Learn why employee retention programs are crucial for business success — plus how to create one at your company.
When someone leaves your company, it creates a void that needs to be filled, and filling that void includes recruitment, onboarding, training, and ramp-up time. Turnover creates an even bigger issue when many people start leaving. This phenomenon is also being referred to in modern times as the Great Resignation. This trend started during the COVID-19 pandemic, where an abnormally high number of people quit their jobs, with a “record-breaking” 10.9 million vacancies at the end of July 2021.
So what can you do to keep your key people happy, engaged, and working for you? If your people are leaving at a higher rate than usual, what you likely need is an employee retention program. Below we outline the steps on how to create an employee retention program, and why you need one.
First of all, why do you need an employee retention program?
one study puts losing a junior hire at 50% of their yearly salary, and a technical or senior employee at 125% of their yearly salary.
Employee turnover is a (very) costly problem. While the actual amount is variable depending on your company, there are always costs, both financial and otherwise, associated with low retention rates – from recruitment efforts to the impact it has on the team’s morale.
Looking at financial costs alone, one study puts losing a junior hire at 50% of their yearly salary, and a technical or senior employee at 125% of their yearly salary. High turnover also creates client delivery delays, stress, and kills business growth.
High retention rates, on the other hand, are associated with increased productivity, more engaged workers, and a better overall customer experience. For this reason, it’s in your best interest to address the problem head-on, and create an employee retention program to keep your best employees with you for as long as possible.
1. Analyze existing turnover/retention data
As a first step, you should calculate your current turnover rate to understand if your retention is growing, consistent, or shrinking. You should also note the distinction between voluntary and involuntary turnover (people who quit/retired versus those who are let go or fired).
The calculation looks like this:
Employee Turnover Rate = (Number of Employees Who Left / Average Number of Employees) * 100
To track a pattern, you should do this calculation for as many years as you have data available at your company. Many small companies sometimes forget to track these types of stats, so if this looks like your HR department, now’s the time to start gathering data!
2. Identify problem areas
Identifying why people are leaving is a huge undertaking, and there are a few ways to approach your investigation.
This is your opportunity to get potentially the most honest answer from departing employees. An exit interview should cover:
- Why the employee is leaving
- What your company could have done differently
- Specific people or incidences that may have caused the person to leave
- Was the position what they thought it would be
During the exit interview, you might get the most candid, unfiltered picture of why your people are leaving. While taking notes, if you notice a common pattern, these are the areas your HR department should be tackling to retain staff. For example, maybe a particular manager is mentioned a few times and needs training, or maybe your people don’t see a clear promotion track in their current position.
Employee engagement surveys are a great data source, when implemented properly. They measure employee satisfaction and allow them to provide an honest (and anonymous) opinion and can help you identify areas of dissatisfaction among your workforce.
Gauging how engaged your employees are is critical for retention: One Harvard Business Review report found that 9 out of 10 workers were willing to take a paycut for more meaningful work. And another study found that engaged workers are 87% less likely to leave a company.
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3. Put strategies in place to retain your talent
Now that you’ve found a pattern or problem areas in your organization, you can tackle the overarching issues contributing to turnover. Some of the areas that might be causing a talent bleed include (but are not limited to) the following:
- Employee burnout. The pandemic brought this issue to the forefront. According to BambooHR, 79% of remote workers feel burnt out monthly, 53% weekly, and 21% daily. We have advice here on how to address employee burnout.
- Lack of diversity in your company. One McKinsey study found one top reason people leave their job is because they don’t feel a sense of belonging (51%). This was particularly prominent among non-white respondents. We highlight the importance of diversity and inclusion here.
- Not feeling valued. The same McKinsey study found that the top 2 reasons people leave their jobs were because they don’t feel valued by their company (54%) or their manager (52%). Read our tips here on how to make your workers feel valued, even remotely.
- Low engagement. Low engagement creates a talent bleed. We put together an extensive guide here and how to address engagement issues.
- Compensation and benefits: Your company needs to make sure you’re staying competitive in the market in which you operate. That being said, while pay is important, compensation is not a leading factor leading to turnover so it won’t fix your more complex issues.
While this list is far from extensive, it could be used as a starting point, since these are some common areas where companies tend to struggle.
A McKinsey study found that the top 2 reasons people leave their jobs were because they don’t feel valued by their company (54%) or their manager (52%).
4. Make a plan of action, and document it
Now that you know the areas your HR department needs to tackle head-on, it’s time to make a plan of action and put it in writing. A strong checklist from BambooHR includes:
- Your goals
- Your timeline
- Who is responsible
- What they will need to be successful
- The desired outcome
Your plan should be well-documented, and include:
- A report of your turnover rates
- Employee feedback
- Goals and how to achieve them
- Task calendar
The Great Resignation is a problem all businesses are facing, both large and small: 53% of the employers in a McKinsey’s report said that they are experiencing greater voluntary turnover than in previous years. If you’re already well-versed in People Operations, you know your people are your most important asset. That’s why it’s key to retain your best employees by putting an employee retention program in place. While turnover isn’t entirely avoidable, your HR team can gauge problem areas, and take the steps outlined above to reduce any unnecessary talent bleed.