While the tension between finding and retaining top talent is nothing new to most industries, it can be extra difficult for businesses or corporations trying to stick to a tight budget and are not able to offer high salaries, bonuses or insurance coverage.
Cost of employee turnover
The impact of losing an employee extends beyond the dollar amount. Not only is there a financial cost to a company when a worker leaves, but there is also a loss of morale among employees and loss of productivity. One study estimates it costs about six to nine months’ salary on average every time an employee needs to be replaced. For the average position earning $40,000, that is $20,000 to $30,000 to recruit and train someone new.Another report, based on case studies, states the cost to replace an exiting worker is about one-fifth of the salary. “For businesses that experience high levels of turnover, this can add up to represent significant costs that can potentially be avoided by implementing workplace flexibility and earned sick days at little or no cost at all,”
The American Progress report stated. For higher skilled, specialized positions or management roles, the cost is even higher.The publication by the Center for American Progress stated: "one-fifth of workers voluntarily leave their job each year and an additional one-sixth are fired or otherwise let go involuntarily."Essentially, this means that employee retention is an important part of a good business strategy and needs to be incorporated.Yet, if you want to understand the true cost of employee turnover consider the expense of losing just one person in your company.
There will be advertising, interviewing, screening and hiring costs to replace the staff member who left. Not to mention the time and cost involved in training and onboarding the new worker. In addition to these expenses, there is also a loss of productivity whenever an employee leaves. One HR analyst notes that it can take up to two years for a new employee to reach the same level of productivity as the one who left. There is also the cost of errors and unsatisfied customers that come with hiring a new employee who is not as experienced in company practices. Essentially, the longer an employee stays with the company, the more valuable they are because they become masters of the system, products, services as well as crucial team players.
Improve employee engagement
Although there is no guarantee that your employees will stay with your company their entire careers, there are some things you can do to improve employee retention. These include:
- Tracking your retention rate. If you don’t measure it you’ll never know if it is getting better or worse.
- Have a strategy for the retention of staff. Rather than just assume a revolving door at your company is the norm, develop a plan that includes making employees want to stay longer.
- Develop a policy of accepting and acting on employee feedback. Making your staff feel appreciated and understood can go a long way to cultivating loyalty.
- If possible, offer health benefits. While they can seem like an unnecessary expense to smaller companies, offering even a modest incentive to employees can increase the likelihood they will remain with you longer.
- Interview those employees who have decided to leave to narrow down why they weren’t happy. Find out if there is something you can do to make your workplace a more positive environment for future employees.
- Recruit properly. If a company invests time and effort into finding an employee with a vision that matches the company’s it is less likely they will lose the new employee. This means you need to consider whether the potential hire will be happy in the work environment. It is also important to know if they see your company as one that helps them achieve the career path they foresee for themselves.
- Offer competitive salary and benefits. Whether you are a large corporation, small Startup with a big vision or a socially responsible company, employees need to be compensated reasonably for their work or they will be forced to look elsewhere. There are so many business insurance to take. No one wants to live below the poverty line or to take on debt just to survive. Even if you can’t offer a top wage, benefits ranging from insurance to workplace privileges like prized parking spots can also play a key role in keeping staff motivated to stay with you.
- Commit to continuous training. Everyone has a more positive view of companies that engage in regular employee training programs. Helping your workers gain and sharpen new skills will go a long way in increasing their commitment to stay with you.
- Reward efforts. Recognizing employees who excel is a great way to encourage them at very little financial cost. It not only helps them feel appreciated but can also help other team members feel motivated to working harder.
- Be flexible. Allowing employees to have a flexible work schedule is a crucial way to improve employee retention. This simple policy can give workers a work-life balance that will help them see the value of working with your company. It can also prevent them from accepting offers from other companies that are less understanding.
A key way to improve employee retention rates is through mentorship programs. By connecting new employees to ones that have been with the company for a while, you create a relationship, which can encourage new workers to develop feelings of loyalty to the company. It is also a great way to impart company knowledge to those new to the fold.However, many businesses and managers understandably struggle with organizing and maintaining such a program. Connecting mentors and mentees with one another has been made easier through mentorship software. Basically, this is a computer program that can help match mentors with new employees.
Brands such as Deloitte, Honda and JP Morgan Chase have been using mentorship software to cultivate connections in the workplace.Rather than expect employees to locate and connect with their own mentors, companies can demonstrate their respect and care for employees by connecting them with older workers who can guide the learning process.Mentorship can enhance employee engagement and productivity. What company wouldn’t want to improve their scores on both fronts?
Although there are always going to be employees leaving your company, that doesn’t mean you can’t implement a solid staff retention strategy. With some planning and moderate effort, any organization should be able to reduce their employee turnover. This includes offering incentives to workers, ensure they are paid a decent wage and provide learning or mentorship opportunities to help them grow.Companies that have a solid employee retention plan are able to reduce the cost involved when a worker leaves, which can add up to thousands and thousands of dollars a year.