Learning how to retain employees is a subject that every business owner or manager should be interested in.
Besides its customers, employees are the bedrock of every organization.
Regardless of their unique skills, qualifications, or talents, they all have the contributions they make to the growth of an establishment.
As a business owner, you might have all the skills, knowledge, dreams, and aspiration to run a successful business.
However, how far you eventually go depends largely on the type of people you bring on board to work with and for you.
Likewise, if you will get much-needed success in your business, consistency is a key factor.
That consistency involves having your employees stay with you for a long time or even forever.
Many benefits come with this, aside from consistency, and it all makes growth and development easier to achieve for your company.
Therefore, it is essential to learn the practical ways and measures to retain employees.
When applied properly, these measures can drastically cut down the rate of employee turnover and keep your best talents.
Also, by doing so, you can maintain the foundation or bedrock upon which every successful business is built.
First off, let’s discuss what employee retention is all about.
What Does it Mean to Retain Employees?
Retaining employees refers to the process of keeping your employees working for your organization or business for the long term.
Employee retention covers all your efforts to ensure that your employees continually deem it fit to work with you.
The opposite of this, i.e., when employees leave your organization, is known as employee turnover.
As a business owner, you would and should be interested in retaining employees, especially your top-performing employees.
Good employees are invaluable assets to any organization and worth every effort and investment towards retaining them.
Hence, you should regularly measure how well your business is doing to retain top talents.
To effectively measure employee retention, you need to where you stand as a business with regards to employee retention.
Can it be said that your business is performing excellently in employee retention, or do you need to make improvements?
Therefore, let’s consider how to measure employee retention.
How to Measure Rate of Employee Retention
Well, you do not need to guess whether or not you are doing well in retaining employees.
You can use a formula to calculate your company’s employee retention rate within a particular time period.
To have a big picture of this value, we recommend doing this at the end of the year.
Therefore, the result you get is the annual employee retention rate.
How to Calculate Annual Rate of Employee Retention
Employee Retention Rate = (Total Number of Employees at the End of the Year / Total Number of Employees at the Beginning of the Year) divided 100.
The value you get from this calculation will reveal whether you are retaining employees well or not.
Usually, a retention rate of around 70%-85% represents a high employee retention rate and shows you can keep more than half your employees from the start of the year to the end.
Clocking a retention rate of 100% is even better.
However, recording a lower retention rate points to an underlying problem in the organization making employees leave, and you should address this as soon as possible.
Note that you can either decide to focus on only voluntary turnover while doing this calculation, i.e., those who left the company of their own volition.
This would reveal a problem with job satisfaction and the work culture.
However, if you want to have insight into job performance and productivity, you can also include employees whose contracts were terminated.
This would give a much bigger picture of employer turnover and retention.
Why is Employee Retention such an Important Concept?
For some organizations, retaining employees doesn’t rank as a top priority for employers for some reasons.
Some believe that there are so many talented and skilled people available for hire, and as such, a loss of employees is not disastrous.
Others are not just paying attention to the value employees bring to the organization and neglect the importance of retention.
It could also be that some organizations rank other projects as more important than employee retention.
Well, this shouldn’t be the case with you and your organization.
There are various reasons why you should take retaining employees very seriously and make conscious efforts towards that.
Some of the reasons why employee retention is important are:
Employee Replacement is Expensive
The cost of replacing employees is one of the reasons why you should take retaining employees seriously.
There are a lot of things you have to spend on during recruitment.
These involve; cost of recruitment agencies, the cost of placing job adverts and notifications, and even the cost of training.
Also, you might even have to pay more in terms of salary for the new staff than what you paid the previous employee.
How about the indirect cost of losing knowledge and experience that goes with the employees that leave your organization?
You would also need to invest a lot of time and energy into onboarding recruits and training them.
All these make employee turnover very expensive, and hence the need to know how to retain employees.
Employee Retention Increases Productivity
When you lose employees, there is a considerable time period that passes before you can get a suitable replacement.
During this time, you are understaffed, and as such, would need other employees to cover up the vacancies.
This would increase the workload of your employees and might even cause some to work overtime.
In the long run, the productivity of such employees would drop.
Additionally, retaining employees help to improve the communication, understanding, and relationship between your staff, which also increases efficiency.
However, when you lose employees frequently, you interrupt this process which happens with time.
It might take a long period for a new employee to be as productive as the new replacement.
Helps to Increase Customer Retention
When you retain employees, they are likely to get job satisfaction and happiness quicker.
The effect of this on your customers is excellent customer service.
This is because satisfied employees are happy on the job.
Hence, they are more willing to solve the customers’ challenges with enthusiasm and vigor.
Thereby leading to happy and satisfied customers.
Also, the happier your customers, the higher the chances of continued patronage.
However, when you change employees regularly, it can affect your customers as they have to keep building relationships afresh with new faces in your organization.
This can be quite frustrating and can make customers leave your business.
It Increases Employees’ Morale and Job Satisfaction
If your organization has a reputation for retaining employees, your staff are more likely to feel motivated and satisfied with their jobs.
This comes from knowing that there is a measure of job security and stability.
This would make employees more motivated and committed to carrying out their job duties without worrying about losing their jobs.
On the other hand, when you are fond of firing employees, it can create resentment in other employees as they lose their colleagues and friends.
When they have to miss out on the relationship and friendships they’ve built with their co-workers frequently, it affects their morale.
It Helps to Foster Consistency
The longer an employee stays with your organization, the more familiar they are with the system, structure, policies, and processes.
Those kinds of employees are better at their jobs and able to contribute more towards growth and development.
It also ensures that the quality of output or results your company comes up with is on a consistent level.
On the other hand, when you have to replace employees regularly, there is a problem with consistency.
New employees take a long time adjusting to the company’s organizational standards, systems, and processes.
This, in turn, can affect the quality of output they come up with.
How to Retain Employees – Factors Affecting Employee Retention Negatively
As important as retaining employees is, it is not a very easy endeavor.
This is because certain factors affect the ability of an organization to retain employees.
In other words, there are some reasons why your employees might leave, or you may be forced to let them go.
Here are some of the reasons why it might be difficult to retain employees long-term:
Poor Employee Compensation and Benefits
One of the main reasons employees leave their jobs voluntarily is poor compensation and benefits from their organization.
Employees want to be paid their worth as it shows them they are valued and important to the company.
Without those incentives, your employees might be actively looking at alternatives and jump into the arms of competitors the first time of asking.
Consequently making it difficult for such organizations to retain employees.
Aside from financial benefits, another thing that employees are concerned about is their personal growth and development.
The best employees love working for organizations that provide them with ample opportunities to grow in their career path.
If you are not offering such platforms and chances for growth to your employees, they are more likely to look for other options, and that would also pose a challenge to retaining employees.
The way you manage employees also affects your ability to retain employees.
Many employees who resign from their position blame it on bad managers.
Employees want to work in an environment where they are treated with love, care, and kindness.
When those in management and supervision positions do not offer this to their subordinates, it can affect job satisfaction.
Also, when employees are no longer satisfied with their jobs, it is only a matter of time before they leave.
Poor or Toxic Work Culture/Environment
In addition to the attitude of managers, the general work culture or environment also influences employee retention.
A toxic environment is one where unity doesn’t exist, and negative traits are the order of the day.
It might be difficult for employees to express themselves in such environments, and other co-workers might be difficult to deal with.
In such situations, the employees are not comfortable, and if they get an opportunity to leave, they will take it.
Lack of Appreciation/Recognition
Another reason employees might leave their jobs is a perceived or actual lack of appreciation and recognition.
Your employees want to feel that their input and contributions to the company are worth it and appreciated.
Whatever the feedback is, be it positive or negative, your employees should hear it from you.
When this is lacking, employees are disengaged and would lose the passion needed to give their best.
More so, if an opportunity comes to get that from another organization, they won’t reject the offer.
A Faulty Recruitment Process
Sometimes, the struggle to retain employees has a deeper underlying reason, which can be traced to the hiring process.
It might not be easy to retain employees who are not a good fit for your organization.
How then do you ensure that you are getting employees that fit in well into your company?
It begins with the recruitment process.
During recruitment, you are tasked with hiring employees who are qualified and have the needed skills.
Not only that, but the employees should also have the right personality and attitude to work for you.
It is also important that you place employees in departments or job roles that fit their abilities and skills.
If you get all these wrong during recruitment and onboarding, it can increase the loss of employees and make retention difficult.
Some cases of employee turnover may be rather involuntary, resulting from you terminating the employees’ contract.
There are many reasons why this might be an option.
It could be due to consistently poor performance, poor attitude towards work, or criminal activities in the office.
Of course, the reasons for termination always speak volumes about the quality of recruitment still.
When you need to terminate employees’ employment often, you will struggle with employee retention.
How to Retain Employees – What You Need To Do
When employee retention is mentioned, it is very common to think about giving money to employees to keep them happy and retain them.
Of course, while incentives are essential to retaining employees, there is more to it than that.
There are many other cost-effective and inexpensive ways to retain employees.
Here are a few of them:
1Plan Recruitment and Onboarding Process Properly
Your chances of retaining employees begin from the recruitment and onboarding stage.
This is the stage where you get to choose the employees that will work for you in the first place.
You should plan this process carefully and ensure you make the right hires.
Decide what your organizations’ core values will be and properly define job roles and responsibilities.
Also, ensure that you select qualified employees that meet up the requirements and scope of the job.
While onboarding, ensure you put the employees through the company’s culture and values.
It is also important to put employees in positions where they are best fitted and express their skills and talents.
If you get this right, you’ve instantly increased the chances of retaining those employees.
2Communicate Effectively with Employees Openly; It Improves your Chances of Retaining Employees
As an employer, another thing you can do to retain employees is by providing an enabling environment for open communication.
Your employees should know that they can come to you at any time to express their opinions, questions or make inquiries.
On the other hand, you as the employer should also maintain constant communication with employees.
When there is an atmosphere where everyone can express themselves freely, it makes employees feel valued, and that can help you retain them.
3Provide Feedback for Employees
Another way you can show your employees that they are important and retain them is by providing frequent feedback.
Feedback is essential, especially in the area of employee performance.
If your employee is doing well or needs improvement, they want to hear it from you.
Even when the feedback is negative, the goal remains the same; helping employees get better and grow.
Also, when you provide this kind of feedback to employees, it shows that you are interested in their growth.
This can go a long way in retaining the employees.
4Provide Opportunities for Personal Development
The higher percentage of employees are not just satisfied with working and getting paid for what they do.
They are interested in working for organizations that give them the platform for personal development.
Hence, this is a discussion you should frequently have with your employees.
Get to know what their career plans are and how you can come in to support them in reaching their goals.
You can also encourage your employees who have plans on running their own businesses even while still working for you.
Additionally, you can provide courses or training sessions for your employees that help them get better at their skills or acquire new ones.
This proves that you’re actively vested in their personal growth and development.
Thereby helping you in retaining employees.
5Give Incentives, Compensations, and Benefits; It will help you Retain Employees Better
The goal of incentives is to motivate employees and give them the added impetus to work hard and get results.
Job benefits also do the same thing for employees.
Some job benefits that you can give to employees are health benefits, pensions, insurance e.t.c.
You can also provide compensations in the form of a pay rise, bonuses, commissions on sales, e.t.c.
The aim of all these is to motivate employees and also help them attain job satisfaction.
In the end, a satisfied employee is more likely to remain with your organization.
6Work on a Good Work Environment and Culture
Employees are more likely to enjoy their jobs and look forward to it when the work environment is good and healthy.
In line with that, one way you can retain employees is by doing your best to create a good work environment.
Teach employees the right work ethics and moral values, and implement the practice of such good qualities.
Do not condone indiscipline and encourage good friendships between employees.
When you do this as part of your work culture, your employees feel at home when at work.
More so, you are more likely going to see your retention rate increase.
7Offer Genuine and Regular Employee Appreciation
Appreciation goes a very long way in helping to retain the best employees.
The best employees will always give their best, work hard and efficiently towards business growth.
The last thing they want is not to be appreciated for their efforts.
If you want to keep your employees happy and increase the employee retention rate, you need to appreciate them more.
It can take different forms, such as an informal “Thank you…” during work hours.
It could also be a formal appreciation message sent via emails.
Whatever form you decide to use, make it genuine and mention why you appreciate the employees.
When your employees see that they are valued and appreciated, they would be willing to stay with you.
8Give Employees Time for Leisure Activities
This is the process of creating employees’ work-life balance in the office environment.
This means that you do not want to overwork your employees and leave little opportunities for rest.
This can cause burnout and affect employees negatively.
On the other hand, giving them rest, leisure activities, and vacations will keep employees’ morale high.
This can also increase their trust in your organization and make them stay longer with you.
9Understand Why Employees Quit
This is more of a reactive solution to the problem of loss of employees or employee turnover.
If you calculate the rate employee retention rate over a specified time period and it comes off low, you should find out why.
You can run surveys to know why the employees are leaving.
Sometimes, when appropriate, you can hold exit interviews with employees, where you can find out why they decided to quit.
You can also ask your active employees to state why they feel their colleagues are leaving their jobs.
The feedback you get from these surveys can reveal where the problem lies and how to solve it.
Then you can now start working on a structure to reduce turnover and increase employee retention.
Final Thoughts on How to Retain Employees
There are so many factors that contribute to the success of a business establishment.
You can talk about funding, getting the right customers, making sales, and so on.
However, one of the most important is the employees you have onboard.
That is why you spend a lot of time, energy, and money arranging recruitment exercises to hire good employees that will fit into the organization’s culture and add value to the business.
This investment will be in vain if you do not get the secret of employee retention right.
However, when you take the right steps towards retaining employees, you are setting up your business for success.