While it’s normal for employees to come and go, sometimes spikes or trends in employee departures can indicate larger issues within your organization. To identify and understand what factors are motivating employees to leave, you’ll need ways to collect, consolidate, and act on employee feedback. That way, you can keep your staff happy — and ensure that they’ll stay with your company for many years to come.
Lately, though, the Great Resignation and the current economic downturn have made it even more challenging to retain top talent. The impact of the Great Resignation has been significant, resulting, in part, in over 47 million Americans voluntarily quitting their jobs last year, according to the US Bureau of Labor Statistics (BLS). Workers have been leaving en masse in pursuit of a pay raise, advancement opportunities, and/or a more fulfilling career, among other reasons.
To attract and retain talent, many companies have been offering more competitive compensation, flexible work arrangements, and other enticing workplace benefits. But these offerings are expensive, and now, rising inflation and a poor economic outlook have forced companies to make budget cuts, freeze hiring, and even lay off employees — none of which are conducive to helping retain talent. And the financial downturn has left companies in the uncomfortable position of trying to retain talent with fewer resources. Luckily, there are a variety of ways to improve employee retention, and not all of them will cost you.
To help you keep your employees happy, we’ve put together a comprehensive guide with everything you need to know about employee retention: why talent retention matters, the top reasons employees leave jobs, and how you can create your own highly effective employee retention strategy. Read on to learn how to invest in employee retention and ensure that your organization remains a competitive employer — through good times and bad.
What Is Employee Retention?
Employee retention is the practice of investing in the employee experience at your organization with the intention of keeping talent happy and engaged while reducing turnover. And yet, talent retention is more challenging than it sounds. Your business must proactively learn what aspects of the employee experience are prompting individuals to leave, and resolve these issues in a timely manner to maintain a positive working environment.
In order to proactively reduce turnover, many businesses create employee retention strategies. While every company’s strategy will be customized to their unique organizational needs, at their core, every strategy must allow HR teams to collect, analyze, and take action on employee feedback; this will enable your business to incrementally improve its employee experience and prevent workers from leaving.
Why Is Employee Retention Important?
The costs of losing top talent — from hiring, recruiting, and training costs, to lost productivity and institutional knowledge — can quickly add up. One Gallup article even estimated that the cost of replacing an employee can amount to anywhere between one-half to two times their annual salary. This means, the article reported, that for a 100-person company with an average employee salary of $50,000, turnover and rehiring could cost anywhere between a whopping $660,000 and $2.6 million per year.
And with many employees still joining the Great Resignation, turnover costs could be even higher. In fact, employee retention strategy company Work Institute’s 2022 Retention Report reiterated the BLS statistic that over 47 million US workers quit their jobs voluntarily in 2021 — and stated that this figure amounted to 34% more than 2020 and 13% more than 2019.
Employee turnover can also cost your business in less tangible ways. For example, when long-time or influential employees leave, your company can lose out on institutional knowledge, or the collective knowledge and relationships an employee develops over their time working at your company. This can not only stall productivity, but it can also impact morale among remaining employees, who might be expected to pick up tasks left behind by the departing employee.
Top Reasons Why Employees Leave Jobs
Employees leave jobs for all sorts of reasons, and some might be out of your business’s control. For example, an individual might leave their job to:
- Continue their education
- Make a career change
- Have a child
- Care for a sick family member
That said, there are some factors that push people to seek new employment opportunities that are directly connected to an individual’s experience at your company. These factors might be influenced by your company culture, values, work environment, or leadership team — all elements that fall within your organization’s control. Some common reasons employees become unsatisfied with their jobs and look for employment elsewhere are:
- Lack of career growth opportunities
- Lack of recognition
- Lack of job security
- Poor management
- Uncompetitive compensation
“There are many reasons people leave their jobs, and most of the top reasons boil down to people being dissatisfied and disengaged with their work — or both,” noted Crispina Wilson-Jones, previously a People operations executive at online learning and development platform Learnerbly. “And both of these are often within an organization’s control.”
While every company will have its own unique areas that need improvement, there are a few overarching trends HR leaders should be aware of. According to a study released by consulting firm McKinsey & Company, the top three reasons employees cited for leaving their jobs between April 2021 and April 2022 were a lack of career development and advancement opportunities (41%), inadequate total compensation (36%), and uncaring or uninspiring leaders (34%). It’s important to keep these three key factors in mind as you create an employee retention strategy; you might find that some of them exist within your own company.
How to Create an Employee Retention Strategy
In order to improve the employee experience at your organization, you need a strong employee retention strategy. While it may be tempting to start working on new retention initiatives right away, being too hasty can waste time, money, and effort, especially if you don’t know exactly what issues are problematic for your workforce to begin with.
Before you start crafting your retention strategy, you’ll need to do some in-depth quantitative and qualitative research to better understand what underlying issues are present in your organization. Here’s a detailed look at how you can conduct this research, and start to build an effective and efficient employee retention strategy.
1. Measure turnover.
In order to improve employee retention at your company, you need to begin by assessing how many employees leave your company in a given time period. While there are a few different types of turnover — voluntary, involuntary, internal transfers, and new-hire turnover, to name a few — you’ll want to primarily focus on voluntary turnover, or the number of people who willingly left your organization.
Here’s how to calculate voluntary turnover:
Voluntary Turnover = [ (# of voluntary departures) / (average # of employees) ] X 100
For example, if you’re calculating voluntary turnover for a given time period like Q1, and your company has 100 employees (on average) and 5 voluntary departures during that period, your equation would look like this:
[ 5 / 100 ] X 100 = 5% Voluntary Turnover Rate in Q1
Note that the ‘average number of employees’ figure should be a company-wide number (unless you’re only calculating this rate for a specific department, in which case, adjust your numbers accordingly), and be sure to keep the time period consistent for both the numerator and denominator.
You’ll also want to consult industry benchmarks to give additional context to your calculations. This can help you understand if your turnover rates are above, below, or in line with your competition. While you can always purchase industry-specific benchmark data sets, you can also access free reports from the Bureau of Labor Statistics, which provide annual turnover rates by both industry and region. Depending on how your rates are trending and how they compare to benchmark data, you might realize you need to more closely examine what could be causing your employees to leave.
2. Survey your employees.
Wondering what underlying organizational issues could be prompting top talent to leave? Ask your employees.
Conducting regular surveys allows you to collect anonymous feedback on all areas of the employee experience — like onboarding, benefits, management, and work-life balance — and identify specific areas of your organization that need to be improved. An engagement survey solution, like Lattice, can help your business analyze these results and highlight high-impact areas you can act on to keep your employees happy and engaged.
“Conducting regular employee satisfaction and engagement surveys is essential to employee retention,” explained Wilson-Jones. “If done right, they can help an organization understand exactly why its employees are dissatisfied or disengaged, and what the organization can do to remedy this.”
While employee engagement surveys touch on a wide variety of workplace topics, you might also want to utilize more targeted surveys — like onboarding and exit surveys — to gain additional insight into the experiences of specific groups within your organization. Here’s a brief look at how your business can use these niche surveys to retain talent.
An employee’s first few weeks set the standard for the rest of their time at your company. But while most businesses believe they’re putting their best foot forward during these influential first few days, only 12% of employees strongly agree their organization does a great job with onboarding, according to Gallup research. That’s why you’ll want to ask your new hires how your business can improve.
With onboarding surveys, your organization can collect your new hires’ unique perspective on company culture, and take action to make every employee’s first days a positive experience. Using a solution like Lattice Onboarding Surveys, your business can automatically send surveys to new hires after 30, 60, and/or 90 days to learn how their experience has been with your company. Leveraging these insights, you can quickly adapt your onboarding processes for the next new-hire cohort, and ensure you give recent new hires a good impression of your organization.
While current employees may be reluctant to share candid feedback for fear of retaliation, departing individuals are often more frank and honest about their experiences. For this reason, exit surveys can be a useful way to learn what’s prompted an employee to leave and what they think can be improved about your business.
“Once you’ve surveyed or interviewed a sufficient number of departing employees, attempt to find trends and recurring themes in their feedback. This will determine your next move as a Human Resources team,” advised Chelsea Stearns, Deputy Director of Human Resources, Employee Experience at the US division of global engineering firm QinetiQ. “For example, if the majority of employees express dissatisfaction with pay and benefits during exit interviews, you might want to revisit salary benchmarks or adjust [pay and benefits] accordingly in an effort to remain competitive and retain employees.”
3. Conduct stay interviews.
You’ll also want to speak with current employees, as your business still has time to improve their experience. Conducting stay interviews allows you to take a pulse check on your highest performing or most engaged employees to learn if they’re satisfied and happy at your organization. In addition to asking what’s keeping them at your company and other common stay interview questions, you’ll also want to have employees share what could improve their experience at your organization.
These conversations give you actionable insights into what’s working within your organization and what’s not, allowing you to take swift action to improve your employees’ overall job satisfaction. Odds are addressing the topics that keep coming up in these conversations will help more than just the individuals you interview.
4. Create employee focus groups.
Once you’ve identified your business’s key areas for improvement, you’ll want to discuss your proposed solutions with a panel of employees from across the organization. Small focus groups can allow you to run your ideas by the very people your initiatives will impact so you can hear their feedback and opinions and further refine your strategy. Getting their buy-in will also help you roll out any new programs and initiatives and ensure they are met with little employee opposition.
5. Execute your strategy.
Then, all that’s left to do is run your findings and proposed solutions by your executive team. Once you have their buy-in, you can start building whatever initiatives, policies, or training programs you’ve identified will positively impact your employee experience and help your business retain more top talent. Just be sure to clearly communicate these actions to your employees so they know you’re making ongoing investments in their well-being.
6 Preventative Tactics to Improve Employee Retention
While your survey and interview results should be strong indicators of what is working (and what’s not) at your organization, it can be useful to see what types of initiatives have helped other organizations retain talent. Here are a few common tactics you can adopt to retain top talent.
1. Offer competitive and transparent compensation.
We’re living in tough economic times. Rising inflation, talk of a recession, and the threat of layoffs have left many employees (and businesses) anxious over their financial future. Unfortunately, that anxiety and fear of the unknown could be strong enough to push your employees to pursue higher-paying opportunities outside of your company. You can’t blame them, though. According to management services company ADP’s 2022 Pay Insights report, as of September 2022, employees who stay in their jobs receive a median year-over-year annual pay increase of 7.8%, while job-hoppers increase their earning potential by 15.7%.
But when raises and bonuses aren’t an option, your business needs to explore more cost-effective ways to create a compelling compensation package that will retain top talent. One way to achieve this is by creating fair and transparent compensation plans. When employees feel properly compensated for their time and effort, they are more likely to remain loyal to your company. Using tools like Lattice Compensation, your business can establish a clear and objective pay strategy that lets employees know how their compensation is determined. This transparency ensures there’s no room for misinterpretation and speculation, so employees know they’re being appropriately compensated for their talents and work.
If your business does have the budget, you can also look into developing a more robust total rewards package for your employees. This might include rolling out wellness programs or new perks, offering more flexible work options, ensuring your workforce has a healthy work-life balance, and giving employees the time off they need. These cost-effective changes can help improve job satisfaction and employee morale, while ensuring your company not only attracts the best employees — but also retains them.
2. Make learning and development opportunities visible and accessible.
Employees at companies with internal mobility stay almost two times longer, according to LinkedIn’s 2021 Workforce Learning Report. While companies with low mobility saw a median tenure of just 2.9 years, high-mobility businesses were able to keep talent for a median of 5.4 years, the report found. Unsurprisingly, if an individual doesn’t think they can learn and grow at your organization or feel your company is invested in their career path, chances are these top performers will take their talents elsewhere.
“Great employees are usually great because they push themselves to keep getting better. They want opportunities to learn and develop their skills,” pointed out Rochele Bertasso, SHRM-SCP, senior HR business partner at Helpside, an HR consultancy specializing in small businesses. “In a small business, where career advancement opportunities may be scarce, offering professional development opportunities can give employees the growth they need to stick around.
“Consider the ”Three E’s” of development: Education, Experience, [and] Exposure,” she continued. “Figure out how you can help employees find internal projects and opportunities that will help them grow in each of these areas.”
Many employees look for job security during tough times, and learning and development (L&D) opportunities can help them feel like they are investing in their current and future career. This can be through a professional learning stipend or reimbursement program that lets employees buy books, attend conferences and networking events, or take classes to learn new skills. It could also come in the form of offering internal growth opportunities, like mentorship programs, stretch assignments, high-visibility projects, and cross-functional assignments, that allow employees to learn new areas of the business and hone their skills. Investing in your employees’ career development can help your business show employees you want them to grow with your company — and that you’ll support them in doing so.
3. Communicate openly and honestly with employees.
During times of uncertainty, your employees want to know what’s happening and how upcoming changes may affect them. While many businesses stall communication until they have a detailed action plan to share with employees, taking too long can cause confusion, frustration, and even panic among your workforce.
Employees don’t expect you to have all the answers, but they do want to know what you know, what you’re doing to figure out what you don’t, and how you anticipate these changes will impact your organization. Being open and honest with employees can build trust and loyalty — two crucial characteristics that can make your organization more resilient and capable of withstanding any challenges that come its way.
4. Prioritize diversity and inclusion.
Employee resource groups (ERGs) are an excellent way to bring employees together based on shared experiences, raise awareness for workplace and social equity issues, and advocate for internal awareness and change. Launching more inclusive policies, like childcare stipends and diverse hiring slate requirements, is another way to make all employees feel welcome, and using more inclusive language like “parental leave” instead of gendered language can help every individual feel supported by the company to take time to bond with their child. Additionally, offering more inclusive company holidays, or giving employees a set number of annual floating holidays, can show your workforce that you’re mindful of their personal lives and respect their religions and backgrounds, whatever they may be.
Even the design of your office can help foster a culture of inclusion and belonging. Creating designated private spaces for nursing mothers to pump and religious employees who may need space to pray throughout the day, building gender-neutral bathrooms, and ensuring you have a variety of different types of workspaces and/or the ability to outfit workstations to make them accessible for people who require various accommodations can help ensure that employees of all religions, genders, and abilities feel set up for success in your office.
5. Offer flexible (and remote) work options.
The pandemic has shown us that telecommuting works, and many employees have become used to the convenience of flexible scheduling. One study found that 80% of employees said they’d be more loyal to their current employer if it offered flexible work arrangements. Trusting and allowing your employees to set their own work schedules and get their work done when (and where) it’s most convenient for them is a well sought-after perk that can help make your business a more competitive employer.
6. Build a culture of employee recognition.
Many employees leave companies because they feel undervalued or unappreciated in their roles. Ensuring each and every employee feels seen and valued at work can help improve engagement, and ultimately, retention.
“It’s crucial to praise our employees for a job well done. Employee recognition can take many different forms, like a wall of fame, an internal newsletter with kudos, or a bonus for achieving monthly goals,” said Ewelina Melon, Chief People and Culture Officer at Tidio, a Polish company that builds live online chat tools. “Recognition programs help improve employee satisfaction and engagement while reducing turnover.”
Even seemingly small gestures — like giving employees handwritten notes or a shout-out in a meeting to acknowledge a win — on a regular basis can help your team feel acknowledged and appreciated. More companies are investing in peer recognition software to allow individuals to call attention to and celebrate their coworkers’ hard work and achievements. Some solutions, like Lattice Praise, even allow employees to tie their kudos to a company value and share the accolade to Slack, Teams, or another internal messaging tool. This gives everyone the ability to acknowledge their colleagues and build a culture of recognition.
Every organization’s employee experience is different. That’s why you must source both quantitative and qualitative data to discover where your HR team can make the biggest impact on employee retention. Once you’ve identified what underlying organizational issues are prompting your employees to leave, you can take swift action to resolve them and make your business a better place to work for all your employees.
Looking for more ways to improve retention? Download our eBook Driving Engagement and Retention in the Hybrid Workplace for actionable HR strategies you can use to boost employee engagement, ensure high performance, and make every employee feel valued and respected — no matter where they’re located.