Employee retention is one of those things that live rent-free in the minds of most business leaders. After all, recruiting the best talent is only half the battle—if employees are constantly leaving, you won’t be able to build success on a firm foundation.
Employee retention strategies are key for reducing turnover. These strategies focus on improving employee experience, company culture, and total rewards in order to reduce turnover, increase engagement, and boost overall employee happiness.
Understanding the Drivers of Employee Turnover
Before creating a strategy, you have to understand the answers to one question: why do employees leave?
Here are some of the top reasons employees quit their jobs:
- Toxic work culture. 62% of employees said poor work culture led them to quitting their jobs. When employees don’t feel supported or trusted, when they feel too much stress, when they don’t feel recognized, or when there is any kind of harassment going on, employees are likely to leave.
- Insufficient compensation. 63% of employees quoted low pay as a reason they quit their jobs in 2021. Employees have to feel that they’re being fairly compensated for the work they put in.
- Lack of development opportunities. More than 70% of employees who are considering quitting say that they aren’t given opportunities to learn new skills and grow in their position.
- Lack of flexibility. 49% of employees stated that lack of work-life balance led them to quit, and 43% said no opportunities for remote work did the same. Employees want to feel empowered to take care of themselves and their personal lives.
- Bad manager. 50% of employees have quit a job to get away from a bad manager before. Employees need managers who they trust to support them and help them grow.
In a nutshell, employees quit when they don’t feel supported, valued, and trusted by the company in both their work and personal lives.
Why Should You Care About Employee Turnover and Retention?
Employee retention is a barometer for employee engagement, leadership effectiveness, and general workplace satisfaction. Retention rates answer the question: Are your employees happy in their jobs?
When employees aren’t happy and decide to leave, that’s a serious problem. It’s all in the numbers:
- According to Gallup, it costs U.S. businesses $1 trillion per year to replace employees who voluntarily leave. Or, to put it another way: replacing an employee can cost up to two times their annual salary.
- High turnover affects employee performance and morale. When workers leave, other team members must work to compensate for the labor loss, which can cause them to feel overworked, less engaged, and less productive. U.S. Companies lose up to $550 billion every year because of disengaged employees.
The costs of turnover are real, and they can be severe. On the other hand, the benefits of retention are hugely impactful as well:
- Save money and time on hiring costs
- Promote from within
- Higher engagement levels
- More collaboration and stronger teams
- Higher morale for all
7 Tips to Creating an Effective Employee Retention Strategy
So retention is important and turnover is bad—pretty basic stuff, right? With that foundation in place, let’s dive into the real meat of this article: how to create an effective employee retention strategy. Here are seven strategies you can follow to create a comprehensive retention plan.
1. Ensure a Positive Onboarding Experience
Onboarding should not be simply new-hire paperwork and compliance training. An employee’s first day is their first impression of your business, and the opinions they form during their first day, week, or month will shape their future mindset of your company.
Good onboarding can increase retention by 50%—however, only 12% of employees say that their onboarding process was good. And to top it off, 69% of employees will stay at a company for at least three years if their onboarding experience was positive.
Start employees off on the right foot, and they’ll stay at the company for longer—it’s that simple. Here are some ways you can consider to improve your onboarding:
- Make the first day smooth and stress-free by clearly communicating where to park, where orientation is, and where employees will sit. Ensure they have all of the equipment and knowledge they need to do their job from day one.
- Ensure each new hire understands what is expected of them. Employees need to have clarity for their role and responsibilities.
- Communicate the mission of your organization by sharing your company values and reinforcing them through your actions.
- Encourage team bonding and inclusivity by assigning each new hire a buddy to help them on their new team.
- Recognize each new hire at least once in their first week to show that they are seen and valued from the very start.
2. Prioritize Employee Engagement
Employees who are engaged are much less likely to leave the company. In fact, high levels of engagement can lead to 43% lower turnover.
To top it off a Gallup study states that if an employee is engaged, it will take more than a 20% raise to lure them to another company. That shows that engaging work and an engaging workplace can be more impactful to retention than salary!
Improving engagement levels at your company is easier than you may think. Here are some strategies to consider:
- Create value-driven work for all employees
- Recognize and reward employees for professional efforts and personal milestones
- Offer feedback for employees through one-on-ones and regular conversations
- Show trust by not micromanaging
3. Provide Plenty of Employee Recognition and Rewards
Nearly 50% of people have quit jobs because they feel under appreciated by managers. On the flip side, employee recognition lowers voluntary turnover by 31%, increases engagement by 40%, and increases productivity by 14%.
Your retention strategy should clearly plan out all of the recognition and reward opportunities you plan to provide to employees. Some examples of this include:
- Birthday celebrations
- Service awards
- Personal milestone recognition
- Various incentives
- On-the-spot recognition (both peer-to-peer and manager-to-employee)
- Lifestyle Spending Accounts
These are just some ideas for planning out your recognition strategy. For an example of how recognition programs like these can improve recognition, check out how Quick Quack Car Wash lowered turnover by 20%.
4. Offer Competitive Compensation
Salary can be a sticky subject, especially if your budget is already stretched thin. However, there’s no getting around the fact that employees deserve a competitive paycheck. To reduce turnover, they need to know that their work is valued, and a paycheck is the way to show that.
However, salaries aren’t the only form of compensation you can improve. Bonuses, raises, and recognition can all be a part of your total rewards package.
Put simply, employees must be compensated for their time and their effort—look at your compensation package and total rewards strategy to see where you can improve.
5. Empower Employee Learning and Development
68% of employees say that they would stay with their company for their entire career if the company made an effort to upskill them. And 94% of employees would at least stay longer at a company if they had career development opportunities. That shows that employees need to feel like they’re improving, learning new skills, and gaining new responsibilities.
Here are some ways to develop an employee learning and development program that makes employees feel like they’re moving continually forward:
- Create career plans or openly discuss long-term goals with each employee
- Discuss together what skills they can develop. This is a great opportunity to find gaps in talent at the company and see where employees can grow to fit those gaps.
- Offer mentorship programs for new hires to help them develop and grow in their role and beyond
- Ask if there’s anything extra they’d like to do. Maybe there is a resource group for employees or an internal committee they can join
- Offer to send them to a conference of their choice
- Pay for an online course in a subject they’re interested in
Don’t stop with individual contributors, though. Train managers and leaders to continue to improve in their skills as well.
6. Support Work-Life Balance and Mental Health
After the stress of a global pandemic, the shift to remote work, high inflation rates, and economic uncertainty, employees have realized that they need to take care of themselves more. In fact, 87% of employees expect their employers to help them maintain a healthy work-life balance.
Without work-life balance and flexibility, stress is more likely to be a problem, and when employees are stressed, they’re 3X more likely to quit their jobs. That’s why flexibility, mental health support, and work-life balance are important. Here are some strategies to try out:
- Let employees choose when and where they work
- Offer resources for mental and physical wellness
- Encourage use of a generous PTO policy
- Create Employee Assistance Programs to provide extra support
- Regularly review workloads and adjust when necessary
- Set expectations around hours and ensure no one works past these limits
Employees will quit if they’re too stressed or overworked. Supporting work-life balance and wellness is key to any good retention strategy.
7. Continually Update Benefits and Perks
Even if you totally revamp your retention strategy with new perks, more recognition, and improved benefits, chances are some of these changes won’t be a home run. Plus, old perks and benefits go out of style quickly while new ones always seem to appear.
Survey your employees to find out what benefits they like, what they would like to see, and what they think is a waste of company money. This feedback should shape future benefit and perk decisions. And the same holds true for your entire employee retention strategy—continually talk with your employees to see how you can keep your culture and offerings up to date.
That mindset of continual improvement will keep your recruitment and retention strategy ahead of the curve.
How to Measure the Success of Your Employee Retention Strategy
First off, always be aware of your overall retention rate. To calculate this number, choose a period of time and divide the number of employees at the end of that period of time by the total number of employees at the beginning of the time. Then, multiply that result by 100.
You should also use surveys and one-on-ones to measure employee satisfaction. Frequently talk with your employees and get their feedback to see how they’re feeling. Stay interviews are also a great idea to figure out why employees are happy and what you can do to improve.
Finally, don’t forget exit interviews. When employees leave your employ, it’s the perfect opportunity to learn why they are leaving. Could your culture need some work? Is your compensation lacking? Take leaving employees’ feedback and work it into your retention strategy.
The Future Trends of Employee Retention
Employee expectations are evolving, and it’s up to each company to adjust. New trends, such as growing disengagement, the booming job market, new technology, and more young employees, make employee engagement and retention a constant process.
That’s why your total rewards need to always be top-of-mind. With a robust total rewards strategy, including compensation, benefits, recognition, professional development, and flexibility, you can easily meet the needs of your employees and exceed their expectations.
Wrapping Things Up
Employee retention strategies are key to keeping employees happy and present at your company. By following these tips—focusing on onboarding, engagement, recognition, professional development, employee well-being, and compensation—you can keep the best talent at your company and recruit more of the same.