Why You Need a Retention Strategy
Employee retention should be at the forefront of every company’s radar.
Employees Don’t Quit Companies.
They Quit Bad Managers.
According to a 2008 Yukon Bureau of Statistics Business Survey, “workplaces that demonstrate the value they place in their employees and that put into place policies and practices that reflect effective retention practices will benefit, in turn, from worker commitment and productivity.”
The primary employee retention strategies have to do with creating and maintaining a workplace that attracts, retains and nourishes good people. This covers a host of issues, ranging from developing a corporate mission, culture and value system to insisting on a safe working environment and creating clear, logical and consistent operating policies and procedures.
Environmental employee retention strategies address three fundamental aspects of the workplace: the ethics and values foundation upon which the organisation rests; the policies that interpret those values and translate them into day-to-day actions, and the physical environment in which people work. The overall goal is to make your company a place where people want to come to work.
A sampling of environmental employee retention strategies includes the following:
- Clarify your mission.
- Create a values statement.
- Communicate positive feelings.
- Stay focused on the customer.
- Be fair and honest.
- Cultivate a feeling of family.
- Promote integrity.
- Do not tolerate sub-par performance.
- Insist on workplace safety.
- Reduce the number of meetings.
- Make work fun.
- These employee retention strategies all relate in one way or another to corporate culture. However, one environmental issue tends to stand out above the rest.
More than ever, employees want a culture of openness and shared information. They want to know where the company is going and what it will look like in the future. How is the company doing financially? Where does it stand in the marketplace?
The importance of top-performer retention is a topic that consistently leads in HR and business surveys alike. Notably, more than 1,000 CEOs were asked, “How important are the following sources of competitive advantage in sustaining your growth over the long term?” The #1 response—chosen by 97 percent—was “access to, and retention of, key talent.”1
Talent retention is critically important for all organizations for two main reasons:
1. Turnover is expensive.
2. Top performers drive business performance.
Although estimated financial impacts from turnover fluctuate depending on industry, position, and location, estimates range from 30 percent to 250 percent of annual salary.
2Research indicates that the total cost of employee turnover is about 150% of an employee’s salary. Because of this high cost of turnover, the organization that is the focus of this article sought to understand their employee’s turnover intentions and the reasons for the potential turnover. Through a series of surveys, observations, and interviews, it was determined that the location of the company and its compensation package were the most common factors in remaining with the company and that compensation and lack of challenge and opportunity were the most common factors in contemplating leaving the organization.
3Turnover costs mount steeply, arising from the direct replacement costs of talent acquisition, the opportunity costs of vacant positions and time to productivity, and—more broadly—lost business performance. The impact of quality performers was crystallized in McKinsey’s seminal “War for Talent” study. It found that, in the opinion of senior managers, high performers outperform average performers by a wide margin. According to the study, high performers in operations roles are able to increase productivity by 40 percent, high performers in management roles increase profits by 49 percent, and, in sales positions, high performers are responsible for 67 percent greater revenue.4
The continually changing labor market, along with differences in the expectations of new generations of employees, makes retaining employees increasingly difficult. Organizations can spend up to 40% of their pre-tax dollars on the costs associated with turnover. Creating and implementing a retention strategy is critical to the long-term success of every organization.
Effectively managing retention requires a thorough analysis of the type and extent of turnover within the organization. Organizations must then understand the key drivers of turnover and the ways in which their employees are deciding to stay or leave. Once this key data is collected, leaders should diagnose the most important retention drivers and determine both broad-based and targeted strategies they can implement to intervene before withdrawal becomes turnover.
And finally, organizations must continuously evaluate and modify their retention strategies to meet the unique needs of employees – and manage all of the consequences that turnover can create.
1 PricewaterhouseCoopers, 12th Annual Global CEO Survey, 2009.
2 Sunil Ramlall, Ph.D. University of St. Thomas, Applied H.R.M. Research, 2003, Managing Employee Retention as a Strategy for Increasing Organizational Competitiveness
3 “Employees Leaving? Here’s Why and What You Can Do,” The New York Times, October 24, 2008.
4 McKinsey & Company, “The War for Talent,” 1998.
5 Oracle White Paper, Talent Retention: Six Technology-Enabled Best Practices, June 2012