Employee retention: top tips for holding on to talent
It's a global phenomenon. In the so-called Great Resignation, employees are quitting their jobs in droves. But why is it happening? What can organizations do about it? And how can you hold on to the employees you want to keep?
As well as fundamentally changing the way we work, the pandemic has prompted many people to rethink work itself. In July 2021 alone, 4 million US employees quit their jobs,1 while across the Atlantic in the UK, 20% of employees say the pandemic has made them reconsider their careers.2 This figure rises to 24% in Spain and 27% in Australia.
What does it mean for business leaders looking for ways to engage with employees and meet the demands of the new workplace? We spoke to business academic and expert in talent management and leadership development, Margaret Mackay to find out.
"The pandemic has given us all a pause, a time of reflection," Mackay says. "It's made us rethink. 'Does this job appeal in the same way? Is this what I want to do?'"
And it's these reflections that could prove problematic for businesses. Losing valued employees is never desirable, but it's more important than ever for companies in the post-COVID recovery phase to hold on to the staff they need. So what steps should organizations take to improve employee retention?
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What is employee retention?
To understand what's happening in your company and whether you have a problem with keeping staff, you need to look at your employee turnover and employee retention rates. Employee retention is defined as the number of employees that stay in your organization over a period of time.
But once you know your retention rate and turnover rate, how do you know if you have a problem? All sectors are different - healthcare and hospitality typically have high turnover ratesfor example - and turnover tends to be higher in the private sector than the public sector.
So one way is to compare your rates to the average rate in your industry. However, figures can only tell you so much. What's important is whether your turnover is causing problems for your organization.
"You will always have natural turnover, and that can be very healthy," says Margaret Mackay. "Somebody isn't a good fit, or wants to do something else or leaves for personal reasons. But I think if you've got a growing pattern it's really important to be tracking it."
"A survey by the Chartered Institute of Personnel and Development (CIPD) shows that less than half of the organizations who took part actually track turnover. A lot will look at how much they're spending on recruitment and candidate experience, and that's great, but you need the balancing side of that - the retention."
Top tips for employee retention.
Why employee retention is important
Having the right staff is vital to business success. “I think there are so many situations where the limiting factor to growth can actually be the people, the talent,” says Mackay. So once you’ve found great people, you’ll want to keep them. The benefits of retention include:
Reducing recruitment costs
The costs of losing staff and recruiting more can be enormous - and not just in terms of money. “You’ve got an impact on productivity and loss of continuity,” says Mackay. “You have to go out into the labor market to replace that person, which is high cost, and it may not be straightforward to find those staff.”
Glassdoor estimates that the average employer spends around £3,000 and 27 days on hiring a new worker. And if you’ve got high churn, that can easily mount up.
With high turnover comes the loss of company-specific knowledge. This can be enormously disruptive and can impact the bottom line. "If you're a law firm dealing with particular clients for example, then suddenly you've got a threat to that client relationship," Mackay explains.
The threat is even more acute in jobs with a long lead time for training - pilots, for example, or, as the UK is currently discovering, HGV drivers. Being able to keep valuable staff means organizations can safeguard relationships and keep knowledge in-house. Plus, there's the opportunity for organizations to pass that knowledge on to other staff.
"There's a feeling of uncertainty if you've got a lot of movement," Mackay tells us. "It can be very damaging to staff morale." Loss of staff can also leave those who remain overstretched - a particular problem in the pandemic - creating a vicious circle of burnout and loss of more staff.
Having a stable workforce where employees are confident that others will stay helps to build trust. It also makes people more willing to invest time in training, mentoring, and supporting others.
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Employee engagement and retention
Engaged employees are more likely to stay with an organization. No suprises there. But they're also the people organizations most want to keep because engagement pays dividends in terms of productivity, loyalty, customer satisfaction and just about everything else. On the flip side, high turnover can lower morale and impact on engagement.
Because the two issues are so inextricably linked, measuring and maintaining engagement strategies will also help boost retention. That means employers finding ways to take the pulse of their organizations, understanding what people are thinking and feeling about work, and so being able to nip problems in the bud.
Why do people leave their jobs?
It’s the question many leaders believe they have the answer to. But they’re probably wrong. “80% of managers think leavers quit over pay,” says Mackay. “But a survey done by Business Insider says there are four main reasons: boredom and frustration, work-life balance, and lack of prospects.
"As Peter Drucker says: ‘If you want someone to do a good job, you have to give them a good job to do’, and I think there’s so much there in terms of what motivates us. Pay is only one aspect of it.”
It's a view borne out in the Work Institute's 2020 Retention Report.3 It reveals that the top three reasons people leave jobs are career development, work-life balance and manager behavior. An increasing number of people are also quitting because of a mismatch between their values and the company's culture. Pay and benefits come further down the list, accounting for only 9% of leavers.
While the wide-ranging nature of the issues causing people to leave may seem intimidating to deal with, the good news is that you can deal with them. The authors of the Retention Report estimate that the employer could have prevented 78% of the reasons employees quit - in other words, three in four employee turnovers are preventable.
Don't resign yourself to the Great Resignation.
Employee retention strategies and techniques
The first step companies need to take to improve staff retention is to find out what people really want from work. Mackay agrees: "Rather than just assuming that people are leaving because of pay, or because they are dissatisfied it's a matter of having conversations and getting feedback - and not necessarily just at exit, but on an ongoing basis."
In this way, you can identify employee retention issues early on. There are a few areas to pay close attention to. Here are six of them.
Carry out regular performance appraisals to understand people's expectations and how you can meet them. Not in terms of the benefits or package, but focusing on learning opportunities, development and growth. Mackay refers to research showing that while a pay rise may keep an employee for another year, investment in learning and skills development may keep them for another three-to-five years.
One way of doing this, Mackay says, is to use a simple traffic light system. Red shows if someone is struggling and might need mentoring, amber indicates potential and readiness for new projects, and you use green for employees who are enthusiastic, capable and up for new roles or positions.
Only 12% of organizations collect data to evaluate their retention initiatives, according to the CIPD’s Resourcing and Talent Planning 2021 survey. This can lead to managers making completely the wrong assumptions about why people are leaving. Whatever techniques you use, it’s crucial to evaluate them to see if they’re working.
Onboarding and early mentoring
Over a third of the people interviewed in the 2020 Retention Report left their organization within their first year. And it found that two out of three people who go in the first year do so in the first six months. This is why effective onboarding and support for new hires are so essential.
Rewards and recognition
While more pay may not be number one on employees' wish lists, that doesn't mean they don't want to be rewarded for a job well done. Open recognition is linked with people sticking around for longer - according to one survey, 63% of people who are always or usually recognized at work are very unlikely to look for a new job in the next three-to-six months.4
"It's wonderful for the staff member getting recognition," says Mackay, "but it's also really good for the workforce in seeing that these are the company values and that we care for people and it matters."
With staff suddenly working from home, many organizations felt uneasy about productivity during the pandemic. This, according to Mackay, has led to micro-management, alienating staff and causing them to quit.
It’s vital then, that as we transition to different ways of working, managers focus on reinforcing the foundation of trust that supports their relationship with their teams. In this way, and with a focus on development and recognition, organizations can build the relationships that encourage the best people to stay.
2 "Resetting Normal: Defining the New Era of Work" Adecco, 2020.
3 "2020 Retention Report: Insights on 2019 Turnover Trends, Reasons, Costs & Recommendations" Work Institute, 2020.
4 "Can employee recognition help you keep them longer?" Survey Monkey, 2019.
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