The concept of employee retention and how to improve it is one that every business owner should be interested in.
And the reason is clear.
Studies have shown that many organizations fork out a whole lot every year in employee turnover and replacements.
This is because they have not been able to master the art of employee retention.
Additionally, it is common knowledge that employees, especially the good ones, are valuable assets to any organization.
Therefore, the cost of losing such assets transcends just monetary implications.
Losing your most valuable employees can affect your efficiency and also affect the results you get in your business endeavors.
Also, failing to have a good system for employee retention can equally negatively impact your customer base.
One thing with customers is that they tend to form a relationship with the people that attend to their simple requests and needs.
The last thing they want is to approach your business the next day, and they can’t find people they already have a relationship with.
Successful entrepreneurs understand that most customers patronize businesses for the quality of products they get and how the company makes them feel.
Also, this organizational culture is something your employees contribute significantly to.
Undoubtedly, you would agree that one should give attention to employee retention and how to get better at it now more than ever before.
Only then can you get the best out of the team and run a successful business enterprise.
Understanding What Employee Retention Means
The word ‘Retention’ connotes the idea of keeping something or being able to hold something down.
That being said, you can say that employee retention refers to the ability of an employer or organization to keep an employee working for the organization for as long as possible.
It involves taking steps to ensure that you don’t lose valuable employees in the organization.
The process of losing employees is referred to as employee turnover.
Because of the costs and negative implications, all successful businesses focus on employee retention strategies.
However, there is a catch when it comes to employee retention.
Employers are not actively interested and motivated to retain just all the employees they have in their ranks.
Retaining employees is still based on holding down those that have proven to be of real value to the organization.
This is why sometimes, you as a business owner might decide to let go of specific individuals who you feel are underperforming or do not fit in with the organization’s culture.
That means that even while you work on improving employee retention, it has to be targeted.
With this, you can be sure that your efforts towards improving employee retention are worth it.
How to Measure Employee Retention Rate
Before we delve into the strategies for improving employee retention, you should know where your organization stands in this area.
In other words, how are you doing when it comes to retaining employees.
The result of this assessment would give you a clear picture of whether or not your employee retention ‘game’ is the optimum level.
There is a formula that can be used to calculate and measure your company’s employee retention rate.
Employee retention rate is the number of employees a business can retain over a certain period in percentage.
If the percentage you get from the calculation is high, you are on the right track, and you are retaining employees well.
On the other hand, if you score a low percentage, then that signals you still need to do a lot more work on improving employee retention.
Now, let’s get to work.
The formula goes thus:
Employee Retention Rate = (Total number of employees within a certain period – Number of employees that have departed within that period / Total number of employees remaining) multiplied by 100.
This would give you the percentage of your employee retention rate.
It’s an important metric that you should know and use frequently to ascertain how well you are doing with employee retention.
Why is it Important to Improve Employee Retention?
Implementing a system for improving employee retention in the workplace is very important for many obvious reasons.
In short, your employee retention rate speaks volumes about your business culture and whether or not you win respect and admiration of others.
Additionally, it can also define the success or failure of your business.
Here are some of the benefits of retaining employees and why we deem it very important:
Employee Turnover Costs a Lot of Money
When you have difficulty retaining employees and have to watch them go regularly, it can sink deep into your business finances.
Recruiting new employees is already expensive on its own.
You would have to spend a lot of money planning the recruitment process, hiring and training the new employees.
Therefore, if you can improve your employee retention, you will be saving yourself and your business many bucks.
Even more, the money can be used for many other vital projects tailored towards business growth.
High Employee Turnover Wastes Time
In the same way, you invested money into recruiting employees; you also invested time and energy.
Remember the time you used in the last hiring process and what it took to scan through many applications before the best candidates.
However, when you constantly have employees walking out of the door in your organization, you repeat this process repeatedly.
This would waste the time that could have been used to handle other essential activities and productive endeavors.
Employee Retention Contributes to a Better Work Flow and Productivity
One thing you get with retaining employees is consistency in systems and processes.
When someone spends a lot of time doing something, they can only get better and more productive.
Whereas, when you are getting someone to carry out a task they are not familiar with, it takes longer to get them up to speed.
Where are we getting at?
Employee retention ensures that you have staff that is highly experienced working with you.
The more they’ve stayed with your organization, the better they understand the structure and system of the firm.
On the other hand, if you have to hire and replace employees frequently, it can interrupt workflow and reduce productivity.
It Improves Customer Experience
When you make employee retention a huge part of your business plans, it lifts the morale of your employees and keeps them happy.
In turn, satisfied and motivated employees would make happy customers.
This is because their general outlook will be different, and so will the way they treat customers.
Additionally, because employees are retained for longer, customers do not have to experience the stress of meeting recruits every time.
Having to familiarize and refamiliarize themselves with new employees can frustrate customers and affect their level of satisfaction.
Employee retention, on the other hand, would generally improve their experience with your business.
It Fosters Good Interpersonal Relationship Among Employees
Relationships grow stronger with time, and the one between your employees is no different.
Having new faces around the office as employees too often can disrupt the relationship between employees.
However, when your employees have had the opportunity to spend quality time together, it can strengthen their bond.
Employee Retention Attracts The Best Talents
When your organization is known for retaining the best talent, it shows people that you are doing something right.
It speaks volumes about your work culture and policies.
This is the kind of environment where the best talents would want to work because it helps them thrive and grow professionally.
The reverse is the case when your business has a track record of constantly losing employees.
If you want to have the best candidates out there itching to work for your organization, then your employee retention rate should be high.
Factors that Contribute to Low Employee Retention Rate
A low employee retention rate indicates that you have high employee turnover, or your employees leave your organization at a frequently alarming rate.
Like they say: “There isn’t smoke without fire.”
Therefore, there are reasons why your organization might be experiencing a high rate of employee turnover and struggling to retain employees.
Identifying these factors is essential, as addressing them will get you back on track as far as employee retention is concerned.
Some of these factors are:
This has been discovered as the main reason why employees leave their jobs.
It could be that the employer or the business owner does not treat employees appropriately.
Also, in more prominent organizations, it might be that some managers of departments are the ones lacking in this area.
Therefore, it is good to analyze your loss of employees in recent times and try to see if there is a trend.
Many times, as a leader, you might also feel you are doing your best, but the question is, “Is your focus what the employee wants?”
Only when you understand how your employees want to be treated can you be a better manager and increase employee retention rates.
Lack of Recognition and Appreciation
Another factor that affects the ability of an organization to retain employees negatively is failure to recognize efforts.
It is a sad awakening for an employee to know that they are giving the best they can and not being recognized.
Studies have shown that recognition ranks among one of the most important things an employee wants from the organization they work for.
However, when this is lacking, and when they are not appreciated for what they do, they are more likely to jump ship.
It’s only poor employees that are satisfied with having a stagnated growth and development in their place of work.
On the contrary, the best talents out there are always looking to improve and get better in their professional careers.
Suppose your company does not offer this opportunity for growth, or your policies and work culture do not give an enabling environment.
In that case, you are most likely going to lose employees often, especially the good employees.
Lack of Employee Empowerment
Another thing that appeals to employees is being trusted and given some levels of responsibility and autonomy.
If you have to influence every action your employees take and every decision they make, you risk losing them.
They want to be actively involved in the decision-making process, company policies, and goals, and they want to feel valued in the organization.
When you fail to empower employees this way, you would have a low retention rate and high turnover.
Many people will tell you that money is not a defining factor in whether or not employees stay with you.
While we agree that money shouldn’t be a significant defining factor, we firmly believe it matters.
There are valuable employees, and this value is very measurable.
Are you paying your employees the wages/salary commensurate with the value they add to your organization?
It is not just about paying high wages but instead paying them their worth.
If employees start feeling like they are not getting what their work, input, and efforts are worth, they would probably leave for somewhere else to be more appreciated in that area.
Poor Recruitment Process
You might also be experiencing high employee turnover because you keep employing the wrong employees in the first place.
Your recruitment process should focus on getting the right employees for your organization, both in terms of qualifications and personality.
Sometimes, you might get a poorly fit employee for a position, and when they cannot perform, they have to go.
Therefore, it is essential to adequately plan this process and ensure you are hiring the right people.
Unhealthy/Toxic Work Environment
People’s priorities are rapidly changing.
Gone are the days when employees can endure toxic work environments because the pay is good.
With the constant focus now on mental health issues, it is no surprise that many employees leave a job posing a threat to their wellbeing both physically and mentally.
Therefore, check your organization and see if many other employees are poorly fit and causing the environment to be toxic.
This unhealthy work environment could be a reason you are struggling with employee retention.
No Job Safety and Security
While it might be true that there is no absolute job security in any organization, your employees want a sense of this.
If, as an employer, you always go about how quickly you can lay off employees and replace them, you are doing more harm to your business.
Also, if you have made it a habit to fire employees with no due cause, you give the wrong signals to others.
Other employees would start to think: “So, who’s next?”
The chances are they will start looking for alternatives and leave your business before you get the opportunity to fire them.
After all, they know it is only a matter of time.
How to Improve Employee Retention – 10 Strategies that Work
Given the risks and demerits associated with high employee turnover, retaining employees is a no-brainer for any organization.
The money it saves you, the stability it affords you, and the overall increase in productivity it comes with make it a severe matter.
Well, if you have been struggling with employee retention for some time, you are about to get a well-deserved break.
Applying the strategies we will give you now will go a long way in changing that pattern and maximizing your best talents to your full potential.
Get it Right from the Recruitment Stage
The first most crucial stage to reduce the chances of having high employee turnover is the recruitment stage.
If you have a poorly fit employee in your organization, it is challenging to achieve employee retention and longevity of service.
This is because it is only a matter of time before they go or resign.
Therefore, you need to ensure your recruitment exercise is close to perfection, especially the interview sessions.
You must use the right interview questions to get to know the staff you are hiring.
Areas that deserve your full attention are their qualifications, skills and abilities, relationship with previous employers, and personality.
If you carefully get a good picture of these, you can ensure you are getting the right fit for your organization.
Appreciate, Recognize, and Reward Efficient Employees
Many businesses focus on customer recognition and reward but forget about their employees who put their best efforts into making customers happy.
You do not want to be on that boat.
It is essential that, as a business owner or manager, you are attentive to the performance level of your employees.
When you notice employees that are performing at their optimal best and adding value, recognize this.
Tell them how much you appreciate their contributions, and reward them accordingly.
This might include giving them rewards such as commission on sales, bonuses, time off work, flexible schedules, e.t.c.
Employee recognition and honest appreciation go a very long way in improving employee retention.
No (great) employee wants to be a part of a team answering a superior without a voice.
If you want to increase your employees’ morale, which contributes to retention, you need to empower them.
Learning how to empower employees will set the stage for your employee retention program.
Work on giving out more responsibilities to them and ensure they feel that their opinions matter.
Additionally, involve them in some management decisions, mainly when those decisions directly affect them or their scope of work.
That way, your employees will see that they mean so much to you, and they are more likely to stick with you much longer.
Communicate Openly with your Employees
There have been cases whereby an employer snubs their employees or gives them the silent treatment.
Whichever way you look at it, this is wrong on all levels.
If you feel or have reasons to believe that some of your employees are not living up to expectations, provide them your feedback.
It would be wrong to keep them in the dark and instead give them cold shoulders.
Even when it has to be constructive criticism, open and frequent communication makes the employees feel important.
Also, that can help you improve your employee retention rate.
Don’t Overwork your Employees, Strike a Work-Life Balance
Another mistake that some employers make is to think that overworking employees would increase productivity and prevent laziness.
Nothing can be further from the truth.
Understand that your employees are humans and have a life outside of work.
Therefore, you need to strike a work-life balance.
Having a working arrangement that covers every day of the week is anything but practical and productive.
When your employees cannot spend time with family and friends and enjoy leisure, they will be unhappy.
It would result in disgruntled staff, and they will be looking for the slightest opportunity to leave your organization.
Have a Flexible Work Schedule
Closely linked to the 5th strategy above is having a flexible work schedule.
The time has passed when organizations set rigid work schedules on where and when to work.
Recently, a lot of companies are beginning to open more to the idea of working remotely.
So, look at your business industry and the scope of work for your employees.
Also, consider their varying needs and circumstances.
Are there some employees who will benefit more from working remotely, and it wouldn’t affect their job?
If there are, why not afford them this flexibility.
You do not have to be unnecessarily rigid if you want to improve your employee retention.
Employees appreciate flexibility, and as long as it doesn’t affect their output, you will benefit from it as you retain them.
Allow Them to Grow
Sadly, some organizations stunt the growth and development of their employees.
They do this by keeping them in the same position for many years, even with proven efficiency and the value they add to the organization.
Some employers look outside when recruiting for senior management positions instead of within to add salt to injury.
Because of this, some employees are denied promotion in their workplace.
Are you guilty of this?
If you are, it is time to make a change.
Employees are generally happier when their employers allow them to grow in their professional careers.
Therefore, your actions and decisions should revolve around this, and you can be sure they won’t be looking elsewhere.
Support their Personal Development
The growth and development of employees aren’t just about the workplace; some are pretty personal.
The best employees always have ambitions and where they want to be in their personal life and career.
As an employer, do not clip those wings.
Whatever steps your employees are taking towards developing themselves personally, support it.
This could involve giving them opportunities for leave periods to further their studies academically and professionally.
Some employers even pay for some courses their employees decide to take when it is convenient.
All of these boosts employee morale and can help you improve your employee retention.
Work on Building a Healthy and Satisfying Work Environment
One of the reasons employees leave their jobs, as earlier noted, is if the work environment is toxic.
You wouldn’t blame them for that, though, because everyone takes their mental health very important.
Therefore, you can also improve employee retention by working on building the culture in your workplace.
That would involve instilling discipline and not condoning unhealthy work attitudes/ behaviors.
When everyone in the office vicinity works together as a team and are best of friends, employees are more motivated to stay.
Who wouldn’t want to work in a healthy and enabling environment?
Hence, establish an organizational culture that fosters team spirit and unity.
Pay Them Their Worth
Sad to say, a lot of organizations today are underpaying their employees.
We understand that you need to work within your set budget, but you equally have to give your employees what is commensurate with their input.
When employees add value to the organization, they know this, and such employees are always in great demand.
Therefore, if you are not giving them their work’s worth, others out there are willing to, and it won’t be long before your employees start looking outside.
However, it is good you understand that just paying employees high salaries doesn’t necessarily mean they will stay.
While this part is essential, you also need to work on other factors we’ve discussed that bothers more on the work-life.
Everything working together, though, would help you improve employee retention.
Final Verdict on How to Improve Employee Retention
Above all, retaining employees doesn’t have to be difficult if business owners can put more effort into ensuring employee satisfaction on the job.
However, as the saying goes, humans are always insatiable.
So you’re right to say that 100% employee satisfaction is impossible, and there’s no guarantee that employees will stick with you for life.
Nevertheless, there are certain things you can do to ensure that you don’t have to recruit new employees frequently due to high employee turnover.
The strategies listed above are beneficial for improving employee retention.
Therefore, endeavor to put them to good use in your organization.