With all the concerns over the past few years related to talent shortages and recruiting challenges that organizations of all sizes and industries are experiencing, the issue of why so many jobs need to be filled in the first place has risen to the top. It has become apparent that the counsel that many of my then-peers and I provided in the 1980s to the HR and line management teams was prescient – that success in recruiting often stems from great turnover control. The less pressure Talent Acquisition teams are under to continually fill large volumes of jobs, the better they can focus on quality versus quantity of hire. Resolving this requires understanding the keys to employee retention.
In fact, employee turnover rates have sadly hit new heights.
Just this past July, the U.S. Bureau of Labor Statistics reported that “the rate of job quitting in the United States has reached highs not seen since the start of the U.S. Bureau of Labor Statistics Job Openings and Labor Turnover Survey program in December 2000.” In fact, in 2022, more than 50 million U.S. workers quit their jobs.
While turnover rates have eased somewhat in recent months, there is plenty of research showing that the “intention to leave” rates are continuing at a high level; perhaps it’s due to lowered hiring rates in certain sectors due to the large layoffs late last year that’s softened some of the availability of jobs to go to. However, in a recent LinkedIn study, 61% of US employees are considering handing in their resignations in 2023, led by almost 70% of Gen Z and millennials who report that they are hoping to leave their jobs this year.
And the leverage that job candidates have in the labor market continues to be tight. The Bureau of Labor Statistics recently reported that the ratio of unemployed people to job openings has dropped to 0.5 - 0.6 since October 2021. That means that for every open job, there is on average only ½ of a candidate. Think about it – talent acquisition pros will tell you that they target 10 reasonably qualified applicants per job in order to yield 3 solid interviewees from which 1 or 2 may be good fits and thus suitable for a job offer. The numbers are leaning heavily against the recruiters.
So, back to that point about easing recruiting challenges with quality employee retention outcomes. Retaining quality performers is a necessity these days. It is neither a luxury nor an HR objective, but a business imperative. Maintaining a strong and optimally tenured workforce is critical to the maintenance of organizational and operational capabilities that deliver stakeholder and consumer value. In fact, LinkedIn’s 2023 Workplace Learning Report tells us that 93% of organizations are concerned about employee retention. So what are the benefits to understanding the keys to employee retention?
Understanding the business benefits of employee retention
Employee retention offers numerous business benefits. Key advantages include:
1. Cost savings.
Employee turnover can be costly for organizations (1-2X annual salary). By focusing on employee retention, businesses can reduce recruitment, onboarding, and training expenses associated with replacing and enculturating new employees. Retaining experienced staff helps minimize productivity gaps and avoids the costs associated with the risks (poor cultural fit, mismatched expectations) inherent in hiring new employees.
2. Knowledge and expertise retention.
Long-term employees develop valuable institutional knowledge and expertise specific to the organization and industry segment. Retaining these employees ensures that the company can retain critical skills, knowledge, and networks related to work processes, collaborations, and best practices, leading to operational efficiency and continuity.
3. Enhanced productivity and performance.
Employees who stay with an organization for a longer duration tend to become more familiar with their roles, work processes, and organizational dynamics. This familiarity leads to increased productivity and efficiency as employees can focus on delivering results rather than constantly learning and adapting to new applications of their expertise.
4. Improved customer satisfaction.
Consistent interactions with knowledgeable and experienced employees can significantly impact customer satisfaction. Retaining employees who have built relationships with customers and understand their needs can lead to higher customer loyalty, repeat business, and positive word-of-mouth referrals.
5. Employer brand and reputation.
A company known for its high employee retention rates and positive work culture can attract top talent and differentiate itself in the competitive job market. A strong employer brand enhances the organization's reputation and makes it an employer of choice, enabling it to attract and retain high-quality candidates.
6. Organizational stability and growth.
Employee retention leads to a stable workforce, reducing disruptions caused by frequent turnover. With a consistent and committed workforce, organizations can focus on long-term goals, innovation, and growth strategies. Retaining employees who are aligned with the company's mission and values contributes to organizational stability and sustainable growth.
Why employees leave their jobs/companies
The issue of turnover has been studied for years. While there have been more recent updates to the list of common reasons (e.g., post-COVID return to the office policy changes, inflationary pressures to earn greater wages), the list of most frequently cited reasons should sound familiar to HR professionals. Those include:
- Lack of growth and development opportunities: This includes opportunities and options for education and skills development, job enrichment and expansion, internal mobility, exposure to new or emerging business initiatives and areas, etc. Without access to these, employees can come to feel stagnated and uninspired by the lack of variety and a sense of growth and change.
- Poor relationships: This can occur in the context of (oft-cited) employee-to-manager relations (feeling a lack of support, micromanagement), a sense of belonging and place within the team or broader employee population (think weak DE&I), encounters with a toxic work environment (such as hyper-competitive cultures), etc.
- Lack of work-life balance: People working in jobs that require long hours, extensive travel, night/weekend work, call-in or stand-by scheduling, and the like can experience difficulties in simultaneously meeting their familial and personal requirements.
- Absence of or insufficient autonomy: Providing people with the ability to exercise a level of independence in deciding how their work will be conducted, what steps they will take to accomplish it, and when those will occur goes a long way to providing a sense of control over their environments and lives, key drivers of a positive human experience. And micromanagement can lead to feelings of helplessness and lost dignity.
- Low job meaningfulness: Employees who lack a sense of how their efforts align with and contribute to the organization’s mission and outcomes, much less contribute to the betterment of customers’ and societies’ outcomes find themselves less committed to and engaged with their work and the organization itself. People seek meaning in what they do to provide a sense of importance, value, and belonging.
- A lack of recognition: Without positive feedback and credit for contributions, employees feel undervalued for the hard work and sacrifices they make. A paycheck only carries people so far. Studies conducted over the years have shown that a lack of appreciation is a major contributor to employee dissatisfaction and turnover.
- Uncomfortable facilities: Consider factors around the work location (e.g., downtown, high crime areas), commuting distance/difficulties (long commutes, lack of public transportation), facility comfort levels (open layouts, windowless offices), working environment conditions (outdoors, poor weather, loud/dangerous machinery) and the like.
- Poor corporate results and image: People want to be proud of the organizations for which they work, and when one is struggling (revenue growth, profitability, market share, share price) the impact on employees can be immense. It can also lead to restrictions and cuts in budgets, rewards and recognition, as well as tightened managerial controls, all of which directly impact the employees’ sense of security and well-being.
What are the keys to high employee retention?
As high employee retention is essential for the stability and success of any organization, companies typically have strategies in place to address the desire to enhance the desire of employees to remain in their employment. Addressing the aforementioned causes of employee turnover are core to the creation of a positive and engaging employee experience. Beyond that, larger-scale opportunities exist to address the needs and preferences of employees. Keys to employee retention include:
1. Creating and maintaining a positive work culture.
A positive work environment that promotes teamwork, respect, and open communication plays a crucial role in employee retention. Encouraging collaboration, recognizing and rewarding employee contributions, and fostering a sense of belonging are vital. Monitoring the work environment, down to the individual department is a crucial step here – the need for multiple and continuing culture measurement and employee listening vehicles to assess and address any weak spots or inconsistencies with stated corporate values cannot be overstated.
2. Continually assessing and enhancing the employee experience.
Create formal programming to understand what is most important to employees as they interact with administrative and work processes, technologies, management, teams, and peers alike. This calls for disciplined approaches to evaluating the employment lifecycle, from candidate sourcing to retirement, from applicant to alumni status. Developing an appreciation for how the employee experiences working and participating in the organization is essential to creating an outstanding employee value proposition (EVP) that is living and breathing. As this involves asking the employees how well the systems, policies and processes work for them, both the communications and improvements act as statements of how much the organization values their input and continuing employment.
3. Providing competitive compensation and benefits.
Offering competitive salaries, incentives, and comprehensive benefits packages helps attract and retain talented employees. Regularly reviewing compensation structures and ensuring that they align with industry standards can contribute to employee satisfaction and loyalty. Considering both the market value of their services (including decisions relative to new hire salary levels) and their associated purchasing power relative to economic conditions are critical pieces of the retention puzzle.
4. Accentuating and encouraging career development and growth opportunities.
Employees seek growth and advancement in their careers. Providing opportunities for learning, training, and professional development not only enhances their skills but also shows a commitment to their long-term success. Focus special attention on informal learning opportunities that blend learning with career development, such as regular project team participation, coaching and mentoring programs, stretch assignments, job shadowing/temporary cross-departmental or -functional assignments, community leadership contributions, etc. Doing this at scale can help build a culture of development and reputation for individual growth, both of which can be keys to great retention levels.
5. Supporting work-life balance.
Balancing work and personal life is a priority for employees. Offering flexible work arrangements, such as remote work options or flexible scheduling, can improve work-life balance and contribute to higher employee satisfaction and retention. Review and enhance policies that provide freedom and support to handle familial or personal (e.g., physical and mental health) issues and educate managers on their fair and equitable use and administration. And remember to monitor managerial behavior and decisions for compliance with available policy, program, and practice (e.g., job-sharing, leaves of absence) options.
6. Insisting on constructive leadership and effective management.
Supportive and effective leaders who provide clear direction, mentorship, and regular feedback are crucial. Employees are more likely to stay in an organization where they feel valued, respected, and have opportunities for growth. To that end, review and upgrade managerial job selection criteria and processes to ensure that managers have core skills and capabilities consistent with positive and constructive managerial behavior standards. Create systemic (and anonymous) employee surveys and ratings of managerial effectiveness and behaviors to track and better create a consistent employee supervision experience.
7. Driving employee involvement and empowerment.
Encouraging employee involvement in decision-making processes, providing autonomy and ownership over their work, and seeking their input on important matters can foster a sense of empowerment and engagement, contributing to higher retention rates. Consider reviewing and upgrading job designs to enhance and encourage employees’ ability to exercise discretion at all levels of the organization. Consider the value of self-directed work teams in more routinized jobs and functions. Reward managers who regularly gather and use team input on important workflow, process, and improvement ideas.
8. Balancing workloads and manageable expectations.
Given recent layoffs, monitoring and ensuring that employees' workloads are reasonable and achievable helps prevent burnout and enhances job satisfaction. Setting clear expectations, providing resources, and addressing work-related challenges in a supportive manner are vital for retention. By collecting and analyzing productivity, payroll data, and related metrics, plus employee listening strategies, data can be leveraged to keep track of any departments, locations or functions where overwork is occurring.
9. Providing meaningful recognition and rewards.
Acknowledging and appreciating employee achievements and milestones through various recognition programs, performance-based rewards, and promotions can boost morale and increase loyalty. Consider the value of adding peer-driven recognition processes that give employees a voice in expressing gratitude and support for extraordinary efforts and contributions by their co-workers to build teamwork and camaraderie. Such recognition should be captured and included in annual performance evaluations.
10. Practicing transparent and effective communication.
Transparent communication channels, both upward and downward, promote trust, reduce uncertainty, and foster a positive work environment. Regularly sharing information about organizational goals, changes, and challenges helps employees feel connected, engaged, and trusted. Regular employee gatherings/all-hands meetings, skip-level sessions, executive video chats and messaging, and similar events should be leveraged as a way to keep employees at all levels apprised of company strategies, progress towards key objectives, and results.
Thoughts on new hire turnover
The costliest and often most painful turnover is arguably the new hire departure that occurs in the first 30-90 days, but for many companies extends into the end of the first year. It is during that timeframe that the new hire is learning the processes, identifying resources, developing a network, and coming up to full productivity. The pain is experienced because the return on investment (costs related to recruiting, onboarding, training and lower productivity) has not yet been achieved.
It is caused by numerous reasons, including:
- Rushed hiring process – one that failed to fully vet the new hire’s background, capabilities, and fit.
- Lack of realistic job preview – overhyping of the work, levels of contribution, status in the company, etc., or not fully explaining job duties, requirements, expectations, and working conditions upfront.
- Cultural mismatch – all too often recruiters and managers focus on the candidate’s background, experiences and skill sets without paying sufficient attention to the fit with corporate culture, values, and behavioral/outlook expectations.
- Dissatisfaction with manager or peers – early issues with the style and substance of guidance received from the hiring manager or poor relationships with peers can trigger concerns of a lack of fit within a team.
- Departure of a hiring manager or referring colleague – the turnover of a manager or respected colleague(s) with whom they had bonded can often lead to questioning the projected fit and opportunities to excel that the new hire held upon accepting the job. The resulting loss of desire to work in the changed environment can lead to an updated job search.
- A better opportunity presents itself – as recruitment processes vary in length, a job offer from a competitor may have been late in the offing, and once it is presented becomes too tempting to turn down.
Anticipating these situations is imperative for both HR and new hires’ managers, especially during those early months. Systemic solutions should be installed to monitor risk of loss, and ensure that each new hire is appropriately welcomed, enculturated, developed, and guided to full productivity and fit within the company. Keys to employee retention for new hires call for steps such as these:
1. Leverage a robust onboarding process.
A formal onboarding process should include complete resourcing on Day One. The need to have everything ready and waiting for the employee on their first day communicates a readiness to accept them into the fold and make them feel like a fully outfitted member of the team. These should include an employee badge and facility accesses, parking passes, workstation/cubical/office, laptop/computer, systems accesses/passwords, etc. Furthermore, assign a tenured peer (or co-worker group) to answer questions and guide them through the facilities, administrative processes and resources, lunchroom, etc. Welcoming lunches and introductions to/meetings with key personnel, customers, and vendors they will need to build relationships with are often helpful and appreciated by new hires.
2. Enculturating the new hire.
Sessions for new hires often include an overview of the company values, strategies, and key initiatives, with a focus on corporate history and achievements, key decision makers, contributions to the industry and society/community, and opportunities for new hires to get engaged with any of these. Introductions to any new hire clubs or cohorts, employee resource groups (ERGs), social activities (basketball or softball league, wine club), and the like can offer opportunities for new hires to “find their tribe” within the larger corporate structure and outside of their normal functional teams.
3. Planning development.
Managers should hold initial meetings to discuss a first-year development plan that blends any skill gaps identified in the recruitment process with individually desired skill or capability growth. Access to, and suggestions for training or certification programs, introductions to experts for mentoring, assignments to special projects, etc. can provide a structured development path that a new hire often needs. Longer-term career discussions should also fit into the conversations, as employees want to see a future of growth and opportunity.
4. Listening or pulsing.
All new hires should be proactively offered opportunities to provide feedback to identify any breakdowns in onboarding and first-year experiences. Brief, pulse surveys asking about the elements that the company has learned are “moments that matter” from employee experience analyses should be sent out at 30, 60, 90, 180 and 365 days to monitor and track new hire satisfaction with, and access to/completion of certain steps in the process. Typical “moments” include introductions to key people, awareness of corporate /departmental goals, availability of desired development programs, coaching from one’s manager, and success in building social networks.
5. Developing predictive measures.
Creating turnover predictors is an excellent strategy for assessing risk. While it involves advanced analytics and statistics, it can be accomplished by surveying only a couple of hundred current and former employees. Departed employees are usually (and often surprisingly) willing to complete an anonymous survey about their experience and reasons that contributed to leaving within the first 3-12 months after quitting. In the most basic analytic scenario, comparing their responses to quality of employment questions to current employees (in similar jobs, roles, and levels) and applying predictive (e.g., statistical regression) techniques can yield a brief set of predictive survey questions. Such questions can be subsequently sent to current employees to assess the likelihood of their leaving. Action steps can then be taken to better understand their feelings and make changes to avoid their loss.
Structured and disciplined approaches to new hire onboarding are critical elements of maximizing the return on investment from the hiring process, and more importantly are key to building a culture of awareness, inclusivity, and development. Such programming supports the longer-term goals and keys to employee retention by establishing a baseline of activities that are consistent with robust talent management practices that contribute to corporate success.
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