Employee retention is an important part of managing any company or business, and it can literally be a make-or-break issue with some companies. We’re going to dig into what employee retention is, why it matters, what impacts it, and how to increase it in your organization.
What Does Employee Retention Mean?
Employee retention is an organization's ability to keep its employees over time. It is the process of keeping employees engaged, motivated, and content with their jobs to retain them with the organization for a longer period of time. A high staff retention rate indicates a healthy and productive workplace culture, which leads to better productivity, fewer costs, and overall corporate performance.
Employee retention is the opposite of turnover. High employee retention indicates a low turnover rate, and vice versa, a high turnover rate indicates a company is having significant employee retention challenges. Acceptable retention and turnover rates will vary considerably with the industry. High retention is common in professions that require a significant investment of education or training, like lawyers, and doctors, while high turnover is more common in industries like fast food, call centers, and so on.
Why Employee Retention Is So Important
Employee retention is critical to the success of a company as it directly impacts productivity, morale, and the bottom line. High turnover rates can result in increased recruitment and training costs, decreased morale and productivity, and a loss of institutional knowledge.
On the other hand, retaining top talent can lead to increased job satisfaction, higher productivity, and a stronger company culture. Investing in employee retention strategies is crucial for the long-term success of a business, but is often overlooked or dismissed with the old “it’s hard to find good help” excuse.
Common Reasons Employees Leave
This list certainly isn’t exhaustive, but it does give a solid rundown of many of the most common reasons that good employees leave their jobs.
The discrepancy between productivity and pay has grown, and the gap widened. The Economic Policy Institute highlights the period between 1979 and 2021 as a period where productivity skyrocketed by more than 64%, while compensation only rose by a diminutive 17.3%. With record profits in many sectors, companies that skimp on the payroll are doomed.
Many people are concerned for their health and the health of their families, so understandably benefits are a primary concern for those people. A lack of benefits, or options that diminish over time, can lead to dissatisfaction and a desire to look for a more generous package elsewhere.
Poor Work-Life Balance
Poor work-life balance is a common reason employees choose to leave their current workplace. A lack of flexibility, long hours, and little time off can lead to decreased job satisfaction, increased stress levels, and eventually, complete burnout.
Employees that feel undervalued are not going to stick around. Feeling undervalued or unappreciated can lead to deeply harmful morale problems, which can then spread around the workforce. There is little worse than doing your job well and being ignored for it.
Another big reason that many good employees leave is poor management. Lack of support, toxic management practices, micromanagement, or creating return-to-office mandates are some of the most frowned-upon management practices in recent years.
No Chance For Internal Growth
If there is no chance or path for internal growth, employees will start looking for a chance to advance outside of the company. While many companies are quick to dismiss these employees, they are joining competitors with a full understanding of the failings and shortcomings of the job they are leaving.
Closely related to limitations on internal growth, employees that don’t see their current employer as a long-term opportunity are already looking for another position.
Best Practices For Increasing Retention
Here are some ideas to help boost retention, as well as overall employee satisfaction.
Since pay is one of the most common reasons that organizations lose quality employees, organizations that want to keep them need to pay well. Not pay “competitively”, but pay well. Make sure your employees can live a comfortable life in your area. It sounds simple, but so many companies are wholly out of touch with what compensation is good and are only familiar with what’s common.
Create Robust Growth & Advancement Plans
A powerful way to increase retention is to create robust growth and internal advancement plans. This can show your employees that not only is there a path to advancement or promotion, but it will lay out the path and the conditions they need to meet to be considered. This can help give them a sense of purpose and drive.
Encourage Better Work-Life Balance
Allowing employees to fine-tune their work-life balance is a great way to get them to stick around. Flexible schedules, hybrid or remote work options, more paid time off, and increased allowances for personal life are solid starting points. Be sure that you aren’t trying to blend work and personal life, and delineate where work starts and stops so your employees are clear.
So many offices frown upon excessive socializing with the outdated belief that it hampers productivity or efficiency. Encouraging your employees to socialize and interact can be a tremendous help toward building a stronger sense of community in your workplace. Make time for regular team-building activities, as well as social events and other opportunities outside of the workplace. A strong sense of community in the workplace helps to boost loyalty, engagement, and of course, retention.
Hire & Reward Great Leaders
A major asset that you need to acquire to maximize employee retention is a selection of great leaders. Whether you promote from within or hire externally, leadership plays a major role in employee retention. By hiring great leaders who foster a positive work culture, provide clear direction and support, and hold themselves accountable for results, you can set your employees up for success. A strong leadership team can also help attract top talent, improve employee morale and engagement, and reduce turnover.