Employee Retention

Retention of productive employees is a major concern of HR professionals and business executives. It is more efficient to retain a quality employee than to recruit, train and orient a replacement employee of the same quality.

Employees identified these five factors as the leading contributors to job satisfaction:

▪ Respectful treatment of all employees at all levels;

▪ Compensation/pay;

▪ Trust between employees and senior management;

▪ Job security; and

▪ Opportunities to use their skills and abilities at work.

Employee job satisfaction and engagement factors are key ingredients of employee retention programs.

Key reasons a focus on reducing turnover makes sense:

▪ Turnover is costly.

▪ Unwanted turnover affects the performance of an organization.

▪ As the availability of skilled employees continues to decrease, it may become increasingly difficult to retain sought after employees.

Turnover costs can have a significant negative impact on a company's performance; however, not all turnover is harmful. For example, a new replacement hire may turn out to be more productive or more skilled than his or her predecessor.

Devising  effective employee retention strategies requires organizations to understand both why employees leave organizations and why they stay.

Why Employees Leave?

Employees leave organizations for all sorts of reasons — Some find a different job, some go back to school, some follow a spouse who has been transferred to a different location, some retire, some get angry about a work-related or personal issue and quit on impulse, and some  simply decide they no longer need a job (these categories of departure are referred to as "voluntary turnover"). Still others get fired or laid off by the organization (referred to as "involuntary turnover").

Generally, an individual will stay with an organization if the pay, working conditions, developmental opportunities, etc., are equal to or greater than the contributions (e.g., time and effort) required of the employee. These judgments are affected by both the individual's desire to leave the organization and the ease with which he or she could depart.

Studies have shown that employees typically follow four primary paths to turnover, each of which has different implications for an organization:

▪ Employee dissatisfaction. Attack this issue with traditional retention strategies such as monitoring workplace attitudes and addressing the drivers of turnover.

▪ Better alternatives. Retain employees by ensuring that the organization is competitive in terms of rewards, developmental opportunities and the quality of the work environment.

▪ A planned change. Some employees may have a predetermined plan to quit (e.g., if their spouse becomes pregnant, if they get a job advancement opportunity, if they are accepted into a degree program). However, increasing rewards tied to tenure or in response to employee needs may alter the plans of some employees. For example, if a company is seeing exits based on family-related plans, more generous parental leave and family-friendly policies may help reduce the impact.

▪ A negative experience. Employees sometimes leave on impulse, without any plan for the future. Generally, this is the result of a negative response to a specific action (e.g., being passed over for a promotion or experiencing difficulties with a supervisor).

Why Employees Stay?

Studies have suggested that employees become embedded in their jobs and their communities and as they participate in their professional and community life, they develop a web of connections and relationships, both on and off the job. Leaving a job would require severing or rearranging these social and value networks. Thus, the more embedded employees are in an organization, the more likely they are to stay. 

Companies can increase employee engagement by providing mentors, designing team-based projects, fostering team cohesiveness, encouraging employee referrals, and providing clear socialization and communication about the company's values and culture, as well as offering financial incentives based on tenure or unique incentives that may not be common elsewhere.

Employees want to be recognized for their achievements. Recognition can help create a positive workplace culture and employee experience and organization's recognition program positively affects retention.

Employee benefits also play a role in retention. Offering a competitive benefits package, in addition to competitive pay, reduces the likelihood an employee will find the grass greener elsewhere.

Retention Strategies and Best Practices

1. Effective Practices

Effective practices in a number of areas can be especially powerful in enabling an organization to achieve its retention goals. These areas include:

▪ Recruitment. Recruitment practices can strongly influence turnover, and considerable research shows that presenting applicants with a realistic job preview during the recruitment process has a positive effect on retention of those new hires.

▪ Socialization. Turnover is often high among new employees. Socialization practices—delivered via a strategic onboarding and assimilation program—can help new hires become embedded in the company and thus more likely to stay. These practices include shared and individualized learning experiences, formal and informal activities that help people get to know one another.

▪ Training and development. If employees are not given opportunities to continually update their skills, they are more inclined to leave.

▪ Compensation and rewards. Pay levels and satisfaction are only modest predictors of an employee's decision to leave the organization; however, a company has three possible strategies:

i. Lead the market with respect to compensation and rewards.

ii. Tailor rewards to individual needs in a person-based pay structure.

iii. Explicitly link rewards to retention (e.g., tie vacation hours to seniority, offer retention bonuses or stock options to longer-term employees, or link defined benefit plan payouts to years of service).

▪ Supervision. Several studies have suggested that fair treatment by a supervisor is the most important determinant of retention. This would lead a company to focus on supervisory and management development and communication skill-building.

▪ Employee engagement. Engaged employees are satisfied with their jobs, enjoy their work and the organization, believe that their job is important, take pride in their company, and believe that their employer values their contributions. One study found that highly engaged employees were five times less likely to quit than employees who were not engaged.

2. Broad-Based Strategies

Broad-based strategies are directed at the entire organization or at large subsystems and are intended to address overall retention rates. Examples include providing across-the-board market-based salary increases, changing the hiring process to incorporate retention-related criteria and improving the work environment. 

The data needed to help a company determine which broad-based strategies to implement typically come from three places:

▪ Retention research can shed valuable light on the primary drivers of turnover.

▪ Effective practices encompass the strategies that other organizations are using and are finding effective or ineffective.

▪ Benchmarking surveys can provide information about how a company compares to competitors on issues such as pay, benefits, bonus plans and the like.

3. Targeted Strategies

Targeted strategies are based on data from several key sources, including organizational exit interviews, post-exit interviews, stay interviews, employee focus groups, predictive turnover studies and other qualitative studies. This information can lead an organization to determine more specifically where a problem exists and to develop highly relevant and linked strategies to address the issue. For example, if female professionals are departing the organization in significant numbers, a company could review common reasons that women give for leaving a company and develop strategies to specifically deal with this group of employees.

Implementation

Having an HR team that is educated about employee motivation, retention strategies, benchmarking and best-practices research is critical to the success of the program.

1. Laying the Groundwork

HR is typically responsible for taking the following steps that together would yield the information that an organization needs to determine the extent of its problem and to help shape the retention strategies that are implemented in response.

▪ Determine whether turnover is a problem. This step can be accomplished through turnover analysis, benchmarking and a needs assessment (both external and internal).

▪ Establish a plan of action. After reviewing the turnover analysis, benchmarking data and needs assessment, create a plan to improve retention. Identify broad-based or targeted strategies (or a combination) for implementation.

▪ Implement a retention plan. Execute the strategies that have been identified as appropriate for the specific problem.

▪ Evaluate the results. After implementing the plan, evaluate the results to assess the impact relative to the cost. 

2. Benchmarking

Establishing appropriate benchmarks—both external and internal—is a key first step in preparing to implement an employee retention strategy.

▪ External benchmarking. Is a 15 percent annual turnover rate too high? This question is impossible to answer in isolation. Benchmarking and a needs assessment can provide valuable information for determining whether turnover is a problem for an organization. Through external benchmarking, a company compares its turnover rates against industry and competitor rates.

▪ Internal benchmarking. With this form of benchmarking, an organization tracks its turnover rate across time. If the rate increases, overall or among particular groups, this can be a red flag that a problem may exist.

3. Dealing With Common Problems

As with all strategic initiatives, there are some common problems associated with employee retention programs. These include:

▪ Lack of top management support. If senior management does not send a message to managers and supervisors emphasizing that employees are critical to the company's long-term success, supervisory employees are unlikely to focus on people-related issues. Unless senior management actively participates in the retention process and takes primary responsibility for it, managers and employees will remain unsure of the true value of employees, both to senior management and to the organization.

Audit and Evaluation

An effective way to determine whether the employee retention program is working is to conduct an independent audit of the way the program is affecting various groups of employees. For example, are certain types of employees (e.g., low-skilled, highly skilled, technical, professional, managerial, executive or those with varying degrees of tenure) leaving the organization at more significant levels than others? If so, that group can be targeted for specific interventions. HR must be responsible for monitoring the effectiveness of all people-related program outcomes.

One way to audit retention initiatives in addition to continuing to review turnover rates and exit interview results is to conduct stay interviews of current employees. Stay interviews help employers ascertain why good employees stay and what might make them leave. It is highly recommended that managers themselves conduct these meetings, after proper training, as they have the most direct relationships with employees.

Edited by: 浪子

Bibliography

SHRM. (n.d.). Managing for Employee Retention. Retrieved from 
https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managingforemployeeretention.aspx