The retention of employees is a major key to success for all organisations. It indicates a company’s success at retaining employees over a period of time and reducing voluntary turnover. High employee turnover means costs of hiring with loss of institutional knowledge, lower productivity, and disruption of workflow.

That all said, employee retention is a pain point for many companies, in part due to bad work culture, no career growth opportunities, lack of pay and poor management. Nevertheless, with the right mechanisms in place, companies can establish a culture in which staff feel valued, engaged and incentivised to remain long-term.

In this post, we dive into the formula to calculate employee retention, the benefits that it can bring to your organization, real-world examples, and 10 proven tactics that can help you enhance employee retention.

What is Employee Retention?

Employee retention is the capacity of a company to maintain its employees over a period of time. This is done by developing a culture whereby employees feel inspired, happy, appreciated, and therefore, are less likely to seek out their next job.

Retention is important as high employee turnover can have severe adverse effects on an organization, such as:

• Rising costs for recruitment and also training
• Loss of skilled and experienced workers
• The constant on-boarding needs reduce the productivity
• Employee morale and engagement decline
• Intangible cost refer to a decrease in customer satisfaction owing to an operational outage
• Companies must take care of career development, competitive compensation, work culture, and employee recognition to reduce employee turnover and improve employee retention.

Formula for Employee Retention

Employee Retention Rate — A metric to help us track how well an organization can retain its employees over time. The calculation is done using this formula:

Example Calculation:

Imagine a company that begins the year with 200 employees. They employ 50 people in the course of a year (ending up with 220 employees at the end of the year).

A high retention rate means that employees stick around, and are likely happy/engaged, whereas a low retention rate indicates that employees are resigning regularly — due to dissatisfaction, lack of career progression or a toxic work culture.

Benefits of Employee Retention

Employee retention comes with a range of benefits for businesses, influencing productivity, workplace morale, and long-term profitability. Here are some of the key benefits:

Cost Savings

Bringing on new team members is costly. The hiring experience is costly; companies need to pay for job posts, recruitment, onboarding, and training. Constant hiring costs are being faced by businesses when the employees do not stay for longer. Keeping employees on board helps cut down on these costs and frees up money for organizations to spend in other ways, such as with employee development initiatives.

Increased Productivity

Seasoned workers are more effective and need less oversight. They know company processes, systems and expectations, so they work more effectively. High employee retention rate leads to a stable and knowledgeable workforce which increases the total productivity.

Stronger Workplace Culture

And a company with high turnover typically fails to build a strong workplace culture. Long-term employees build meaningful relationships with their co-workers, promoting better morale and a more cohesive workplace. A stable workforce encourages collaboration, team spirit, and a sense of belonging.

Higher Employee Morale

High turnover can create frustration and uncertainty for employees that stay. Organizations which follow through with their human capital create a feeling of security among its employees as they know they will have a job tomorrow, leading them to be more engaged and motivated. A happy workforce means higher productivity and reduced absenteeism.

Better Customer Satisfaction

Employees already had long-term relationships with the customers. They know what the customers need, prefer and expect, which results in more satisfied customers and loyal customers. A high turnover rate can compromise the quality of service and damage company image.

Increased Innovation and Growth

Keeping employees helps bring stability and institutional knowledge, meaning companies can focus on doing big things rather than retraining new ones. And when employees feel valued, they share ideas, streamline processes, and move the company forward.

Examples of Effective Employee Retention Strategies

Google

In fact, Google is the gold standard in retaining its people by providing great salaries, work flexibility, and career growth that attracts talent and keeps their people on board. Wellness plans, on-site facilities, and professional development initiatives all contribute to high retention rates of employees.

Salesforce

Salesforce focuses on the well-being of its employees: free mental health and counseling services, paid opportunities for volunteering, and development programs for managers. Moreover, this focus on diversity and career development promotes long term retention.

Netflix

Netflix has a different way to retention: Unlimited paid time off, work wherever you want, and everybody is judged on performance, not micromanaged. Employee take ownership of their work, leading to a highly engaged workforce.

Zappos

Zappos has a fun, engaging culture aligned with its core values. The company provides lucrative benefits, an encouraging work culture, and training to motivate and keep employees engaged and invested in their respective domains.

Adobe

Adobe invest a lot in leadership development programs, as well as continuous learning opportunities. Workers enjoy mentorship, upskilling programs and the chance to advance in their careers, and they feel valued and engaged, which will want them to remain.

10 Tactics to Improve Employee Retention

Provide Competitive Salary and Benefits

Employees must feel secure financially. Salary structure data should be reviewed on a regular basis by organizations to avert falling behind industry standards. Job satisfaction is also bolstered by having access to health insurance, paid leave, and retirement plans where applicable.

Offer Career Growth Opportunities

People want to stay in positions that allow them to grow. Offering skill development programs, mentorship, and career progression paths keep employees engaged and motivated.

Create a Positive Work Environment

A toxic work environment is tantamount to a high turnover. To foster a workplace culture in which employees feel respected, companies should work toward cultivating an environment where diversity, respect, and a sense of safety are a primary priority.

Employee Recognition

A little recognition of employee hard work goes a long way toward building morale and motivation. Recognition includes bonuses, awards, public appreciation, or even just verbal acknowledgment.

Do Work-life Balance Measures

Providing employees with remote work options, flexible hours, and mental health support, is a way to help them maintain work-life balance. A good work-life balance helps to decrease stress and increases feelings of job satisfaction.

Enhance Leadership and Management Strengths

Incompetent management is a top reason that employees quit. Leadership is also another range of skills to focus on, as leadership training for managers, to make sure they have the skills they need to guide, mentor and motivate their teams effectively.

Conduct Stay Interviews

Stay interviews find out what employees enjoy about the business and what issues need to be addressed. Unlike exit interviews, they aim to resolve issues before employees resign.

Establish Transparent Career Development Tracks

Employees want to see a future in the company. Clear career pathways and promotion opportunities help employees understand what steps to take to grow with the organization.

Encourage Employee Feedback

Encouraging an open culture of communication helps employees to feel appreciated. You can implement regular surveys, suggestion programs, and one-on-one meetings to help your employee’s voice to be heard.

Develop a Culture that Inspires Your Company

A healthy company culture builds loyalty and engagement. Such employees are much less likely to leave and are more efficient in helping the company achieve its goals.

The Long-Term Impact of Employee Retention on Business Success

At the end of the day, employee retention is important for the growth of any company in the long run. Companies need to create an environment with competitive pay and the opportunity for advancement; a work atmosphere that is fun and engaging; and strong and supportive leadership to keep talented individuals and low turnover rates.

Learn about proactive retention strategies by joining Employee Retention Techniques and Strategies for Growth offered at London Premier Hub for Training and Development.  You can save costs which will result in a much more engaged, productive and happier workforce. By retaining employees, a company also strengthens its reputation, customer satisfaction, and sustainable growth.