You are on page 1of 5

Eight Proven Employee

Retention Strategies
That Will Reduce Your Turnover Costs

989-751-4351 2/24/19

Eight Proven Employee Retention Strategies
That Will Save You Thousands in Employee Turnover Costs

What is employee retention?

Employee retention measures an organization’s ability to attract and retain employees. Retention is
calculated by tracking the number of employees who stay or leave an organization over time. Retention
is typically tracked and calculated as a percentage of turn-over per year. For example, an organization
reporting a retention rate of 80% for the year indicates a 20% employee turn-over.

Managing employee retention requires proactive strategic interventions that impact employee morale
and motivation to ensure that employees are engaged, satisfied, and productive. An effective employee
retention program benefits an organization’s ability to attract and retain employees and reduces costs
related to recruiting, hiring, and training.

Why is tracking and managing retention important?

Employee retention is a considerable cost factor for organizations of all sizes. Employee retention
programs reduce spending, foster a healthy productive company culture and result in high-performance
teams who produce increased bottom-line profits. Engaged, productive, and hard-working employees
are the result of a positive culture.

Employee retention is affected by physiological and internal motivational factors:

Physiological factors:

• Working conditions
• Peer relationships
• Leadership quality
• Job Security
• Compensation
• Status

Motivational factors:

• Responsibility
• Job Satisfaction
• Recognition
• Achievement
• Growth Opportunities
• Advancement

Whatever an organization’s size, employee turnover can exponentially impact a company’s remaining
employees, customers, operations and finances.

What is the cost of employee turnover?
Employee retention matters because high turnover rates equate to high costs of doing business.
Numerous studies indicate that the cost to replace an entry level employee can average 40% of the cost
of their annual salary (upwards of $15,000 to replace a single employee earning $31,000 per year).
Replacing higher-level employees --such as managers and executives-- can cost upwards of 150 to 200
percent of their annual salary. By this metric, the loss of just five entry-level employees could cost your
organization over $75,000. And if you lose a single manager earning $75,000 per year on top of it, those
costs can more than double.

Aside from cost, high turnover impacts the remaining employees. Employees who feel like their
organization is a revolving door will have feelings of stress, anger, resentment and are likely to
disengage; ultimately impacting the overall company culture and teamwork. Implementing a thoughtful
strategic employee retention strategy will cut costs and contribute to a sustainable team of employees.

Retaining employees is important to the success of your organization. A high rate of employee turnover
can result in a loss of knowledge, skills, and organizational capabilities negatively impacting your bottom
line. The cost of losing an employee includes not only lost productivity, but also adds the expense of
recruiting, selecting, and training a new employee.

How do you know when employees could be considering leaving?

Recruiting and hiring quality candidates has become extremely hard, expensive, and time-consuming.
The current job market is 90% candidate driven. Organizations do not have the freedom and flexibility to
pick and choose from a vast pool of talent: talent picks them.

Two out of three employees are planning to quit their jobs this year. According to Harvard Business
Review, there are five signs that an employee is going to quit:

• Decreased productivity
• Increased negativity
• Less job-related focus
• Increased expression of job dissatisfaction
• Increased tardiness/short days

These red flags don’t even include some of the more obvious signs like employees dressing up more
than usual at work, taking more sick days or longer lunch breaks, or other indicators that they may be

A million respondents to recent study indicated that workers are most likely to switch jobs at the one-
year mark. This phenomenon doesn’t stop at year one – the same study found a yearly trend, with a
spike in the likelihood of voluntary turnover with each successive anniversary. So what factors impact an
employee’s decision to quit?

The answer lies within the dynamics of your employee retention strategies.

Proven retention strategies to keep committed and engaged employees
1. Execute effective hiring, on-boarding, and orientation processes and practices
o Seek candidates who have shared values and will thrive within your culture
o Hire the person who fits the job: one who is trainable and has growth potential--both personally
and professionally--within the organization. Remember that technical skills are easier to train
and take less time and effort than soft skills and values
o Hire slow: focus on the values, character and culture-fit during the hiring process
o Hire mature: seek candidates capable of sustaining long-term commitments. A mature
candidate makes decisions based on character, not feelings. They tend to be secure in their
identity and can put the success of their teammates and the organization before their own.
o Hire employees who value service, are service oriented, and have a service heart
o Provide structured on-boarding and training which helps new employees to quickly understand,
assimilate, navigate, and thrive within your organization

2. Provide and support career development and personal growth opportunities

o Budget for and include training and development as a strategic objective
o Provide ongoing formal and informal functional and skills training opportunities
o Establish individual development plans
o Provide timely performance improvement and evaluation conversations
o Identify and support employee career development interests and training needs
o Offer a variety of training opportunities and methods such as cross-training, job shadowing,
external mentoring, and professional development conferences and courses
o Invest in developing great managers and leaders
o Allow employees to make mistakes, fail and to learn from their mistakes

3. Offer competitive employee compensation and benefit packages

o Provide awards for performance and achievement
o Offer competitive salary, instant pay, bonuses, stock options, and retirement savings plans
o Deliver quality health insurance, health/wellness programs and life insurance options
o Include vacation, PTO, sabbaticals, and maternity leave options
o Give timely performance and compensation reviews

4. Demonstrate sincere and consistent employee appreciation

o Recognize, acknowledge and reward positive behaviors
o Utilize peer recognition tools/processes
o Include performance incentive programs for new ideas, innovation, productivity/quality
improvements, and cost savings
o Offer non-monetary reward and recognition programs

5. Foster healthy work-life/load balance programs and opportunities
o Consider creative shifts/scheduling and working off-site
o Allow work sharing and collaboration
o Provide cross-training
o Alter work responsibilities
o Manage and prevent employee burnout. Encourage breaks, rest and vacation days

6. Develop and foster a positive culture where people like to be and enjoy working
o Foster a work family/team environment where people and relationships matter
o Promote open, safe communication and feedback; building and maintaining trust
o Inform and include employees in strategic planning goals, tactics, and performance measures
o Include and empower employees in the decision making and problem-solving processes
o Live and role-model your organizations values. Inspire and develop leadership at all levels
o Make sure your office or work space is at a comfortable temperature, is well-lit and properly
ventilated. The furniture should be ergonomically designed to prevent aches and strains at

7. Engage everyone in the business

o Share the organizations vision, strategies, goals, metrics, and financial information with all
o Maintain ongoing personal development and goal discussions with each employee
o Ensure all employees understand how they fit into the bigger picture and how their work affects
or contributes to the long-term vision of the organization.

8. Establish employee exit strategies

o Gather institutional and tribal knowledge and pending tasks/responsibilities to pass on to others
o Communicate departure to others to maintain trust, positivity, and misperceptions
o Show departing employee thanks/gratitude
o Conduct exit interviews, track your findings and turnover rates

The Bottom Line

It’s no secret that employees typically leave because of their relationships with their managers.
Employee retention reflects an organization’s leadership and management. As a leader, are you at least
acknowledging your employees? Have you successfully created an environment where they feel safe to
communicate openly and confide in you? Are you sharing in their workload and helping to build their
team spirit and camaraderie?

Comparing your existing policy to the strategies listed in this article could be a useful way to analyze the
areas that your organization might need to improve and develop. While every organization operates
under a different paradigm, attention to certain themes involving culture, values, and collaboration can
make a big difference in your bottom line. They should be adopted as the core principles that guide you
in the development or re-calibration of your retention strategy.