Everything You Need to Make a Winning Employee Retention Strategy
We all know it hurts to lose a good employee, but what happens when it’s not just a single employee who decides to leave? When turnover becomes a trend, the effects can spread beyond a team or department to the entire organization, and the results can be devastating.
While many businesses put a lot of effort into their hiring and onboarding process, employee retention is often treated as an afterthought until employees start walking out the door. In fact, a Watson Wyatt survey found that more than 50 percent of companies don’t have structured employee retention plans in place.
Your people are the heart of your business, and it’s important to develop an employee retention plan that treats them that way. Creating a winning employee retention plan not only helps reduce turnover costs, but also makes your business a more appealing place to work—for new hires, for veteran employees, and even for candidates.
A common misconception regarding retention is that it is mostly based on employee pay and incentives. However, the data suggest that making employees feel secure, appreciated, and successful goes a lot further than a few extra dollars in their paycheck each year.
Here’s everything you need to know about why and how to create a winning employee retention plan.
The Need for an Employee Retention Plan
Employee turnover can place significant strain on an organization, and it’s not always preventable, which gives HR professionals and business owners anxiety. That’s why creating an employee retention plan is worthwhile. By identifying your areas of influence and putting a plan in place to keep the amazing people you hire, you’re helping increase their morale, productivity, and performance, as well as saving on hiring and training costs that increase along with turnover.
Consequences of Low Retention
One of the major consequences of low retention rates is the high cost of replacing employees.
Considering that the cost of losing an entry-level hire is, on average, 50 percent of the employee’s salary, having a high employee turnover rate can get very expensive, very quickly. However, employers lose more than money when they have low retention.
Low retention rates also contribute to a poor work environment for your employees, and as you fill, train, and replace people in your organization, productivity can suffer. For employees, low retention rates lower morale and make your company less desirable to work for—creating a compounding effect. And low retention harms your employer brand, too: Great employees want to work for great companies, and poor retention rates may indicate to potential employees that your company isn’t where they want to work.
Common Reasons for Low Retention Rates
There are many reasons retention rates suffer in a company or industry. A LinkedIn study found that high turnover is often the result of a “very healthy, very unhealthy, or changing industry.” In healthy industries, high turnover rates result from high demand coupled with rising costs of compensation. Employees in these industries are constantly bombarded with new opportunities offering higher pay, better benefits, and extras like profit sharing or stock options. In the case of an unhealthy industry or business, however, the number one reason for individuals leaving their jobs was a lack of career opportunity and growth. Employees in unhealthy industries may not just leave an organization behind when they go; they might abandon the entire industry for another career path.
But if external, industry-specific factors are one side of the turnover coin, internal issues are the other side. If employees are leaving and your industry doesn’t fall into one of the above categories, chances are it’s your organization that’s at fault. If your employee retention rates are low because of involuntary turnover, you may need to reevaluate your hiring process and make sure you’re hiring people who are a good fit for the position and the company. If your turnover is mostly voluntary, however, it’s time to take a hard look at your company culture, values, mission, and vision, and how they align on paper versus in reality.
Considering that 71 percent of currently employed individuals are actively searching for their next job, employee retention is a big issue. Some of the early warning signs that an employee is headed out the door may be excessive absences, attitude change, a decline in work quality, arriving to work late, and leaving work early, among others. Employees who don’t feel your company offers the opportunities they need will turn their attention elsewhere pretty quickly.
The Benefits of High Employee Retention Rates
High employee retention rates are great for you and your employees and make work a better place to be for everyone involved.
For employers, high retention rates mean lower hiring costs and turnover expenses as well as increased employee productivity, especially for skilled workers who become more effective over time. For employees, high retention rates are tied to better morale, less stress, and stronger work relationships, not to mention the contributions veteran employees make to help new employees get up to speed and feel at home.
Identifying Areas of Influence for Retention
While you can’t account for everything—for instance, you may not be able to compete with the big salaries other companies are offering, and you can’t control the overall health of your industry—you can play a role in employee retention by looking inward and finding ways to support your employees.
Your employee retention plan may incorporate changes to your company environment, culture, benefits, development, and employee recognition. Here are some ideas that can help you in each of these areas.
Even simple changes to your work environment can help improve employee retention.
Is your work environment flexible for employees who might want to explore custom scheduling, telecommuting part-time, or working entirely remotely? If not, consider making it more flexible.
HubSpot’s Consumer Omnibus in 2017 discovered that 53 percent of respondents valued a flexible work environment over a competitive salary, so this is a major consideration for companies looking to improve employee retention.
In addition to giving employees a flexible workspace, consider other ways your company can foster a better work environment. Is there a sense of respect between employees? Do your employees feel safe in their work environment? While these may not be issues in most companies, it pays to check when developing your employee retention plan.
Company culture is a major contributor to employee retention issues. Nearly half of all people looking for new jobs cite company culture as the main reason for their decision to leave. Fostering camaraderie, purpose, transparency, and communication are just a few ways to help improve your company culture.
Competitive benefits might not be the top reason employees stay with a company, but they are certainly an important reason to stay. A survey for America’s Health Insurance Plans found that 56 percent of employees with employer-sponsored benefits considered good health insurance a major reason to remain in their present job.
Although healthcare appears to be the most important benefit to employees, there are other benefits you can incorporate into your employee retention plan, such as:
- Paid time off and sick leave
- Maternity leave
- Dental and vision insurance
- Retirements plans
- Life insurance
Creating unique benefits that match your industry, your location, and the values of your employees and company is another way to boost engagement and retention. Some examples of less conventional benefits include:
- Ride sharing, van pools, and public transportation passes
- Pet daycare and “pawternity” leave for new pet owners
- Sponsoring intramural sports and e-sports teams
- Paid-paid vacation
While these latter options can’t make up for a lack of conventional benefits, they help foster an environment where employees can have fun, feel more connected, and get to know one another. Building these ties and providing the security of a robust benefits plan helps employees feel more connected to the organization.
Employees value the ability to advance in their careers. When employers know their employees’ long-term professional goals, they are better able to meet them and create learning and development programs that help employees gain skills and advance.
If you don’t have an educational program, consider other ways to guide and encourage employees who are looking for ways to advance from their current position or broaden their skill sets to other areas. Tuition reimbursement is great if your budget allows for it, but there are other excellent but less expensive options, including mentoring, shadowing, internal internships, and using internal projects such as company events to create a workspace for cross-skill development.
Employees like to be recognized. Implementing employee recognition in your employee retention plan can help with retention, improve company culture, and boost employee engagement and happiness. One of the best ways to improve employee recognition in your employee retention plan is to tie recognition to the core values of your company.
Your Current Retention Rate and Strategies
Your current retention rates and the employee retention strategies you choose will help determine the next steps for your employee retention plan. Here are a few steps to follow as you evaluate where you currently stand and how to move on to the next phase of your employee retention plan.
1. Review Your Current Employee Retention Data
Before you can jump in and create a new employee retention plan, you need to know your current retention rates. Look at your retention data for at least the last five years (longer if it’s available). Then perform an audit of any existing retention practices, methods, and successes to help find the root of your retention problems. Surveys can also be useful methods of gathering feedback during your review process.
2. Find Strategies and Solutions
Once you know your data, you can look to find the root of the problem. Identify what the company is doing right and what you need to work on. Consider an employee retention plan that incorporates or acknowledges all of the following:
- Employee engagement
- Work-life balance
- Better recruiting
- Company culture
3. Make a Plan of Action
Now that you know what areas to focus on you can break it down into achievable goals. Get started by specifying:
- Your goals
- Your timeline
- Who is responsible
- What they will need to be successful
- The desired outcome
4. Create Your Employee Retention Document
Take your data, analysis, and plan and create your employee retention document. This document should include:
- A report of your turnover rates
- Employee feedback
- Goals and how to achieve them
- Task calendar
You should also analyze the cost of implementing your employee retention plan. Implementing your plan will cost money, but should save you money on retention in the long run.
Following this process outline will help you focus your efforts where they belong and transition toward a different area of focus than you currently have.
Innovative Employee Retention Strategies
In 2016, a SHRM study found that 46 percent of HR professionals identified employee retention and turnover as their top workforce challenge. With that in mind, it’s no surprise employers and HR departments alike are striving to implement innovative employee retention strategies into their employee retention plans.
The best place to start is often with the recruitment and hiring process. Beyond hiring, your own employees can be an excellent source for ideas about what they wish were present in their work experience. You can use simple surveys to get feedback and ideas, and employ the same surveys to see if your efforts are making a difference.
Some common strategies companies have used include:
- Contributing to charitable organizations: Employees with the opportunity to donate time or money through their company feel a stronger connection to the mission of the organization as a whole.
- Providing mentors: Increase employee learning by creating open workspaces and encouraging collaboration between colleagues.
- Work flexibility: Millennials especially value a good work-life balance, with 84 percent citing this as their number one factor when job hunting.
Using proven strategies like these in your employee retention plan is a sure-fire way to help keep your awesome employees.
How to Measure Retention Success
The only way to know whether your employee retention plan is working is to compare your performance over time, which means it’s essential that you keep track of your retention metrics and turnover rates. Important metrics to track include your voluntary and involuntary turnover rates, retention rates under different managers, and employee satisfaction.
Implementing HR software from BambooHR can help you stay on top of employee metrics so you’re aware of your retention performance at all times. BambooHR’s software can help you with the onboarding process, track retention, provide analytical reports on employees, and more. However you decide to measure your retention success, make sure you track it from the beginning so you can see clearly what effect your plan is having on your organization.
Don’t forget to incorporate employee feedback into your retention plan as well. Getting accurate and honest answers from employees will help you know if your retention plan is on the right track.
Successful Case Studies
Case studies show how you can successfully and realistically implement a winning employee retention strategy as others have done. Read how these companies created a culture with low voluntary turnover.
Netflix built its incredible employee retention plan on a few core strategies, including the beliefs that you should only hire “A” players, that you should treat your employees like adults, and that developing great managers is essential. With these core strategies and beliefs in mind, Netflix revamped its hiring strategy to ensure that new employees were a good fit for the company right from the start.
Hiring responsible high performers who were well-suited to the company culture and training managers to be good leaders have been essential parts of Netflix’s successful employee retention plan. Considering their average employee sticks around for 3.1 years, it seems to be working pretty well.
Clif Bar & Company
This company had its humble beginnings in Gary Erickson’s kitchen, where he whipped up the first CLIF Bars and nicknamed them after his dad, Clifford. However, there was no magic recipe for success when it came to the Clif Bar employee retention plan. Instead, they abide by the beliefs that employees should have a sense of ownership in the company (an employee stock options program), have opportunities for personal development, and have leaders who set good examples for their employees. All of these actions have led to Clif Bar’s impressive 97 percent employee retention rate.
These case studies’ results aren’t unrealistic for others to achieve. If your main issues with employee retention stem from choosing employees that aren’t a good fit for the company, it may be time to revamp your hiring process. Alternatively, if your employees aren’t fully invested in the company, the answer may be providing better leadership, opportunities for development, and a sense of company ownership. A good employee retention plan can help address these issues.
How to Make High Retention Rates Last
Getting high retention rates that last isn’t a set-it-and-forget-it process. Once the plan is in place, it takes continuous efforts to maintain great results.
To lay the foundation for this, while you’re developing your employee retention plan, consider how you can help employees become more involved in their work environment over the long term. Employees stay with companies longer when they feel integral to and valued by their work community, and you can foster that involvement through key components like these:
- Creating team projects
- Cultivating team relationships
- Providing mentors
- Giving recognition
- Providing good benefits
Create Success with an Employee Retention Plan
The real goal of high employee retention isn’t to keep warm bodies within the walls of your organization; it’s about the benefits a high retention rate has on your entire organization now and in the future. You put a lot of effort into hiring the best people for your organization, so retaining them maximizes the return on your effort. Creating a great employee retention plan ensures that not only will your current employees want to stay with you for the long haul, but new employees will feel great about their future with your company and prospective candidates will be eager to jump on board when you need them. In short, a great employee retention plan can make your organization a great place to be.