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A retention strategy is a system that workplaces can use to reduce employee turnover and to keep more workers at their company. It is a way to address some of the reasons employees leave and to create a workplace where people want to continue their careers.
Why Do You Need a Retention Strategy?
Losing talented employees can reduce the skills and expertise that you have in your workforce. It can also increase your recruitment costs when looking to replace those employees. A retention strategy can reduce turnover but has the following benefits too.
- It can be financially smart. HR company E. L. Goldberg & Associates estimates that the total costs of replacing one worker are between 33% and 200% of a worker’s annual salary, depending on the specialty of the role. Of this, about 33% involves direct costs such as hiring temporary labor or recruiting a new worker. Around 67% of the cost of replacing an employee is related to “soft costs,”—such as loss of talent and skill at the company.
- It can increase productivity and business success. When employees leave, so do their skills, talent, and knowledge. Hiring someone else and bringing them up to speed takes time. During that process, your remaining workers may have to pick up the slack that a loss of an employee has caused.
When you have more stability in your workforce thanks to retention strategies, you may experience fewer of these dips in productivity. Reducing the time and costs associated with regularly looking to replace employees means you can focus on your business’s future instead.
- It can boost morale. Seeing one employee after another leave can make the remaining workers feel unsettled. When you implement retention strategies and cut turnover, it can create a sense of stability in your workplace. Many of the strategies can also improve worker satisfaction overall.
Two Types of Retention Strategy
There are two types of strategy overall. Your decision about which to use depends on why you’re concerned about keeping talent in the first place. Targeted strategies are focused on a specific pain point or problem. For example, a new manager may be clashing with some workers in one department leading to several resignations. In this situation, you can offer coaching and training for the team and manager to help the group learn how to work together. Broad strategies take a look at the bigger picture and involve using a more general approach to keep workers happy. There may not be a problem at your company, but you may want to implement broad strategies because a recruiter is targeting your employees or because you’re in a competitive industry. In a tight labor market, broad strategies are important. They can also be effective if you need to address systemic and company-wide issues that are causing workers to jump ship.
Examples of Retention Strategies That Work
Many retention strategies are about addressing anything that could be making workers leave. They also focus on creating opportunities to build a great workplace. You can implement more than one strategy to encourage workers to stay.
Employee recognition
In a poll conducted by the Achievers Workforce Institute in 2022, researchers found that 57% of workers who felt recognized were less likely to talk to a recruiter. Another two-thirds of these employees said their desire to look for a new job would be less if they got “meaningful” recognition. There is a range of employee recognition initiatives that you could implement at your organization, including rewards, “employee of the week” announcements, genuine thank-you notes, or call-outs in meetings.
Investing in your teams
Providing learning opportunities and career development shows you care enough to contribute to a worker’s growth. Investing in your teams through mentorship, coaching, and other growth opportunities can make employees feel more engaged. For your top performers, investing in your teams and offering growth inside the company can help make your business more attractive than any recruiters who may be contacting your top talent.
Building a strong company culture
There are some workplaces where people want to work. They’re proud of their company and what it does and genuinely enjoy showing up every day. Building a company culture that your employees are proud to be a part of means getting to know each other as people. Having company traditions and celebrating successes and holidays together can help too. A part of your company culture is also your employer identity. How do current and former employees see your workplace? Are you a casual and supportive workplace? Or a focused and corporate one? There are no wrong answers here, but keep in mind that employees naturally gravitate toward a workplace that fits their personalities. If someone feels they don’t belong, they will likely leave. Make sure your identity as an employer is clear so that you can attract talent that wants to stay with your organization long-term. From your online presence to internal communication, create a consistent image and way of interacting with others. Decide what you want your brand to be and work to foster that.
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Give employees a strong “why”
Employees who have a strong sense of purpose in what they do have a sense of contribution which can keep them engaged. Creating a company mission and values statement can give your organization a higher purpose. You can then work with employees to help them see how they fit into that purpose. Workers who feel they’re contributing to their communities or making a difference may be more inclined to stay. According to a study by McKinsey, workers who are more connected to purpose at work report better outcomes and engagement.
Invest in diversity, equity, and inclusion (DEI)
A 2022 report by Edelman found that 60% of workers surveyed said they had left a job in the past twelve months or would refuse to take a job because of racism in the workplace. A robust DEI commitment can help you attract and retain more diverse employees and can help make everyone in the workplace feel welcome and included.
Offer flexibility
When GoodFirms polled HR managers about reasons they were given for employee resignations, 70% cited a lack of work flexibility as the top factor. Not all jobs allow for remote work or other flexible work options, but it pays to offer solutions where possible. A different position, maternity and paternity leave, daycare support, and other options can all help.
Rethink compensation
A 2021 Pew Research Center research poll asked employees why they quit their jobs. About 37% cited low pay as a primary reason for their resignation, and another 26% listed low pay as a minor reason. And even when workers are happy with their pay, a competitor with a higher wage can be tempting, especially during times of high inflation. Stay in touch with living wages in your location and the averages in your industry. By offering competitive wages, you make it possible for workers to stay at your workplace and pay their bills. Look beyond wages to employee benefits, which can also make you attractive to talent.
What Else Can You Do to Create a Retention Strategy?
While investing in your people and creating a welcoming workplace can be a great start, you also want to customize your retention efforts. Here’s how.
Find the pain points and opportunities
Find out what your organization’s selling points are and where you may be pushing candidates away. You can use Connecteam surveys to ask your team about any hidden pain points, what they like best about working with you, and where you can do better. Surveys can also help you to uncover employee unhappiness and dissatisfaction, so you can act before these problems push people out the door. Exit interviews are another opportunity to ask questions. When someone has already chosen to leave, they may be open to talking about what shaped their decision. Be transparent and explain your commitment to creating a workplace that values its employees. Explain to the employee that is leaving that you’d love to hear what informed their decision, so you can address any problems for their team. Another way to dig down to uncover what may be pushing workers away is with eNPS (employee net promoter score). This score measures how likely your workers are to recommend your business as a place to work. A score under ten can indicate your workers are unhappy and may be at risk of leaving if a better opportunity comes along.
Measure retention
Evaluating retention lets you see whether a high number of people are leaving. Having a number also gives you a baseline, so you can see whether your efforts to hold onto talent are working.
- Start by determining a period of time. You can measure retention over a year, for the past quarter, or the past month.
- Next, divide the number of workers that you had at the end of the retention period by the number of workers at the start of the period. For example, if you had 120 workers at the start of the year and 80 had left by the end of the year, you would divide 80 by 120.
- Next, multiply the resulting number by 100.
- Repeat the process during the next retention period. So, if you calculated for the past quarter, run another analysis at the end of the next quarter for comparison.
If your retention rate is 50% or lower, either implement a retention strategy or update the one you’re using. Aim for a retention rate of 85-90% or higher. A 100% rate is unlikely—unless you’re measuring monthly. People will leave. They may be moving to another city, changing industries, or retiring. This is normal. You want to keep an eye out for a lower retention rate that suggests there’s room for improvement.
Reevaluate your workplace
Regularly review your workplace by taking a look around and talking to workers. Is there gossip or harassment in the workplace? Are there any signs of a toxic culture—such as arguments or tension? Do some departments or workers seem frustrated or overwhelmed? If you see signs of problems, act quickly. A work-safe policy, employee training, and coaching to improve communication skills can help with many interpersonal challenges. Frustration and overwhelm can sometimes be addressed with a different staffing system or by a new method to distribute tasks.
Resignation-Proofing Your Company
Change is a natural and inevitable part of workplace culture. You can’t convince all your employees to stay with your organization forever—nor would you want to. By offering flexibility, creating a great workplace culture, and making your organization competitive as an employer, you can retain more top talent. This helps keep your business productive, maintains high morale, and strengthens your bottom line.
