What is Employee Retention, its importance, and the strategies to enforce it

According to the 2022 Global Benefits Attitudes Survey by WTWCO, 53% of the employees are searching for new opportunities, and there are different factors resulting in this, including pay and bonus, job security, health benefits, and flexible work. However, these components aren’t merely the top reasons employees move away from a company. They can be the top reasons for improving employee retention when offered correctly.

As gauged from the title that grabbed your attention in the first place, this blog will walk you through what employee retention is, the importance of employee retention, and how you can retain your top talents.

So, why don’t we get right into the discussion?

What is Employee Retention?

According to the Gartner Glossary, employee retention refers to the “organizational policies and practices designed to encourage employees to remain employed by the company.” Employee retention rate is a statistical measure companies can calculate for a particular duration of time. This directly correlates with employee turnover rates, meaning the rate at which employees leave an organization.

In a nutshell, companies can improve employee retention when they reduce employee turnover. Through this, they can enhance the effectiveness of their HR functionalities and processes.

There are different types of employee turnover, including voluntary (where an employee decides to leave the organization), involuntary (employee being laid off because of poor performance), functional, and dysfunctional turnover.

According to a research survey conducted by SHRM, the annual voluntary turnover rate in the US is 13%, and involuntary turnover is 6%. Similarly, 13% of workers in the US think about quitting their jobs daily in the US. There are different reasons why employees decide to leave their organizations.

As per a recent research study published by Zippia, money, unpleasant office culture, unsupportive bosses, lack of career advancement opportunities, and flexibility are some of the many reasons paving the way for employee turnover. Employers can build strategies to reduce employee turnover and improve employee retention by considering these factors. You don’t have to worry, as we will discuss some of the best employee retention strategies in a while.

What is the importance of Employee Retention?

Retaining top talents within your organization can benefit your company in numerous ways. It can save time for HR professionals, improve productivity, enhance business growth, reduce hiring costs, increase employee engagement, and so forth. Now, let’s look at some of these crucial factors that add to the significance of employee retention in any organization.

Help reduce costs

When an employee leaves an organization, the TA team will have to find new talent as a replacement. And this, indeed, is a costly venture. Different expenses come with it, including recruitment partner costs, job board fees, background checks, onboarding process, allocation of salary, and benefits.

Generally, as per SHRM, the total cost incurred by an organization per hire of a new employee is around $4129, and it takes about 42 days to fill an open position. Similarly, a study from Gallup also shows that when an organization is replacing a full-time employee with another, they would have to spend between half to twice the annual salary of the previous employee.

Therefore, employee retention can be highly beneficial as part of saving money. Apart from hiring costs, when a company loses a talented or unicorn employee, it would also adversely impact its business growth and revenue.

Enhance and preserve company culture

Organizations must preserve and enhance their company culture to boost employee retention. A bad workplace culture, including a lack of recognition, the presence of gossip, and biases, can increase employee turnover rates.

But when your organization and its employees work together to uphold a good workplace culture, it can improve productivity, collaboration, engagement, satisfaction, retention, morale, and so forth.

Ways to enhance and preserve company culture

Retain Institutional Knowledge

Institutional knowledge, also known as institutional memory, is an asset for any organization. It refers to understanding the company, its products, functionalities, customers, and vendor relationships. Having employees with institutional knowledge helps any company go about its daily business without any hiccups.

Mainly there are two types of institutional knowledge, and they are tangible and intangible knowledge. Tangible knowledge can be gained through training and other organizational initiatives. On the other hand, intangible knowledge is garnered through experience and exposure.

When a talented employee with exceptional institutional knowledge decides to leave an organization, it can hamper the institutional knowledge present within the company. To overcome such a concern, having plausible employee retention strategies in place can be vital.

Since it isn’t always viable to irradicate staff turnover completely, it is crucial to have other measures in place to retain institutional knowledge. They include:

Initiating mentorship programs
Having training programs conducted by experienced employees
Creating succession plans beforehand to avoid unexpected roadblocks when such a unicorn talent decides to leave

In short, one of the critical reasons for enhancing employee retention and reducing staff turnover is to preserve and retain institutional knowledge.

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How to increase Employee Retention in your company strategically?

Different strategies can be adopted to increase employee retention and lowering employee or staff turnover, ranging from providing flexibility to offering career development opportunities. Why don’t we have a look at them in detail?

How to increase employee retention strategically

Offer flexibility in your company

As per a recent Gartner study, 52% of participants in this study stated that they would reevaluate their current employment if their organization didn't offer flexibility. In the same survey, 16% of the participants said they would quit if their company shifted to work-from-office full-time. This shows that flexibility is a major criterion in ensuring employee retention.

Therefore, adopting flexibility, which can be in the form of flexible working hours, remote working opportunities, reduction in working hours, and four-day week culture, can be highly beneficial in retaining your top talents.

By facilitating this opportunity to your employees, there are several benefits, including:

Improve your employees' productivity
Reduce commute and relocation, which helps employees to focus on their work
Assist in attracting new employees
Lower absenteeism among employees
Build engagement and, most importantly, enhance the chances of employee retention
Help with building international businesses and communications

Indeed, there are different things to take care of as part of seamlessly integrating flexibility within your work culture. However, once you overcome these struggles, opting for flexibility can benefit your employees and your business equally.

Focus on employee wellness and well-being

mental health improvement for employee retention

Around 30 years back, most organizations equated employee wellness and well-being by bringing physical health and safety to the spotlight. It mainly focused on avoiding workplace injuries, accidents, or deaths. Although physical well-being is still a priority, in the last few years, and especially during the pandemic, organizations are also prioritizing mental health.

It is vital because many people are now succumbing to issues like stress, anxiety, depression, and other mental health concerns, hampering their professional and personal life.

For instance, according to a recent study published in the National Library of Medicine, companies worldwide face work-related stress-based losses of around $221 million to $300 billion annually. These numbers are indeed aggravating and caused due to absenteeism, lack of productivity, etc.

With an increase in remote work culture, prioritizing mental health becomes essential. It can be through awareness programs and support, medical leaves, insurance coverage and free health checkups, recreational activities, team building initiatives, and so forth.

Besides physical and mental well-being, companies have to consider organizational well-being as part of employee retention. It includes open communication, teamwork, value-based work culture, etc.

Provide fair compensation to employees

In today’s world, most employees leave an organization if they don’t get fair compensation based on their performance and job role. As discussed, it is indeed a poignant reason for employees to switch jobs.

Therefore, as part of initiating employee retention, employers and HR professionals have to consider various factors while performing salary revisions. They include employee performance, job role, labor costs, cost of living, inflation, etc. Similarly, if employees are provided with additional responsibilities, employers have to evaluate this aspect while deciding their salaries.

Along with providing a competitive salary package, offering other benefits (including health insurance, paid vacation leaves) and bonuses to the employees is essential. Coming to benefits, employees are particular about retirement plans and healthcare plans provided by an organization while deciding whether to continue or discontinue working for a company.

As per WTWCO, in 2010, only 25% of employees considered retirement plans, and 32% of employees prioritized healthcare plans. But, in 2022, 60% of employees value both as deciding factors to continue working with an organization. Therefore, it is essential to improvise these benefits offered to employees from time to time.

This way, you can improve the chances of retaining your top talents within your organization for a long time.

Facilitate career development opportunities

career development opportunities for employee retention

Lack of career advancement opportunities is one of the main reasons employees quit their jobs. Therefore, to retain top talents, it is essential to form career development plans for employees. However, while doing so, ensure that it aligns with your company's business goals and objectives and the employees' aspirations and interests.

Now, let's have a look at the different ways to facilitate career development within an organization, regardless of its size, location, and niche.

Initiate upskilling, cross-skilling, and reskilling programs for your employees
Provide opportunities for internal mobility
Conduct reviews, performance appraisals, mentorship programs, etc.
Create career plans, career trajectories, and progressions
Have open communication and transparency

Your organization can improve employee engagement, satisfaction, and retention rates by conducting these initiatives. Nowadays, HR professionals can perform these tasks, provide skills insights, create skills matrixes, and so forth by using a skills intelligence platform.

For instance, using a skills intelligence platform, employees can explore the skills they have to enhance to attain career growth, find relevant upskilling programs, enroll and complete the courses, validate them, and update them easily.

Hire talents strategically

As part of retaining employees, it is vital to hire talents strategically. Nowadays, by using predictive analytics and similar AI-powered tools, HR professionals can calculate and analyze the chances of an employee staying with the organization.

Similarly, once hired, HR can make the best out of people analytics and predict when an employee will resign from an organization. Based on this, employers can plan and focus on their retention.

Also, while hiring talents, it is best to choose from a diverse talent pool and seek out people with diverse thoughts. Through this, you can bring in people from different walks of their professional journey and help build strong teams. In the long run, these initiatives can indirectly help improve employee retention.

Final thoughts

To summarize, employee retention is not just a metric. It represents employee satisfaction, company culture, transparency, open communication, understanding, and so forth.

So, regardless of the size of your organization, it is essential to prioritize employee retention and rely on strategies that would help with the same.

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