What Is Employee Retention? Benefits, Tips & Metrics

What Is Employee Retention?

Employee retention refers to a company's concentrated efforts to retain existing employees and keep their best employees on board for the company to succeed. It refers to the strategies that an organization develops to reduce employee turnover risks, as well as the processes that it implements to retain critical talent. It is a significant focus point for businesses. According to one study, 87% of human resource leaders rank employee retention as their top priority for the next few years.

It also helps in increasing productivity, ensures continuous business flows, and lowers the cost of rehiring. That is why most organizations prioritize retention. Employee retention rates of 90% or higher are considered good in general, and a company should aim for a turnover rate of 10% or less.

Benefits of Employee Retention

When employees leave an organization, one of the most significant losses is reduced productivity and competitive advantage. The ability to retain employees is universally beneficial for many reasons -

• Improved Morale - High turnover rate can disrupt the flow of the team-building process. The smaller workforce might see an increase in the workload which leads to employee dissatisfaction.
• Retain Experience - One of the most devastating costs of high turnover is the loss of institutional knowledge, skills, and relationships — both within the company and with customers and partners.
• Positive Impact on Productivity - Employee burnout and overtime, lower job quality, and delays are all issues that can arise in an understaffed setting due to a lack of retention. Employee retention can assist a company in avoiding a loss of productivity. Workplaces with high retention rates have more engaged employees, who get more done as a result.

Impact of High Turnover on Organizations

Turnover rates are high, with severe immediate consequences: loss of valuable knowledge and experience, loss of morale for those who remain, and loss of faith in the team's competence and ability to perform. None of these are simple or quick to replace. It disrupts and destabilizes that culture of constant improvement.

Outgoing employees create staffing gaps in the short term, and recruitment costs skyrocket. In the long run, a high staff turnover rate within your organization may indicate to current employees and job seekers that your company has a problematic company culture or is not a great place to work. Although employee turnover may not be the result of internal issues, it can still hurt your business.

Causes for Employee Turnover

Overwhelming Amount of Work

An employee is likely to start exploring elsewhere for a fresh opportunity if they feel overwhelmed by the quantity of work they have on their plate. Employees occasionally experience this, which is common, but if it becomes a regular part of their working lives, it may become overwhelming.

Employees experience burnout when they are required to accomplish duties without being provided the tools they need to be successful, when they feel powerless, or when they routinely deal with more stress each day than they can handle. Burnout combines tiredness on an emotional as well as a physical level with a sense of helplessness and self-blame, and it can show itself as behavioral and physical problems.

Lack of Recognition

An important piece of the employee engagement puzzle is recognition. Praise-giving organizations demonstrate to employees that their efforts are valued and acknowledged. Positive feedback reassures employees that their efforts are contributing to greater objectives, making their work more fulfilling and pleasurable. An appreciation-based culture eliminates uncertainty and increases output.

Work Culture

The level of employee satisfaction will be strongly correlated with your workplace culture. Employees that enjoy working with your organization will be significantly happier, which will lead to higher productivity. Many aspects constitute a bad workplace culture, like negative gossip, lack of communication, inappropriate behavior, unequal distribution of work, and many more.

Employees dread coming to work, which would affect productivity and morale in the entire organization. Bad work culture is a major catalyst for high turnover rates.

Absence of Feedback

Although praise is not always necessary in feedback, it is essential for the growth of any individual. Beginning with accomplishments, concentrating on details, encouraging employees while offering suggestions on how to strengthen their deficiencies, and checking in frequently are all good practices for managers. Additionally, praise and criticism need not originate from the management to have a significant impact. Programs for peer appreciation are effective, especially when they use technology. Avoiding this procedure can hurt your employees' chances of success because feedback is the first step to making sure they achieve.

Lack of Growth Opportunities

Possibilities for development and improvement are crucial for keeping good staff. An employee who feels stuck in a job that offers no advancement opportunities is more likely to explore opportunities at other organizations. One of the key elements influencing turnover is a lack of growth and advancement. Opportunities for growth and development are cited by 87% of millennials as one of the most crucial elements in determining professional happiness, according to a Gallup study. About 70% of experts from other generations agreed.

Poor Remuneration

According to research, 25% of workers would leave their current positions in search of higher salaries elsewhere. Your company must provide competitive compensation packages. This will cover base pay, commission (if applicable), and benefits like a pension, access to healthcare, discounts, and the like. It's crucial to monitor your employee's development through your performance management program to make sure they receive bonuses and pay raises appropriate for their performance.

Pay is one of the main causes of employee turnover. A study from Paychex revealed that 70% of respondents would leave a job because of low pay. As part of the interview process, moving businesses offer job seekers the chance to negotiate over pay and benefits

Employee Retention Models

People Management (Maslow’s Hierarchy of Needs)

The hierarchical model of needs, created by Abraham Maslow, was the first strategy for retaining employees. He said that to meet their basic requirements, workers must seek out fulfillment on five different levels: psychological, safety, love and belonging, esteem, and self-actualization. This approach proposes that the secret to organizational success is employee growth. Companies should work to understand each employee's needs and promote job happiness. Better performance as well as eventual employee progression would result from this.

Motivation Hygiene Theory

In "The Motivation-Hygiene Concept and Problems of Manpower" by Frederick Herzberg, employees were asked to recall times in their lives when they had experienced happiness or unhappiness at work. Herzberg hypothesized two primary characteristics that lead to job satisfaction based on the interview data that was gathered:

Motivation: The opportunity to find purpose in one's work, recognition for accomplishments, participation in decision-making, and opportunities for personal improvement are all examples of motivating elements.

Hygiene: Salary, perks, job security, individual standing about the employer and the firm, and general business practices like corporate policies and management techniques are all examples of hygiene or maintenance elements. Although these upkeep items don't make people happier, their absence makes people unhappy.

Human Motivation Theory

The urge for success, power, and connection were three of the driving forces recognized by David McClelland as being fundamental to humanity. Each of us possesses all of these qualities, he hypothesized, but only one will be dominant.

Achievement Dominance

These employees must set and achieve challenging targets. They may take some risks, but it is usually calibrated to help them achieve their goals.

Affiliation Dominance

They usually follow the group's lead because they want to be liked by everyone. They dislike large risks and unpredictable outcomes and would rather work together than compete.

Power Dominance

These are the leaders who command and sway their subordinates. Even in debates, they are competitive and like to prevail. They seek approval and prestige.

Improving Employee Retention

Better Hiring Practices

Simply recruiting the right individuals is frequently the first step toward employee retention. And the best way to make sure you're employing the appropriate people is to create a recruitment procedure that guarantees it.

It is important to avoid putting prospects through a lengthy procedure because it might cause them to go elsewhere. Furthermore, it is important to interview in a way that enables you to better understand the applicant and determine whether they have the necessary skills for the position or will be able to acquire them through employment.

Build a Productive Work Culture

One of the keys to keeping employees is providing them with a work culture where they feel supported. Therefore, make an effort to foster an environment where workers may thrive and do their best work.

A few of the most effective strategies to achieve this goal include giving employees enough on-the-job training, promoting effective and transparent communication, and providing rewards and bonuses.

Provide Optimal Training and Development

Providing training for employees gives them opportunities to upskill and learn while on the job. This is beneficial because employees start to trust the organization’s efforts and the scope of growth in their role. Communicate with your employees to understand their goals and expectations for development.

Your employees need to be completely informed of their responsibilities and how well they're carrying them out. Having a job plan in place and giving frequent performance feedback to employees can help you achieve this. An employee is more likely to feel dissatisfied and start looking for employment elsewhere if he is unsure of his job within your company

Focus on Employee Engagement

Employee engagement has been an essential part of retention strategies. One of the best indicators for predicting employee turnover is employee engagement. Employee engagement is best understood as a reflection of the quality of each individual's work life, and employee retention initiatives involve improving the overall workplace experience to retain talent for longer, so a company's retention strategy has a direct and measurable impact on overall engagement.

How Vega HR can help with Employee Retention

Employee retention strategies are elaborate and are an amalgamation of many elements, which helps enhance employee experience with top-class features that foster employee engagement and clear-cut ideas to help you retain your top talent.

Vega HR provides an array of exclusive features like Vega Social, with which you can create an internal social network for your employees, foster interconnectedness, and bring everyone closer; Vega Pulse, which helps you gain insights about your employees’ well-being. You can also foster employee recognition by establishing peer-to-peer recognition and feedback, where employees can redeem their points in our coupon store, which is home to more than 3000 brands!

Vega HR is THE platform for you to enhance your employee experience. To know more, schedule a demo with us today!