, people don't quit jobs, they quit managers. This adage is especially true in the modern era, as fewer workers are willing to put up with abuses on the job. Negative work environments can include issues like:
- Burnout - Workers are asked to do too much during their shift, leading to fatigue and high stress levels.
- Short-Staffing - Too few people are on hand to take care of tasks, so the remaining workers have to carry extra responsibilities.
- Harassment - Workers can get harassed by co-workers, managers, and even customers. While it's virtually impossible to prevent all harassment, companies should have a clear process for employees to report incidents and receive assistance. If a business doesn't address these incidents, turnover will be high. Also, the company could face legal challenges.
- Workplace Drama - Jobs that have interpersonal conflicts will also have high turnover rates. If workers can't rely on each other, the entire operation is doomed to fail.
Top Employee Retention Strategies That Work
Now that we've seen the top reasons why employees leave, what can a company do to mitigate their turnover? Fortunately, addressing these issues is relatively straightforward. What matters most is whether the business is committed to employee retention or if they just want to pay it lip service. Here are the best ways that companies can retain their top employees:
Offer Raises and Benefits
One thing about competitive wages is that they must adapt to the changing environment. In 2010, making $20 per hour was phenomenal. In 2020, that salary isn't as competitive, especially as inflation and the cost of living goes up.
So, companies need to incorporate raises into their labor practices. For salaried employees, this could be an annual raise to keep up with rising costs. For hourly employees, raises could be tied to added responsibilities or duties. Raises may also be part of a long-term retention strategy. For example, if someone stays with the company for six months, they can see an incremental raise.
As we mentioned, benefits are another substantial draw for new employees and can offset their salary. Let's say a worker was offered either $25 per hour with no benefits, or $20 per hour with comprehensive health insurance. Most people would take the pay cut, knowing that they have good benefits in case they get sick or injured.
Provide Feedback Regularly
Open communication is crucial for employee retention because it makes workers feel like they're part of the team, not just a cog in a machine. For example, if employees just get memos or see notes about workplace changes, they won't feel like an integral part of the company. Instead, they're receiving orders from a faceless manager and expected to follow through.
Personal feedback and communication can take several forms, such as:
- One-on-One Meetings - Employees can meet with supervisors or managers and talk about their jobs and, in some cases, their personal lives.
- Performance Reviews - What matters is how the company handles these reviews. For example, if a worker is punished for poor performance, these reviews can create anxiety and dread. However, if they're treated as a way to make employees more satisfied with their jobs, workers will appreciate them.
- Company Updates - As the company makes internal changes, workers should be kept in the loop as much as possible. Ideally, employees can also ask questions or provide feedback before the change to mitigate any issues after the fact. This kind of communication makes employees feel like they have a voice within the company.
- Bonuses - One way to let employees know they're doing a good job is to pay them a bonus for their hard work. For example, if a department was short-staffed for six months, the remaining workers could get a bonus for having to pick up the slack during this period.
Offer Flexible Working Conditions
Some people like coming into the office every day, while others may prefer to work from home. These days, in a post-pandemic world, the work-from-home crowd is much more prevalent. So, businesses that can offer such flexibility with employees will enjoy better retention. After all, why should someone switch to another job when their current one is so accommodating?
The type of work environment isn't the only thing that matters. Many employees don't want to be married to the traditional "9 to 5" schedule. Instead, they prefer deadlines, meaning that they can complete tasks whenever it is convenient for them. Companies may still impose a set number of hours to schedule things like meetings and conference calls, but workers can do their jobs whenever they like.
Hybrid work environments also offer flexibility while maintaining a company's culture. In this case, employees may come to the office a few days a week and work the rest of their schedule from home. Over half (59 percent) of workers prefer hybrid environments, and that number is likely to increase in the future.
Finally, workplace flexibility is not just for day-to-day operations. Employees like to have freedom for days off, sick days, and vacations. While some industries may have to limit time off requests, workers need to be able to call off for different reasons from time to time.
Focus on Onboarding and Orientation
In many cases, high turnover rates are a result of poor training and onboarding. If new hires aren't brought up to speed correctly, they're less likely to thrive within the company's work environment. Usually, what happens is that trainees get moved into their positions too fast, so they wind up making mistakes or feeling overwhelmed. A longer and more comprehensive onboarding process ensures that new hires don't have to "sink or swim." Instead, they can move into the position once they're comfortable with their duties and responsibilities.
The best way to ensure a smooth onboarding process is to create a training manual with all necessary materials for trainees. Also, if you can have a dedicated training staff, that helps provide consistency across the board.
Offer Internal Mentoring
Many workers may want to rise through the ranks to become managers and executives someday. One of the best ways to determine which route someone should take is to have them work with a mentor. For example, let's say someone wants to become a department head in the next five or 10 years. That person can get mentored by a current department head to find out more about what the position is like and what it takes to be successful in it. From there, the employee can align themselves with the company to ensure that they're on the right path.
Internal mentoring offers many benefits, including employee retention. Also, when you use a comprehensive networking system like Structural, it's easy for workers to connect with managers and executives for mentoring. Over time, your business will see a more balanced and stable workforce.
Allow Workers to Fill Unique Positions
If your employees are looking for challenges within the workplace, they may want to try new positions within different departments. Internal recruitment is a valuable tool that can lead to a more polished business model. Instead of bringing in new hires for mid and upper-level positions, internal recruiting allows workers at the bottom to rise through the ranks.
Recruitment can also work for temporary projects and needs. In this case, workers can apply for temp positions within the company to broaden their skills and explore new jobs that might pique their interest. This kind of project-based recruitment can help keep employees refreshed and well-rounded.
Incentivize Workers With Personalized Rewards
Some workers like getting money for doing extra work, while others prefer perks and gifts. Customizing an employee's incentive package makes it much easier to retain them over the long term. For example, one person might get a $500 sales bonus for the month, while someone else gets gift cards to their favorite restaurant or tickets to a concert.
When creating a bonus structure, be sure to have clear expectations and make the guidelines achievable. Also, it's crucial to re-evaluate your bonus structure regularly to ensure that workers are not taking advantage, nor are you setting the bar too high.
Create a Positive and Uplifting Work Environment
There's a tired trope of people lamenting the fact that they have to get up and go to work everyday. For many years, a job was seen as something of a prison sentence, only with weekends off for recreation. These days, employees don't want to dread coming to work. Instead, they want to be at a positive and uplifting environment where they look forward to clocking in and out.
While all jobs come with stress, the best way to make a workplace positive is to figure out stress relief methods for everyone. By addressing stress as it happens, workers don't get overwhelmed, and they feel supported. When that happens, they're far less likely to look elsewhere for employment.
What is the ROI of Employee Retention?
The best way to determine the ROI of employee retention is to look at what it can cost businesses to train new workers in specific positions. According to data, it costs an average of 30 to 50 percent of an employee's salary for entry-level positions. For mid-level employees (i.e., supervisors and middle management), the cost shoots up to 150 percent. For executives and highly specialized employees, that figure balloons to 400 percent.
So, as you can, employee retention is most valuable as you go up the food chain. Unfortunately, many companies only focus on their executive level team, offering perks and bonuses. However, a high turnover rate at the bottom can wind up costing a lot more than some of these retention strategies we've discussed.
How Structural Can Help With Employee Retention
As we've seen, communication, engagement, and a challenging work environment are all necessary to retain employees. Structural is a networking platform that allows employees to switch positions, mentor each other, and collaborate more efficiently. So, this one program can achieve multiple retention strategies simultaneously.
If you're interested in seeing the value that Structural can have on your business, contact us today. We can walk through the software with you and help you understand why Structural can be an integral part of your company's success.