Last month, the academic who had invented the term “the Great Resignation” in 2021, predicted US labor shortages would ease off this year. According to Anthony Klotz, associate professor at University College London, high inflation, large-scale staff cuts in the US technology sector and a looming recession are expected to stop the trend of millions of people quitting their jobs.
Some employers may breathe a sigh of relief. However, the balance is not shifting as the employee retention statistics show, at least not entirely, in their favor. Industries like healthcare and retail will continue to face labor shortages. In addition, highly-trained and capable employees – especially those with strong digital skills – will always have multiple options.
In other words, now is not the time to act complacent and slack off efforts to keep employee retention rates high. Taking proactive steps to retain the best performers and improve working conditions for all staff will be as vital in 2023 as in 2021 and 2022.
Why employee retention is more important than ever?
Employee retention is measured by the retention rate, or stability index, which shows numerically an organization’s ability to retain employees over a certain timeframe. To get a better picture of how well the organization is dealing with this task, managers typically also look at the turnover rate: the number of people leaving as a percentage of the average number of employees for the same period.
In general terms, employee retention also refers to the effort to create the kind of working conditions that get employees to stay. For example, as resignations hit record numbers during the past two years, companies took steps to improve employee well-being and offered hybrid and flexible work. This article will outline additional steps that organizations can take to increase loyalty and retention rates. But first, here are four reasons why an effective employee retention strategy is a no-brainer for any organization that wishes to excel and thrive.
- Saves time and money: High turnover is costly. When an employee leaves, it typically takes about six weeks to find а replacement. The new employee then needs between four and five months to become fully productive. In addition, benchmarking data from the Society for Human Resources Management estimates that the average cost of a new hire in the US is around US$4,700. However, in some industries, the cost of hiring a new employee can be as high as three to four times their salary. This is why employee retention programs are so important: they help organizations avert the waste of time, financial resources, productivity and institutional knowledge caused by high turnover.
- Protects organizational knowledge: A lot of organizational knowledge is tacit and experiential. It is shared among staff and never (fully) spelled out. In addition, each employee within a company has valuable knowledge. This means that when someone leaves, their knowledge may be permanently lost to the organization. Consider the findings of this study which claims that 42% of the skills and knowledge required to perform well at a certain position are only known to the person currently holding it. Furthermore, the average new hire spends almost 200 hours working inefficiently. While there are many ways to preserve organizational knowledge – for example, mentoring and a connected learning culture – strong employee retention rates ensure that vital organizational knowledge stays within the company.
- Improves the employee experience: Successful recruiters and HR personnel know that employee retention efforts start at the recruitment stage. This is why it is important that companies set up clear candidate selection criteria and act transparently. Other key steps include making sure that HR staff get back promptly to everyone interviewed for a position and keep in regular touch with selected candidates. Once a new employee has started, a well-structured and executed onboarding experience will ensure they feel welcome and reassured that they have made the right choice. These steps have the added benefit of also enhancing the employee experience.
- Boosts employee morale and engagement: The link between a great employee experience and high levels of employee engagement is well understood. Staff who feel welcomed and valued at work are more engaged. Studies estimate that highly committed employees take fewer sick days and are up to 87% less likely to leave. Furthermore, an authoritative Gallup study on engagement has found well-established connections between employee engagement and 11 performance measures such as productivity, customer loyalty and engagement, quality and organizational citizenship. In addition, when the Gallup researchers compared business units in terms of engagement levels, they discovered that those in the top quartile were 23% more profitable compared to those in the bottom.
Improving employee retention in times of crisis
As mentioned already, a well-executed employee retention strategy not only reduces turnover but also ensures staff feel valued, motivated and satisfied – all prerequisites for getting the best out of them at work. Below are some key elements that build the kind of organization employees are unwilling to leave:
- Efficient and friendly onboarding: Onboarding is a one-off opportunity to impress new hires and align them with an organization’s culture. Employers that make the first few weeks about HR forms and bland how-to videos run the risk of having a vacancy again soon. In a recent survey of 1,002 recently-hired US workers, half said they wanted to leave. Among those who had experienced poor onboarding, 80% were planning on quitting soon. On the other side of the spectrum, employees who feel they have received a warm welcome are twice as likely to have strong feelings of belonging at work. A great onboarding experience engages new staff from day one. It means they receive adequate training and have someone to turn to when in doubt. The social element is not to be underestimated either. Managers need to properly introduce new workers to relevant people in the organization, making sure new hires are included in team activities and important projects early on.
- Mentors for everyone: The link between mentorship and increased employee retention is well established. Just consider that 90% of workers with a mentor say they are happy at work. Furthermore, mentorship can transform a person’s career, pushing them to grow in ways they had previously not imagined. This is true for mentees, mentors and organizations. A well-executed mentorship program can make a company more diverse, creative, productive and profitable. A successful program should ideally make mentorship available to everyone. It may sound like a daunting task but this is, in fact, completely achievable with the right technology. In addition, not every worker is interested in a long-term relationship with a mentor. For many, on-demand mentoring and peer learning are all that is needed.
- Work-life balance: Millions of people reevaluated their priorities during the pandemic and, as a result, work-life balance is now a top concern for many. One way to support workers as they juggle multiple responsibilities is to offer flexible work. To gauge just how popular this measure is, consider the findings of a study among more than 10,000 knowledge workers in the US, UK, France, Germany, Japan and Australia. Almost 93% of the people interviewed wanted flexible schedules. Other possible steps include encouraging staff to take breaks, providing time off for volunteer work and focusing on productivity instead of just the number of hours spent in the office.
- Compensation: According to Deloitte’s Global Millennial Survey, dissatisfaction with pay may have contributed to the Great Resignation, at least partially. Is compensation the top motivator for every job seeker? Perhaps not. But it is essential for companies that wish to retain their top performers. To determine whether a salary is competitive, organizations should compare it to the median country-wide salary for the same position and to what competitors are offering. In the past, it may have been enough to only consider local competitors. However, with remote work, talent is no longer geographically limited and neither is the reach of a company's competitors. Many organizations offer perks like commissions and bonuses on top of a worker's basic salary. Insurance, onsite health services and mental health support are other perks that employees value. Some companies offer additional paid leave for parents, support for higher education or tuition reimbursements. Of course, there are also perks, like communal sports activities and a pet-friendly environment, that don't cost anything and yet are very valuable to staff.
- Training and development: The opportunity for learning and growth is the second most important priority for job seekers from the millennial and Gen Z age groups. It is also a compelling reason to stay on. Firstly, because it makes staff feel valued and supported to excel at their jobs and, secondly, because it promotes internal mobility and career growth. These are precisely the reasons why organizations, too, should focus heavily on staff training. And with modern advances in the way information is disseminated and exchanged, training and upskilling employees do not need to be costly, time-consuming or burdensome. From microlearning to collaborative learning and internal talent marketplaces, many novel approaches represent a win-win for employers and employees alike.
- Continuous feedback: More than half of voluntarily exiting employees surveyed by Gallup have said their organization could have acted to prevent them from quitting. The problem is, managers oftentimes have no idea what is coming until it is too late. Feedback programs help managers identify trigger points early on before they have turned into major sources of discontent. In addition, more and more companies are using stay conversations, also known as stay interviews, to engage with their star employees. These one-on-one informal conversations help managers learn more about employees’ career goals and aspirations. When done right, stay conversations are very effective in engaging employees and making sure they stay on.
- Positive workplace culture: More than three-quarters of employees consider a company’s culture before sending in a job application. In addition, 65% say one of the main reasons for staying with their employer is company culture. A positive and supportive organizational culture is a key driver for employee retention. In addition, companies with a healthy culture are more adaptable and perform better. According to McKinsey, companies that score in the top quartile in terms of culture post returns to shareholders 200% higher than the returns of companies in the bottom quartile.
In conclusion, a successful employee retention strategy has many elements. The good news is that the factors that drive high retention also ensure that workers are driven, creative and productive while on the job.
To see how Mentessa can help streamline onboarding, scale mentorship, encourage collaboration and promote a healthy organizational culture, schedule a free expert consultation now.