When we talk about employee retention, we’re talking about the specific length of time a given employee (or group of employees) stays in their job.
Here are some facts:
- Average annual turnover across all industries was 15.7% in 2014.
- Employee turnover has been gradually increasing every year since 2011.
- The American Management Association (AMA) estimates the cost of turnover is 1.4X an employee’s annual salary.
- According to the BLS, the average employee stays in their job for approximately 4.6 years.
For large companies, this represents a multi-million dollar problem every year. For small to mid-sized companies, it costs tens or hundreds of thousands per year. And for the really small guys, such as startups – hiring the right person and keeping them there is even more critical, because it can mean the difference between success and permanent failure.
The question is, then: How come turnover is increasing? Why are people only staying in their jobs for a few years, and then moving on? What can we do to make things better?
Table of Contents
- 1 LinkedIn’s Employee Retention Report: Why People Leave Jobs.
- 2 Five Simple Ways to Improve Employee Retention.
- 3 To Increase Employee Retention, We Have to Care.
- 4 Does My Business Really Need to Improve Retention?
- 5 Four Highly Targeted Ways to Improve Employee Retention.
- 6 Conclusion: Your Toolbox for Increasing Employee Retention
LinkedIn’s Employee Retention Report: Why People Leave Jobs.
LinkedIn recently published a white paper outlining the main reasons employees leave their jobs. It is called Why & How People Leave Jobs in North America.
The conclusions of the report are not surprising. After surveying thousands of individuals who have recently changed jobs, these were some of their findings:
Key reasons people left their jobs
- Concerned about lack of opportunity for advancement.
- Unsatisfied with leadership of senior management.
- Unsatisfied with work environment and culture.
- Unsatisfied with compensation and benefits.
- Looking for more challenging work.
- Inadequate rewards and recognition for contributions made.
Key reasons people joined new jobs
- Stronger career path and increased opportunity.
- Better compensation and benefits.
- Better fit for my skills and interests.
- Greater ability to make an impact.
- The prospect of more challenging work.
- Belief in the company’s overall direction.
What we see here is a familiar story: issues concerning advancement, money, leadership, culture, and job fit. This is almost always what turnover boils down to – a combination of one or more of these factors drives someone away.
Five Simple Ways to Improve Employee Retention.
The good news is that every single one of these areas is under an employer’s control. Let’s take a look:
- Career paths or ladders can be designed.
- Schedules for performance-based raises, commissions, and/or bonuses can be developed (plus, changes to base compensation can be made when possible).
- Leadership and communication can be enhanced.
- Culture can be changed and developed.
- Jobs can be benchmarked for perfect job fits every time.
The problem is that many employers are stuck in a reactive mode, only treating individual issues when they get so far out of control that significant losses have already been sustained.
Taking a proactive approach to employee retention is the solution.
The proactive strategy is always a cost-effective, winning strategy. We have choices after all.
We can choose to eat healthy on a daily basis to prevent expensive, life-threatening operations later in life – or not.
We can choose to work hard for the next hour, or slack off and procrastinate.
We can choose to participate in regular exercise, or allow yourself to get out of shape – losing strength, bone density, and mental clarity as the years go by.
The same goes for our business.
Large or small, many employees or few, big revenues or just getting started, we have a choice.
Let’s choose to take human resources seriously. Let’s commit to creating a better culture, and implement more effective hiring practices. Let’s work to strengthen leadership. Let’s figure out how to maximize employee retention.
When we do, it pays itself back ten-fold every time – in the form of increased profits, decreased costs, happy workers, enjoyable work environments, functional communication, and innovation that drives business forward into the future.
As discussed in the Harvard Business Review:
If management concentrates on understanding why employees stay, then they can act to reinforce the right reasons and stop reinforcing the wrong reasons. In other words, they can take a positive approach to managing retention, which will be more effective over the long run than the ordinary, negative approach of simply reducing turnover.
To Increase Employee Retention, We Have to Care.
What is the difference between proactive and reactive businesses? How come some businesses are eager to improve employee retention, while others are content to maintain the status quo (even in spite of major, costly issues)?
Over the course of time we have developed three answers to this question.
- First, some business leaders are not aware of the need for change. Busy with other things, they haven’t taken the time to evaluate the facts or crunch the numbers (perhaps for fear of what will be discovered!). Alternatively, they have run the numbers but do not believe they are significant enough to be addressed.
- Second, some businesses lack the resources (time, money, talent) to pursue change initiatives. They may understand the need for change and wish to pursue it, but what can they do if everyone is already busy putting out fires? If the budgets are maxed and would-be project leaders are tied up elsewhere? Running at red line is common, and makes it tough to get out of reactive mode.
- Third, some businesses simply don’t care to make things better. Business leaders may be aware of the need for change and have the resources to pursue it – but without proper motivation, action is not taken and progress is inhibited.
Remember, we all have choices. We can seek to understand and work with the realities of the world around us – or we can go against the grain. The question is, what’s your reality?
To find out, here are four questions you can ask yourself:
- Is your annual turnover rate higher or lower than average?
- If higher, is your organization aware of the need for change?
- Does your organization have the resources required to address it?
- Do the business leaders responsible for effecting change have motivation to do it? Do they care?
What we have discovered is this: awareness can be raised and resources can be procured, but if business leaders are not motivated to make improvements, progress will not be made and losses will be sustained.
Perhaps the greatest loss a business can sustain is an employee leaving because of leadership’s lack of action. As noted in LinkedIn’s survey, the number two reason employees leave their jobs is because they are “unsatisfied with leadership of senior management.”
Once again, the good news is that this is within our direct control. It is something we as business leaders can act on immediately and with power.
Hence the importance of caring. Nobody can make someone else care about something if they don’t want to. However, upon examining the facts and understanding the consequences of inaction, we may renew our motivation to address culture, talent, and employee retention.
Does My Business Really Need to Improve Retention?
Of course, not every business needs drastic change. Many companies already have excellent retention rates and lower-than-average turnover. Other companies are already taking proactive steps with regards to culture and talent management.
Companies like Google, for example, are constantly tweaking their hiring process to make it better. They never arrive at a point where they say, “Yep – we’re done. This is it, and will work forever.” Instead, they challenge themselves to constantly improve, such that they may grow and mature as a company, and become more profitable.
They also take great care of their employees, constantly seeking to understand what will drive greater productivity.
Naps during the day are encouraged where productivity may be increased. Cross functional teams often do not have one specific supervisor or point of authority; rather, it is shared and distributed across team members, which is similar to how a Navy SEAL team operates.
Interestingly, while we might say Google does not need to change (because they’re already taking proactive steps towards ongoing betterment) – the very reason we say this is because they are already committed to continuous improvement. They take employee retention seriously as a corporate value.
Even with low turnover and high retention, businesses like Google are committed to staying one step ahead of the curve, and avoid being caught off guard when they least suspect – and this will keep them on top.
Successful businesses are committed to long-term progress.
When we look at very successful businesses, athletes, and other individuals, one thing they share in common is a desire for achievement and a commitment to ongoing learning. That which they do not know today, they are determined to learn tomorrow and apply to their lives.
Businesses and individuals who maintain an open and receptive mind will continue to win and progress. In the context of this discussion, we note such businesses win greater cooperation from their employees and improve their employee retention rates dramatically.
For this reason, every business can benefit from proactively pursuing betterment – in all areas, really. Existing systems can stay in place, but evolve and strengthen as new ideas and information surface.
Four Highly Targeted Ways to Improve Employee Retention.
To close this discussion, let us examine four very specific ways employee retention can be improved – and turnover reduced. I’d also recommend checking out our recent article on how to make employees feel important. It contains some additional information on this subject.
Hire for great job fits.
The employee life cycle begins at the point of hire. It makes sense, then, to make sure you’re getting this right.
Yet too many businesses are still relying on outdated methods of comparing exaggerated resumes to outdated job descriptions. HR generalists struggle to mentally process the hundreds of resumes they scan with systematic accuracy, and wind up taking best guesses at who to bring in for a job interview.
Here’s the good news: there are now validated solutions that allow jobs to be accurately benchmarked – and candidates to be assessed systematically against those benchmarks – to ensure excellent job fits, every time. Hiring confidence can be increased to as high as 93% when using a validated job benchmarking system.
Show leaders how to increase employee motivation on an individual level.
Something almost all of us struggle with (as human beings) is assuming everyone else is just like us. Hey, why wouldn’t they be?!
And so what do we do? We try to motivate others based on our reasoning, not theirs. Worse yet, we will resort to using our authority to motivate others into action, which is at best a short-term strategy.
It doesn’t take much analysis to understand the disconnect here, yet on the average day, most of us will continue to use ineffective communication strategies with the people around us, and wonder why our results suffer.
Here is the plain truth of the matter: All of us are unique creatures with completely different ways of thinking about the world around us. We have different reasons for taking action in life, and different ways of taking action too.
The key to unlocking real, intrinsic motivation in another person is not to speak to your motivation (the reason you would take action), but rather speak to their motivation. And in order to do this, you must understand their motivation. You must discover their reasons for doing things, and understand their logic and reasoning.
Unfortunately this is not always obvious or easy to do. Luckily, there are highly effective tools available to measure behaviors and motivators in ourselves and others, and we can use that information to achieve higher levels of collaboration, productivity, and satisfaction in the workplace for all parties.
Solicit employee feedback and work to incorporate their ideas in key decisions.
As mentioned in this article, we all want to feel important.
We all need to matter to somebody, or something. The second we stop mattering or feeling important, motivation decreases and we start looking for new opportunities where we might regain that sense of importance about ourselves.
When an employee is made to feel unimportant, they begin to disconnect from their job and start looking elsewhere. They seek out new jobs where they might feel importance again.
One of the greatest ways to make another person feel important is to listen to them, pay attention to them, and to care about what they think and how they feel.
This does not mean you need to agree with someone, but you can still listen to them and seek to understand them. You can still show you care about them as a person, even if you hold a different opinion about the matter at hand.
Think about it, though: how often do other people really, truly listen to you? How often do you feel others pay genuine attention to you, your ideas, your thoughts, and your dreams, and talk through them with you?
Most of us don’t get enough of this in our lives, because the average person is too busy talking about themselves to pay attention to someone else. And frightfully, we too make this very mistake when dealing with other people, much more often we’d like to admit.
By making employees feel important, motivation and retention can skyrocket. This can be accomplished through the use of individual meetings, team building events, awards and recognition, and even organizational surveys designed to solicit large-scale feedback.
When such feedback is used to influence important business decisions, and employees know their feedback influenced those decisions, the effect is huge. It says, “We care about you, your ideas, and your thoughts – so we acted on them. Thank you for providing us with such excellent advice. We couldn’t do it without you.”
Even in situations where a final decision is made that does not concur with the employees’ voice, the time taken to solicit their feedback and show appreciation for it goes a long ways towards minimizing hurt feelings – and ultimately improving employee retention.
Improve employee engagement and communication with ongoing training.
As another way to show employees they matter is to engage them in coaching, workshops, and mentoring programs designed to help them grow. This comes with the added benefit of increasing their on-the-job skills, making them more productive and effective in their work.
As an added bonus, this gives employees something else to look forward to besides their paycheck, or their usual projects. It’s something fun, interactive, and engaging that benefits them on an individual level – helping them in their career, and aligning their individual incentives with that of your organization.
Since the number one reason employees leave jobs is “concern about lack of opportunity for advancement,” any opportunity to further their transferable job skills can go a long ways towards improving retention.
Conclusion: Your Toolbox for Increasing Employee Retention
In summary, we have plenty of tools to increase employee retention – and we should want to do so, because greater employee retention benefits everyone.
The employer benefits from greater productivity, decreased costs, and a competitive advantage in the workplace resulting from having the best players on their team.
The employees benefit from being happy, engaged, motivated, and fulfilled on a daily basis. And isn’t this a goal we all share? Don’t we want to see our co-workers, spouses, family members, and friends succeed at work? Don’t we want to see them smile, loving life every day?
The sad news is that 80% of the workforce has reported they are unhappy in their jobs. And on nearly a daily basis, nearly everyone can relate to someone complaining about their job, or their boss, or the type of work they’re doing.
As a society, we have a responsibility to work together to achieve progress, efficiency, balance, and happiness in life and work.
We must be accountable for our decisions and take proactive steps towards making the world a better place, including within the context of our workplace.
We should seek to achieve win-win outcomes in which greater advancements can be made through collaboration and group cooperation, and use technology, information, and feedback to guide this process.
Let our conscience be our guide, then, leading us to great things are on the horizon. And if that isn’t a compelling enough reason to effect positive, proactive change, then at least remember that it’s a losing strategy to look the other way. Winning businesses and individuals are those who care and who invest in their future.