The business and employment landscape is forever changing and evolving, and so are human resources department in any agency. In this article, we’ll be discussing who and what to prioritize if you´re running a small business or a large enterprise.
The economy has opened worldwide since the pandemic outbreak in 2020, and companies and agencies have been experimenting with growth again. While this is very much welcomed, many industries are facing a new challenge: employee turnover and skill shortage. Turnover rates are increasing and giving flexible work initiatives and wellness are not enough. Hr leaders, for you to grasp the idea, are focusing now on mental health as a top priority. Job satisfaction incentives for employees are a must in a modern and healthy job market and those are good news.
Undoubtedly, skill shortage will continue though, to be a key subject in the coming years and months. And that investment in recruitment to address this issue will be very important. Vacancies take time to fill, and training good employees also demands time and the uncertainty of turnover is always around, waiting to be unfolded.
Keeping at bay your top talents must become priority number one as they will give you security and will play a significant role in helping your agency to bloom and fight more challenging times as well.
Why employee retention should be your top priority
Here are six reasons why employee retention should be your business´s top priority now, even above employing new team members.
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Oodles of options
Desperate times mean recruiters are dangling amazing job opportunities in front of your top people. Companies are increasing pay, incentives, and benefits in order to attract new talent. Employees who are not being paid well, treated well, appreciated, trained, listen to, encouraged to grow, smiled at, and recognized as valuable are at high risk of moving to a job with many opportunities available. So be mindful to create an ideal work environment where your talents feel comfortable and secure, a place where they will want to sharpen their knowledge
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Mind the gap
Existing employees can temporarily fill some of the gaps during your worker shortage. Loyalty is one of the perks of those satisfied employees, they will happily take extra hours or overtime. Good employees will pitch in to help the team succeed. That´s especially the case if they know that you´re actively working to fill open positions, that the extra work is temporary, and show them how much they are appreciated.
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Institutional knowledge
Retaining staff saves significantly on your company´s overhead expenses. Hiring and training costs aren´t the only expenditures when you replace a team member. Existing employees have institutional knowledge and experience that new employees won´t replace quickly or easily; it may take months or even years.
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Consistency with clients
Retaining employees creates consistency with customers or clients. The relationships your employees develop with customers can be critical if you need to adjust business practices in response to labor shortages. In times of uncertainty, people look to those they know and trust.
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Workplace Satisfaction
Retention creates a happier workplace. When employees leave, it can create a sense of instability in your company, making others question their own desire to stay. So new hires must be dealt with some sort of time gap between them to ensure employee engagement of all parties, both new and experienced ones.
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Identify superstars
Times of transition can bring out the best in people. Potential leaders in your company could be stepping up and proving their value. Your ability to put them on a growth path depends on whether you can retain your future superstars. Employee experience on the matter should always be welcomed and recognized.
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Turnover expenses
Replacing employees is expensive with costs ranging anywhere from 16% to 213% of an employee’s salary. Organizations pay up to 1 trillion in turnover expenses annually.
Advertising your company to future candidates, interviewing, onboarding, and training take many hours. This creates a high cost for your organization.
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Lost knowledge
When seasoned employees leave, their knowledge goes with them. When employees fail to relay their institutional knowledge to their peers, their information and skills can be lost forever. This can lead to low productivity and confusion among team members left behind.
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Roadblocks to Productivity
As a position remains unfilled, hours of lost productivity pile up. When other employees pick up the slack for unfilled roles, they might get burned out and overall productivity will plummet.
Additionally, it takes a long time to bring a new hire up to maximum levels of productivity. Research says it takes a new hire one to two years to achieve the productivity levels of an existing employee
To round up, employee retention promotes the health and success of your organization. The time, stress, and cost of hiring and training new employees are significant, and turnover can have a negative impactive on your business outcomes. High employee turnover brings about multiple problems including high costs, knowledge loss, and low productivity.
Costs of an employee leaving
Turnover can negatively impact employee morale and productivity, but there is a longer-term impact on a company’s revenue. Recruiting and training new team members requires time and money, and that expense only increases if you don´t have an effective knowledge management tool to retain company information.
Employee turnover refers to the rate at which employees leave your organization and are replaced by new workers. To calculate the turnover rate, you would count the total number of workers who leave the company over a certain time period. You would then divide that number by the total number of employees working at the company during that time period and multiply by 100 to get a percentage.
Studies have found that the average expense to replace an entry-level employee can be up to 50% of that employee’s salary. For a supervisory role, that replacement cost could go as high as 150% of the annual salary.
Many factors contribute to this high cost, including the recruitment fee paid to recruiters, the time it takes to interview and hire, and the possibility of a demand for an increased salary.
And if these direct, hard costs are intimidating, what about the indirect costs that result after losing an employee and the company knowledge they have?
It can take eight to twelve weeks to replace a knowledge worker when they leave your company. And once a new person joins the team, you will be faced with another four to eight weeks before your new hire is fully trained, comfortable, and productive in their new role.
During those first months of onboarding a new team member, one of your best people will typically be tasked with training. Tasking top talent with training may ensure excellent results from your new hire, but you’ll also encounter hidden labor costs that can quickly add up to tens of thousands of dollars.
During an employee’s tenure, they develop knowledge and gather insights that are beneficial to the ongoing success of the organization. However, in many cases, if your agency or company doesn´t have a way to record or preserve that information – that knowledge lives only in their mind. When an employee leaves the company, they take that knowledge with them.
To avoid losing all of this information, you must make knowledge sharing a priority. Consider implementing an intuitive, easy-to-use knowledge management platform and making documentation and process updates part of employees’ job descriptions. Foster an environment that encourages collaboration, working, and cross-training to seamlessly facilitate the transfer of knowledge and avoid knowledge silos in the workplace
Beyond the tangible costs it incurs, employee turnover can impact companies in many other ways.
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Disruptions to customer services
Employee turnover can cause gaps in customer service. For example, if a customer service request ticket isn´t immediately transferred to a new representative, they may experience delays in getting their issue addressed. Considering the fact that customer service is a direct expression of a company, a decline in customer service can cause a company to lose its competitive advantage.
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Reduced employee morale
Turnover can create uncertainty for the remaining workforce. Workers may begin to wonder why other employees have left for other jobs, or, in the case of involuntary turnover, if their own job is at risk. This can create low morale, decreased motivation, and lost productivity.
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Lower company profits
When morale suffers, the company as a whole suffers as well. A lack of employee confidence and low morale correlates with lower company profits.
What can small businesses do to retain employees?
As you can see, there´s so much that goes into hiring a new employee. It sucks up time and money. Wouldn’t it be nice if there was a way to retain them? Certainly, there are, but sometimes there is nothing you can really do to prevent them from leaving. However, let´s focus now on how to ensure your employee’s happiness.
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Improve your agency’s culture
If you notice that your employees seem unhappy, take a look at the policies you have in place. Using reward and recognition can go a long way toward employee engagement and retention. Employees need to feel trusted, and if your work environment isn´t providing that, something needs to change. Take a look at your company culture and act accordingly.
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Provide a safe workplace
Make sure you have a no harassment/bullying policy. It’s imperative everyone in the company understands this and takes it seriously. Nothing will force a good employee to leave faster than being harassed.
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Have an open communication policy
If someone has a problem with how things are being run, don´t make them jump through hoops to address their concern. This is especially doable in a small business setting. Be open about communication and expect the same from your employees.
Retaining your employees is essential for keeping your small business afloat. Let your employees know you can about them and appreciate their work. As discussed earlier, it will cost a lot of time and effort to hire a new employee. Don´t make the mistake of taking people for granted. Take advantage of the strategies above and continue to grow your small business effectively.
How to Reduce Employee turnover?
To reduce employee turnover you must make an effort to maintain a positive environment that supports your workforce.
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Offer competitive pay and benefits
Employees often leave a company for a role that pays better or offers more attractive employee benefits. To retain your best employees, you must offer competitive pay and benefits.
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Prioritize company culture
employees who fit well within your company culture have greater job satisfaction and are less likely to leave their roles. That means you must hire employees who add to your culture; however, it also means that you must continually prioritize creating a positive and inclusive company culture.
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Commit to employee development
Employees want to know that they have room to grow within a company. If they feel like their job is a dead end, they will likely look to move somewhere else where they can advance. To retain your best workers, make sure to offer employee development opportunities and give your workers a clear path for advancing in their careers.
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Listen to your employees
When you take time to acknowledge and respond to your employee’s thoughts and opinions, you demonstrate that you are committed to the and want to support them in roles. That support can make them feel respected and loyal to the company, which can ultimately help reduce turnover.
Over time, your employees accumulate a vast amount of knowledge, experience, and industry expertise. As a result, losing those employees can be costly, not only to your company’s button line but to the quality of your customer service and your employee morale. Fortunately, by preserving employee knowledge in a management platform and creating a comprehensive plan to reduce employee turnover, you can’t set your company for long-term success.
What Company Culture Means to Employees
Company culture refers to the attitude and behaviors of a company and its employees. It is evident in the way an organization’s people interact with each other, the values they hold, and the decisions they make.
Company culture encompasses a variety of elements, including the work environment, company mission, leadership style, values, ethics, expectations, and goals.
A company’s culture may be expressly and deliberately cultivated, or it may simply result from the accumulation of decisions made over time. With a strong company culture, employees understand the expected outcomes and behaviors and act accordingly.
Some companies have a team-based culture that emphasizes employee participation on all levels, while other businesses have a culture where formal, traditional, or hierarchical management is valued.
When you work at a company with a traditional management style, your job responsibilities will be clearly defined, but there may not be opportunities to advance without going through a formal promotion or transfer process.
In a more casual workplace, employees often have the opportunity to take on new projects, and additional roles, as time permits.
Benefits of Employee retention
1) Reduced costs.
Turnover is expensive, period. Recruiting and onboarding new hires are time-consuming and especially detrimental when paired with severance costs. In addition, inexperienced employees can reduce the quality of your customer experience, causing revenue loss. Save your organization’s time and money with a solid retention strategy.
2) Improved morale.
When valued employees leave, it’s a downer for their team members. Effective retention strategies can boost morale.
When employee morale is high, the workplace becomes a more positive place. Positivity rubs off on employees, making them believe their company is a great place to work. Happy employees are likely to stay and become great advocates for your agency.
3) Increased productivity.
Productivity and engagement tend to be higher among tenured employees. Long-term employees have had time to develop their abilities, can accomplish tasks within a shorter amount of time, and are more committed to the success of the business.
Research also shows that high engagement levels lead to increased productivity and better quality of work. When you focus on engagement and retention, employees notice and perform better.
4) Increased customer experience.
Focusing on retention makes employees happy. And employees who are happy exude that feeling to customers. Employee happiness correlates with high engagement, and high engagement leads to better customer service.
Plus, employees who have been at their company long-term can solve complicated problems to boost customer satisfaction.
5) Less time spent recruiting and training.
As an HR leader, you already have a lot on your plate. When your organization is in need of talent, recruitment efforts can be disruptive and time-consuming. By decreasing the amount of time spent interviewing and onboarding new hires, you can spend more time investing in strategic initiatives that improve the employee experience and prevent turnover.
6) Improved company culture.
Your company culture affects whether your employees leave or stay. If you experience high retention rates, you can thank your cultural initiatives. In fact, 72 percent of workers cited workplace culture as a driving factor in whether they work at a company or not.
When you’re able to engage and retain your employees, they’ll feel more connected to their work, their team, and your company culture. Ideal company cultures celebrate employees, leverage great benefits, and prioritize inclusivity. With low turnover, your norms will be naturally adopted and maintained in the everyday employee experience.
7) Higher employee engagement.
Research shows that there is a direct link between employee engagement and retention. Employees who are highly engaged are 1.8 times more likely to say they will be working at their current organization a year from now.
So, it’s no surprise that organizations that prioritize retention efforts have highly engaged employees. And organizations who have highly engaged employees reap many benefits, including:
- Better employee health
- Happy and satisfied employees
- Lower absenteeism
- Greater employee loyalty
- Better customer service
- Higher profitability
8) Improved revenue and ROI.
Retention problems reduce the ROI of your talent strategies. Between hiring costs, training investments, and lost sales and productivity, it’s costly to lose and replace a departing employee. These costs have direct and indirect impacts on your bottom line.
9) More employee expertise.
The longer an employee stays, the longer they have to develop their expertise. They have the ability to understand organizational nuances and procedures that new hires can’t yet grasp.
Plus, the longer an employee stays, the more value they provide the company. As employees stay, their dedication to driving business outcomes grows. With time and development, your average performers can become rising stars.
6 Strategies to Improve Employee Retention
Considering the benefits that organizations reap from low turnover, it’s important to adopt the strategies that drive employee retention. By hiring the right talent and centering your retention strategies around them, you can better ensure your employees are with you for the long haul.
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Hire strategically.
Investing in the right hires from the jump is a key way to ensure you aren’t throwing away your recruiting and training investment. In fact, 80% of turnover is due to bad hiring decisions. You don’t want to spend money on a new hire just for them to quit a few months later.
To avoid misalignment in skills and role responsibilities, clearly explain your expectations for the position. Be aware of possible mismatches in experience and culture during the interview process.
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Improve the onboarding experience.
Effective onboarding is an integral part of retaining employees. In fact, 40% of employees who did not receive adequate training leave their job within a year. Onboarding is more than giving an office tour or training employees for a few days. Onboarding should be a year-long process that achieves multiple goals.
Effective onboarding reinforces a positive impression, sets clear expectations, clarifies policies and benefits, and integrates new hires into the company culture. It also connects new hires with existing team members and enables planning for their long-term future.
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Leverage feedback from top to bottom.
Employee feedback drives growth at all levels of your organization. When feedback is used consistently, employees understand what they are doing well, and what they could improve upon. When leaders are transparent, employees are less likely to feel left in the dark and become a retention risk. Plus, their quality of work will increase as they improve over time.
Leaders should create a channel for employees to give feedback as well. This helps companies grow to support their employees and attend to their needs. Practice continuous listening, hold regular 1-on-1s, and leverage employee surveys to safeguard employee turnover.
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Prioritize recognition.
To retain top talent, leverage recognition processes that make your employees feel valued. This is important, as nearly two-thirds of employees would leave their position if they didn’t feel appreciated by their manager.
When recognition is used consistently, employees feel competent and respected, making them unlikely to explore their options elsewhere.
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Drive employee growth.
A great way to prevent turnover is by giving employees opportunities for growth and development. Our research shows that only 38 percent of departing employees said they saw professional growth and career development opportunities for themselves at their organizations.
To reduce retention risks, encourage long-term goal setting, provide coaching and mentorship, and leverage internal hires when possible. Prioritize consistent growth conversations and be vocal about available opportunities to your employees.
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Uncover insights from exit surveys.
Sometimes employee turnover is inevitable. Luckily, you can gain valuable insights from employees who have decided to leave.
Leverage exit surveys to receive direct feedback from departing employees. Ask them their reasons for leaving and possible suggestions for improvement. This helps you improve the employee experience for those who remain at your company.
Conclusion
Employee retention has become the top priority of HR leaders all around the globe. While companies and agencies may look at various ways to retain employees, the latter have already spoken about what motivates them to stay. Hence work towards creating a culture where employees feel they have everything they need in the workplace, a place they can belong to, a second home, after all, your employees are your best advocates.
