Are back-to-back candidate interviews cutting into your other responsibilities? Are there so many new faces at work that you have trouble remembering who needs to complete the latest safety training module? Or maybe a hostile culture simmers under the heated grumblings of overworked, under-staffed employees. You’re inviting these and many more problems if you aren’t implementing these 5 main drivers of employee retention.
Hey, I get it. People leave their jobs for a variety of reasons. And at first glance, it may seem like there isn’t much you can do when an employee says they want to move to another city or switch careers. The reasons for high turnover that you hear most seem to be out of your control. It’s easy to hyper-focus on recruiting, even if you understand the importance of employee retention. But the reasons exiting employees tell you may not be the whole story. Giving these employees a reason to stay may be easier than you think.
Employee Retention Definition
A simple employee retention definition is “the rate at which employees leave a company and are replaced by new employees.” New hires are at the highest risk of leaving, with many companies losing one-third of these workers. Long-term employees, however, take experience and knowledge with them when they leave. When your employee turnover is high, you lose the stability long-term employees bring.
The importance of employee retention can’t be overstated. Whether your business is Armstrong Flooring or Physicians Healthcare Network or anything in between, you need a high employee retention rate to stay competitive. Companies that maintain a definitively high employee retention rate enjoy greater profits and productivity. Their teams are stronger and their customers have a better experience. By keeping your employee retention rate high, you spend less on recruiting and training. You also get to hold onto the wealth of knowledge and experience your current employees offer. Employee retention, by definition, reduces the high cost of turnover.
A high employee turnover rate, on the other hand, is costly. According to the Work Institute’s 2017 Retention Report, every employee that leaves costs your company about 15 percent of his salary. That cost goes up if the employee leaves before his one-year anniversary, long before his productivity can offset recruitment costs. Companies lose an average of one-third of these new hires.
High turnover has hidden costs too. Decreased customer service that goes along with too many inexperienced new hires can drive sales down. Low morale and a weak team also exemplify the harm that comes from voluntary turnover. These factors prove the following statement about turnover: poor employee retention is expensive.
Employee churn refers to the rate at which companies must hire new employees to replace the ones who are leaving. A high rate of churn tends to have a negative impact on the remaining employees in an organization. And while insufficient pay is one of the reasons that lead to employee turnover, it isn’t the most important. Before companies can find ways to retain employees, they must first know what is driving their workers to leave.
Factors Affecting Employee Retention
There are five main drivers of employee retention.
- The first driver for employee retention is effective onboarding. Introducing your employee to the company and her new role will improve your company’s image in her mind. By proactively creating an onboarding plan for each new hire, you take the reigns on another important factor that affects employee retention: culture.
- The second factor, a positive workplace culture reduces turnover and improves employee retention. Emphasizing a positive culture during employee onboarding is one way to improve employee retention. A strong value statement and purpose will help you find ways to improve culture throughout your company.
- The third factor that affects employee retention is job satisfaction. An employee who is satisfied with her job feels her work has meaning, is challenging, and is fulfilling. There are several ways you can improve workplace satisfaction. Recognizing achievement, fostering growth, and increasing responsibility are a few.
- A fourth way you can improve employee retention is through environmental factors at work. These are things like salary and benefits, work rules, and coffee breaks. Maintaining facilities that are comfortable and conducive to good work is just one way to improve the environmental factors that can reduce employee turnover.
- The fifth driver of employee retention is inertia. Turns out Newton would have been a good HR manager because he understood a body that isn’t moving won’t move without good reason. Even if you’ve proactively addressed the previous causes of turnover, your employee may leave if there is a significant change to his circumstances. If he becomes fully invested in his stock options and his children graduate college, he may decide to move on to a less stressful position. HR managers need to create drivers for employee retention during all phases of an employee’s tenure.
Adams Equity Theory and Employee Retention
John Stacey Adams is an American psychologist who developed the earliest need-based theory of human motivation at work. The resulting Adams Equity Theory is still used over 50 years later. The theory states that the employee’s input, in the form of his work, must be balanced by the output, such as salary or job satisfaction, he receives from his employer. Adam’s Equity Theory neatly balances employee motivation with employee retention.
Hard work, which according to equity theory is an input, should be balanced with the result the employee gets in return. According to Equity Theory, employees lose motivation if they feel their input is greater than the output they receive. Conversely, employee motivation is higher if they trust they’ll receive an output that matches their input.
According to Adam’s Equity Theory, employees provide the following inputs: effort, skills, knowledge, loyalty and experience. Employees receive as outputs financial rewards as well as immaterial rewards, such as recognition, challenge, and responsibility. These financial and immaterial rewards keep employee turnover low. Adams Equity Theory provides a formula for employee retention strategies by balancing the employee’s input with the rewards he receives.
Employee Retention Strategies
Employee onboarding software can help you organize and develop an onboarding process for each position. By strategically introducing employees to your company and their roles, you’ll help them become productive more quickly. You can also emphasize your company’s culture and expectations through the onboarding process. Companies with a strong onboarding system enjoy higher employee retention rates.
Defining your company’s values and purpose is the first step to creating a better culture. Once you have a clear vision for your company’s mission, you can use employee assessments during the pre-screening process for candidates. Employment assessments are one of the most effective employee retention strategies. You’ll be able to screen candidates for the qualities you value in your corporate culture such as work ethic, integrity, and compassion.
You can expand the scope of your employee retention strategies by implementing ways to increase job satisfaction. Remember, effective employee retention goes beyond salary and benefits. Recognize your top employees’ achievements. Incorporate opportunities for growth through educational and training programs.
Pay attention to the environmental factors that drive employee retention. Create a workplace environment that is comfortable and conducive to productivity. Make investments in software and other tools your employees need to reduce their frustration and increase efficiency. Pay attention to the details, like providing quality coffee and tea.
Proactively work to make sure your employees don’t have a reason to leave as their circumstances change. Yearly bonus programs are more effective than stock options that become vested at the same time. Use HR software to identify employees who may have plateaued in their careers and find ways to reignite their enthusiasm. Interviews that assess current employees‘ experiences will help. If an employee does leave, conduct an exit interview to find out why.
Employee Retention | PDF Download
The importance of employee retention goes beyond saving the time of your HR team. The numerous benefits of employee retention will keep your company competitive. You can increase the scope of your employee retention measures through strategies that address the drivers of employee turnover. Employee retention strategies should balance employees’ input with the output they receive from your company. A thorough exit interview will help in employee retention efforts as well.
If you need more ideas on how to create a workplace that encourages employee retention, download our guide on Cultivating Company Culture.