Three Cs to Improve Employee Retention: Compensation, Career Path, and Culture

Even if your existing workforce isn’t composed entirely of superstars, retaining your current employees is almost always preferable to searching for new candidates—after all, they know how your business works, and you know them as well. But staff retention can be one of the trickiest parts of managing an organization.

To help you build your business value and retain a team you can trust, we’ll dive into the three key components of retention:


The Cost of Replacing Employees

Finding and hiring the right employee is expensive not just in terms of money, but also in time—which is, effectively, the same as money spent. In the U.S., it takes companies between 36 and 42 days to find the right candidate, and costs an average of 4,425 dollars per new hire. Then there’s the less quantifiable cost of missed productivity during a new hire’s onboarding and training—it’s not unusual for a new employee to take six months before they’re familiar in their new role.

And yet, even though employers are familiar with the costs of replacing employees, they’re still reluctant to give wage increases that rival the 14.8 percent increase in pay the average employee gets when job hopping. If your employees know they’ll make more money if they leave their current position, why should they stay with you?

How Improving Compensation Improves Retention

The strategy here is to give regular wage increases, bonuses, and equity. Changes in cost of living and local job trends can set you behind the competition without regular compensation review. While keeping up with fair pay may lead to increased expenses, the cost of recruiting and re-training an employee tends to be much higher. Dollars spent to improve retention are dollars effectively spent (and a great way to show how much you value your employees).

Consider, too, benefits on top of financial compensation that increase your employees’ bottom line. For example:

These are all factors that go into your employees considering whether or not to leave. Let’s look at an example in context: Perhaps a job at a different company pays 10,000 dollars more per year. However, this new job doesn’t offer the same childcare reimbursements that equate to far more than the wage increase. That difference could be a compelling reason for your employee to stay.

And then there are the psychological benefits of higher compensation, including:

Getting Compensation Right from the Get-Go

Setting up this ongoing recognition of employee value requires starting with the right compensation offer. While outbidding competitors with higher salaries may help get a candidate in the door, it won’t improve staff retention long-term if your bid maxes out your budget and leaves no room for a raise. Compensation works best when the employer and the employee are aligned on the value of the employee’s contribution and their future potential—a process that starts with good hiring and continues through consistent conversations.

Career Path

As humans, we need purpose and movement—in our careers, we want to feel like we’re contributing to something worthwhile and like we’re moving forward. Even if you’re giving regular wage increases to your employees, they’re more likely to job hop if they don’t feel like the organization is investing in their professional growth.

Investing in Your Employees’ Career Development

Moving forward doesn’t have to mean climbing up the traditional corporate ladder. Think of more ways to develop your employees’ skills and give them opportunities to put them into practice.

The first step is to help each employee develop a defined, individualized career path. This path should be determined in consultation with the employee and should incorporate several concrete markers, such as:

More than anything, fostering a culture of learning allows your employees to tell you what they need to grow. Here are some suggestions for supporting your employees’ growth:

Investing in the long-term success of your employees proves to them that you value their work and are dedicated to advancing their careers. And by deepening or broadening the skillsets of your current employees, you’re also building business value while becoming more resilient to market shifts. When your employees aren’t stagnant, neither is your business.

When your employees aren’t stagnant, neither is your business.

Why You Should Promote Internally

Investing in your staff’s careers also means making a commitment to promote from within. While your internal hires may lack some experience that outside applicants have gained, promoting internally saves you the cost of having to search, vet, and hire an external candidate. Where experience is concerned, keep this in mind: any additional time and effort you spend bringing an existing employee up to speed in a new role is likely offset by the institutional and cultural knowledge they already have.

On top of recruiting internally, you can also create more loyalty by showing that your organization is loyal to its employees. Recognize your employees as they advance in their careers. For every milestone or successful project completion, give public recognition. That loud acknowledgement of their success goes a long way towards making your employees feel seen and appreciated.


Of the three pillars of employee retention, culture is by far the most important factor. An employee will stay for the company’s culture even if the compensation isn’t over market rate, but someone qualified won’t stay long at a job with high compensation if the culture is toxic.

If you want your retention efforts to truly be effective, what your organization says about supporting employees and what your employees experience has to line up—and that comes down to reexamining and refocusing on creating a people-positive culture.

Starting with the Right Definition of Company Culture

It’s tempting to see defining culture as a one-time project—just find the perfect words to put on your office posters and company swag, and mission accomplished! Now you have a motto you can point to and use to rally the troops, right? Not so fast.

While it’s certainly important to define your company values, mission, and vision, all of which underpin company culture, culture involves more than what anyone in leadership or management says it is. At BambooHR, we think of culture as the sum total of all the experiences in an organization; in other words, defining culture is only effective if your culture defines your organization in turn.

For example, it’s easy to say an organization values both work-life balance and a standard of excellence. But it takes more thought and planning to set up operations so employees can work at that standard and still feel comfortable leaving at the end of the day, whether they’re commuting home or stepping away from their home office. For both values to apply, a healthy sense of urgency can’t lead to daily emergencies.

Mixed messages on values can lead employees to feel like your culture applies to some, but not to all, setting the stage for unfavorable comparisons and dissatisfaction. Neither helps improve employee retention.

Finding the Culture Balance that’s Right for Your Organization

Culture, at its core, needs to marry the human needs of your employees with the monetary and operational needs of your organization. This means exploring the complexity of these interactions and course correcting when employer and employee values conflict. It means working with every department and team to define how your values influence the specifics of day-to-day work.

As you assess and cultivate your culture, begin with the following aspects of your workplace:

If you don’t have a clearly defined culture, start by understanding how your employees view it. Consider conducting an anonymous survey to ask questions about their experience, such as:

By seeing your culture for what it is, you can better shape it to what you want it to be. Ultimately, to increase retention, you need to create and maintain a culture that’s healthy, supportive, and welcoming. No single perk, poster, presentation, or bonus can make up for a failure in culture, because culture is the total experience.

Determining Your Employee Retention Technique

If committing your business to higher compensation, clearer career paths, and stronger culture is intimidating, consider the inverse: high turnover, brain drain, disengaged employees, and fragmented teams. And it’s clear when a business hasn’t committed itself to the three pillars because word spreads quickly on company review sites and social media—and nobody wants to stay in an unhealthy organization. In the current job market which favors applicants, it’s more important than ever to keep the valuable employees you already have.

The three Cs require work, but they’re worth the investment. When you’re fully committed to your employees’ overall success, they’ll be committed to yours. You’ll have employees that only get more valuable over time and who contribute to the healthy, supportive culture you want to foster. By consistently offering higher wages and better benefits than those of your competitors, your employees will have no reason to start looking for a new company. They’ll be happy, balanced, and overall satisfied with their role. And you’ll find improved employee retention as staffing worries become a thing of the past.