What is Employee Retention Really Worth?
Why do employees quit?
How much time and money does your company spend on hiring and training new employees? If your turnover rate is anything like the national average of 19%, then you're probably spending a considerable amount of resources. Did you know that employee turnover is one of the highest costs associated with running a business? If you aren't taking measures to effectively combat employee turnover at your company, you are wasting both money and time. By developing a thorough understanding of what drives employees to seek other opportunities, you can potentially save significant capital. Here are the facts you need to create employee retention strategies that will keep you from having to spend a fortune on hiring and training costs.
Micromanagement frustrates employees. Not to mention the fact that it hurts your business in many ways. By allowing managers at your company to micromanage their teams, employees will feel as though they are being belittled and not appreciated. Micromanagement also hinders employees’ abilities to develop job-related skills. If managers are frequently doing the jobs of their team members for them or dictating their duties step-by-step, those team members will not be any better at doing their job at the end of the day. Because of this, micromanagement makes it more difficult for companies to train valuable, skills employees. Employees want to feel as though they're progressing in the workplace and that their skills are valued. In fact, employees who feel like they are regularly micromanaged are 28% more likely to look for work elsewhere.
Overworked employees are less productive and less happy. Employee burnout is a recurring problem within small businesses and large companies. When a business adds to the workload of its staff without hiring additional talent to balance out the workload, it creates stress for existing employees. Around 70% of workers feel like they don't have enough time in their week to complete their job duties. This feeling undermines job satisfaction and demotivates employees. Employees who consistently feel overworked are 31% more likely to look for a new job than employees who are happy with their workload.
Lack of professional development opportunities
Providing professional development opportunities at your company could boost employee retention by as much as 34%. Employees generally want to expand their skillset and grow their knowledge - professional development programs benefit the employee and the business. Through learning opportunities provided by companies like tuition reimbursement, online courses, in-house solutions and off-site classes, employers can show that they place value in their team members by offering them professional development opportunities.
Low company culture
Company culture is essentially the personality of a company. Workers are more likely to enjoy working for a company if there is a strong company culture that involves a positive environment and aligns with their values and expectations. When employees feel as though the fit in with their company, they are happier within their roles. Workers who describe their workplace' company culture as weak are 15% more likely to seek employment elsewhere.
Lack of recognition
Recognizing your employees for their successes and skills is vital to maintaining their job satisfaction. The fact is, people want to feel valued and appreciated at their place of employment. By verbally praising employees when they perform at high standards, accomplish a difficult task, successfully learn a new skill, or skillfully utilize leadership abilities, you're exhibiting that you truly appreciate their efforts. A recent study shows that two out of three employees would leave their position if they did not feel adequately appreciated.
The cost of employees leaving
What are the true costs of employee turnover? This study shows that turnover costs are considerable. For example, replacing a single $10 per hour employee costs around $3,300 on average. As the salary and requirements for a job position increase so do the estimated costs of replacing an employee in that position.
Costs associated with finding a pool of qualified applicants and screening them depend on what resources and methods you use for recruitment. Your business might use an agency or recruiter to locate and screen applicants for you. You probably invest in advertisements for open positions. Both of these things along with interviewing candidates, performing background checks, checking references, and preparing to make a job offer all involve money and time taken away from other facets of your business.
Costs associated with onboarding a new hire
Depending on the scope of the newly filled job position, onboarding a new hire can take anywhere from three months to three years. During that transition period, businesses spend, on average, 10-20% of the employee's salary for training and other onboarding processes. Consider the costs of the following items when tallying up what it costs for your business to onboard a new hire.
- Training programs
- Wages for any trainers or teachers involved with training and development
- Drug testing
- Paperwork processing
- Equipment and office furniture
- HR and administrative costs
It's rare to find a job candidate whose skills are on par with a highly skilled, long-term employee who has just left a company. Hiring someone new almost always comes with a loss of productivity until the new hire functions at the same level as the previous employee. Losing a seasoned employee will cause greater productivity loss than the loss of a more recent hire, but most newly-filled positions will mean a loss of productivity. On average, expect a new hire to take up to two years to reach the productivity level of the previous employee.
If your company has a high turnover rate, the employees that stay will feel demotivated. The direct result of this is a loss of engagement. Workers stay motivated and on-target when they are part of a team working toward a common goal and members of the team see consistent progress. Progress is difficult to achieve with a high turnover rate. Existing employees feel as though they are fighting an endless battle and become disengaged with their team and their work.
How to improve employee retention
So how, then, should you improve employee retention? There are several strategies you can employ to save money on employee turnover. Many of them may not be as costly or time-consuming as you might think. While it's true that raising salary tends to have a direct positive effect on employee retention, several less expensive and non-monetary factors have a strong influence on employee turnover.
Before we dive into the two primary solutions for employee retention, be sure that your company is hiring the correct candidates. Every candidate needs to be properly screened. Businesses who fail to complete background checks and call references hire more bad apples than companies who are more thorough. It's also critical to comprise a list of necessary hard and soft skills for each position and include these in the job description. If a description for one of your positions was written over a year ago, it's time to revisit it and be sure that it still correctly describes your company's needs for the position.
Technical skillsets are important, but if you hire candidates based on skills alone, you'll find yourself in hot water quickly. Non-teachable soft skills like time management, temperament, willingness to be coached, enthusiasm, interpersonal skills, and work ethic should be at the top your priority list when screening and interviewing new candidates. More employees fail in a new job position because of a lack of important soft skills, not a lack of technical skills. Technical skills can always be taught or added to, given you have hired the right candidate.
First, be sure that your business is utilizing HR to the best of its abilities. In 2016, employee retention was one of the top priorities for HR departments. If your business isn't actively urging HR to gather information about why employees are leaving, you're letting critical data fall through the cracks. Conducting exit interviews can help your company gain insight related to why employee turnover is a problem.
Additionally, sitting down with employees when issues occur and documenting their complaints and comments will take you far. Take employee concerns seriously - your employees are trading the hours in their day to work at your company. By listening to and investigating issues that occur, you're gathering valuable information that can be used to directly address problems. You are also showing your team members that you truly care about their experience as employees and value their opinions.
Recognition and incentives
Next, you can greatly improve employee retention by making a better effort to reward high-performing employees. Employee recognition is front and center when it comes to how happy your team members are in their positions. These are some of the simplest ways for you to recognize employees and improve turnover.
- Verbal recognition. We touched upon this before, but providing verbal praise to your employees is a simple, effective way to affirm to your team that you appreciate them.
- Giving a physical representation of your appreciation, like an employee award, is a long-lasting example of the value you place on your high performers. Employee awards can provide a daily morale boost especially when they are displayed in plain sight, like on a wall or on the employee's desk.
- Increase workplace satisfaction with small office perks like free lunch, free coffee, or free snacks.
- Recognize your employees’ passions by allowing them a few hours per work week to work on a company side project that they enjoy.
- Shout out employees on social media. Taking the time to post about employee successes and appreciate team members through social media platforms is a simple way to show your appreciation and give customers a behind-the-scenes look at your company.