What is Employee Retention and How to Manage it?

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What is Employee Retention and How to Manage it?

The definition of employee retention is to keep staff happy by ensuring they feel positive and motivated. Acknowledging the importance of employee retention and how it can help a business thrive is key. Having an employee retention strategy can support the success of a business.

What is Employee Retention?

How can we define employee retention ? It goes hand in hand with job satisfaction. A business will retain employees if they’re happy in their work.

Successful employee engagement and retention isn’t just about paying staff well. It cultivates the whole ‘going to work’ experience and encompasses:

Staff motivation
A strong company culture
Understanding one’s role
Benefits
Training
Professional development
A focused career path

Employee turnover is likely to be lower if a company acknowledges the above are essential to personal development. Does your company experience a high turnover of staff on a given period of time ? Might be time to ask why and consider introducing or updating the employee retention strategy and plan.

Employees leaving a company can have a severe impact on a business, especially if several leave at the same time. It can demotivate other staff and cause them to look for another position too.

How can a business increase its employee retention? The process starts before the hire, when deciding the role and the benefits it will offer. These can include:

A good salary and benefits
Flexible working (remote, full or part time)
Being family-friendly (helping with day care costs)
Providing a comfortable working environment (work life balance, a comfortable office and chill-out areas)
Giving perks (free drinks, snacks, lunch, company discount, free product samples, clothing allowance, company vehicle)

The benefits should not be just good, but excellent, to attract top talent. Then it’s time for talent retention and to make sure employees see their role as meaningful.

Checklist

5 tips to improve employee retention

According to Gallup, only 21% of employees are engaged in their work. Download this checklist to discover 5 easy things you can do to improve retention.

Download the Checklist

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Why is Employee Retention Important?

Employee retention is important as it breeds loyalty and commitment. Employees who are happy and engaged are less likely to quit their jobs. This is because they feel satisfied and understand their roles within the company.

This builds a knowledgeable workforce that grows with the business. This knowledge can be invaluable to the development and plans of a business. Far cheaper to train and build on existing knowledge than to hire someone new.

If employees feel appreciated and listened to they’ll enjoy their work. Motivated employees are company advocates – they’ll praise their employer if they feel inspired and look forward to going to work every day.

Another reason why employee retention is important is cost. High employee turnover is expensive. It can cost up the equivalent of an employee’s annual salary to hire someone new. This can include advertising, human resources, management time, training, and loss of productivity while the new employee learns how to do the job.

5 essential strategies to improve employee retention

Boosting employee retention can improve the bottom line and having a winning employee retention strategy to achieve this is essential. The strategy should be reviewed regularly, to check what’s working and what isn´t. Each of the 5 employee retention strategy ideas can be integrated to support the core of the business.

1. Communication

Are your lines of communication as good as they should be? Do people feel they can ask questions? The answers should be yes, as good communication is fundamental to a successful business. Everyone should feel they have a voice and can say what they feel and contribute ideas that will be listened to.

Conducting employee surveys is also very important to learn opinions. Encourage employees to take them, as they can be anonymous so people aren't afraid to say what they think.

An intranet is a good tool to foster communication, as it reduces the need for formal meetings and allows for quick, easy chats and answers.

2. Rewards and Recognition

A standard way to improve employee retention is by offering a good salary, perks, and benefits. Bonus systems are a good way to maintain employee retention and don´t have to be in the form of cash. Other rewards can be:

Shopping vouchers
Extra time off
Weekend breaks
Free health club membership
Free parking
Event tickets

The list can be as creative as you want it to be. If people know they’ll be praised and rewarded for their hard work they’ll believe in the business. This is also a way to promote how fantastic your company is to work for.

People also want to feel recognized for the work they do. It costs nothing to say thank you for a job well done and can boost employee morale incredibly.

3. Define the Corporate Culture

Successful businesses are clear on where they’re heading and their long-term goals. This information should be fed to employees so they feel part of the team and the culture of the company.

If the culture is clear and employees understand where and how they fit into the company structure then this will benefit retention. How? When you’re clear about your role and know it’s important and appreciated, you feel part of the ultimate vision. Build a successful company culture and your employees will stay with you and not jump ship to join the competition.

4. Promote Loyalty

Loyal employees are invaluable. They are the people that understand and believe in the core roots of the company. Build employee loyalty & recognition and your business will benefit from:

Employee advocacy
Free PR
Employees you can trust
Mentors for other staff
Positivity
Commitment
Employee engagement

Loyal employees will stick with your business through good and bad times. They’ll always do their best for you and work hard. Loyal employees don´t need to browse the job ads as they’re content where they are, which translates to good employee retention.

5. Create an Employee Retention Plan

For employee retention techniques to be successful you need a working plan. This should be available to all managers (the intranet is a good place to store it) so everyone works together to maintain employee retention. Measurable targets should form part of the plan.

When designing this plan it´s important to listen to employees’ views ‘ and talk to them about why they do or don´t like working for the company. This can be done through surveys or face-to-face meetings.

Employee Recognition Center - LumApps Intranet

How to measure Employee Retention?

Employee retention is tangible and intangible. When a business knows it’s not placing many job ads and people aren´t leaving it’s intangible. When the metrics are measured and the numbers show good or bad employee retention figures, it’s tangible.

Here are 4 Simple Ways to Measure Employee Retention :

1. Analyze retention figures every quarter or year

Once you have this figure over say, 4 quarters, you can work out whether retention is going up or down. This will give an idea of how successful the company is at retaining employees. Take this further and analyze by department, age, or gender and you can spot your business’ weaknesses and address them.

2. Hold exit interviews

When people leave, record and monitor why they are leaving (better career prospects, more money, improved benefits…). This information can be invaluable to improve future retention.

3. Monitor

Read the industry media. Are other companies in your sector suffering from poor employee retention or is it just yours? Are others seeing employee retention success but you’re not? This can highlight if your business has an employee retention problem or not.

4. Why are people leaving?

People could be quitting their jobs because they’re unhappy, or because they’re being lured by the competition. Alternatively, some people will be retiring, having children, or not be replaced through natural wastage.

The Average Employee Retention Rate and How to Calculate it

According to the US Bureau of Labor Statistics, in 2018 the average time Americans had worked for their employer was 4.2 years. This hadn´t changed from two years previously. This figure perhaps demonstrates that people aren’t as happy as they used to be in their work and look for new challenges. It’s also a sign that the days of having a job for life are over, but does not make employee retention any less important.

The formula to calculate employee retention is: Divide the number of employees that have left by the number remaining. Multiply this figure by 100 to express it as a percentage.

Example of how to calculate employee retention: 25 people left a company in 2019 ÷ 75 people remained = 33% of the workforce have left

Employee retention matters and this quote from the Gallup 2017 State of the American Workplace report summarizes this perfectly:

“Employees want to feel good about their organization and what it offers the world. They want to be able to say, ‘I like what this company stands for.’ If employees do not believe in their company or do not believe the company can successfully uphold its brand or reputation, they are likely to look for a different job.”

Why LumApps is the Best Intranet Solution on the Market and a Premier Employee Retention Platform

LumApps leads the market of intranet solutions, with its own AI-powered intranet, transforming internal communication, day-to-day operations and boosting employee retention. Its intuitive design and user-centric features enable seamless communication and collaboration, keeping employees engaged and aligned with company objectives.

LumApps isn't just a platform; it's a comprehensive solution that integrates with existing tools, enhancing productivity and fostering a connected workplace culture. It therefore serves as an employee retention software, an internal communication solution...

One standout feature is its ability to centralize essential information, making it easily accessible to all employees. This promotes transparency and ensures everyone is on the same page, building trust and a sense of belonging. LumApps also provides robust analytics, allowing organizations to measure engagement and pinpoint areas for improvement, thus addressing potential retention issues proactively.

With personalized content and social features, LumApps makes employees feel valued and part of a community, which is crucial for satisfaction and loyalty. It supports initiatives like onboarding, training, and recognition programs, all of which contribute to high employee retention rates. All these means to increase retention of staff and retain talents.

In summary, LumApps is not just an intranet but a strategic tool that enhances communication, engagement, and overall employee experience, making it essential for any organization aiming to boost employee retention.

How do you measure employee retention?

Measuring employee retention involves several methods, each offering unique insights. One approach is tracking retention rates over specific periods, such as quarterly or annually, which helps identify patterns and trends. Another key method is conducting exit interviews to understand the reasons behind employee departures, providing valuable qualitative data. Additionally, comparing industry benchmarks allows companies to gauge their performance relative to competitors and identify best practices.

By combining these strategies, companies can gain a comprehensive understanding of their retention landscape, pinpoint areas for improvement, and develop targeted initiatives to enhance employee satisfaction and loyalty. This multifaceted approach not only helps in retaining top talent but also contributes to a positive organizational culture and overall business success.

How important is employee retention?

Employee retention is crucial for maintaining an efficient workforce. High retention rates are characteristic of a satisfied, engaged, and productive team members, which in turn contributes to the overall success and stability of a business. A stable workforce ensures that the knowledge and skills accumulated over time remain within the company, fostering a culture of continuous improvement and innovation.

Moreover, retaining employees reduces the costs and disruptions associated with high turnover rates, such as recruitment, training, and the loss of institutional knowledge. By investing in employee satisfaction and development, businesses can build a loyal workforce that drives long-term success.

How to calculate employee retention rate?

To calculate the employee retention rate, use the following formula:

(Number of employees at the start of the period - Number of employees who left during the period) ÷ (Number of employees at the start of the period) x 100.

This calculation gives you a clear percentage that represents your organization’s retention rate over a specified period.

Understanding your employee retention rate is crucial as it reflects the stability and satisfaction of your workforce. A high retention rate indicates that employees are generally happy and well-managed, reducing the costs and disruption associated with frequent turnover. Conversely, a low retention rate can highlight potential issues within the organization's culture, management, or other areas that may require attention to improve employee satisfaction and loyalty.

Tracking this metric over time can provide valuable insights and help guide strategic decisions to enhance workplace conditions and overall performance.

What does it mean to retain employees?

Retaining employees means keeping your workforce engaged, satisfied, and committed to the organization's goals, thus reducing voluntary departures. It involves creating a work environment where employees feel valued, supported, and motivated to stay for the long term. This can be achieved through various strategies such as providing competitive salaries, offering opportunities for career growth and development, fostering a positive company culture, and ensuring open and transparent communication.

Additionally, recognizing and rewarding employees' contributions, promoting work-life balance, and ensuring a safe and inclusive workplace are crucial elements in maintaining high levels of employee retention. By investing in these areas, organizations can build a loyal and dedicated team that is more likely to contribute to the company's overall success.

What drives employee retention?

Several factors drive employee retention, including competitive compensation, opportunities for career growth, a positive work environment, recognition and appreciation, and strong leadership. For instance, offering competitive salaries and benefits ensures employees feel valued financially. Providing clear pathways for career advancement motivates employees to stay and grow within the company.

A positive work environment fosters collaboration and job satisfaction, making employees more likely to remain loyal. Regular recognition and appreciation of employees' efforts boost morale and commitment. Lastly, strong and supportive leadership helps create a culture of trust and respect.

Understanding and addressing these factors can significantly enhance your ability to keep talented employees within your organization. By investing in these areas, companies can build a dedicated and motivated workforce that drives long-term success.

Why does employee retention matter?

Employee retention matters because it directly impacts the continuity, productivity, and morale of your workforce. High retention rates mean less time and resources spent on recruiting and training new employees, thereby reducing operational costs and minimizing disruptions in workflows. It leads to a more experienced and cohesive team, fostering a collaborative environment and enhancing team dynamics. It also means including every team members (those in the onboarding process, those that work from home...)

A stable workforce is better equipped to drive the company's vision and achieve long-term goals. Additionally, consistent retention helps in building strong relationships internally and externally, further solidifying the company's reputation. In essence, it ensures sustained organizational growth and success, creating a positive cycle of productivity and employee satisfaction.

How to manage employee retention?

Effectively managing employee retention requires a strategic and proactive approach that focuses on meeting workforce needs. Start by creating a positive culture that prioritizes employee well-being, inclusiveness, and involvement. Implement thorough onboarding programs to help new hires integrate smoothly and set them up for success. Regularly gather feedback through surveys, focus groups, and one-on-one meetings to understand and address employee concerns.

Competitive compensation is crucial, but so are career development opportunities. Encourage continuous learning and provide clear advancement pathways to keep employees motivated and engaged. Recognize and reward accomplishments to foster a culture of appreciation and achievement. Investing in professional development not only enhances skills but also shows your commitment to employees' growth.

Ensure open communication channels where employees feel heard and valued. Offering flexible work arrangements, promoting work-life balance, and providing mental health support can significantly boost job satisfaction. Strong leadership that exemplifies empathy, integrity, and transparency is essential for creating a supportive environment. By implementing these strategies, organizations can effectively retain top talent and drive sustained business success.

Which KPIs are important for employee retention and satisfaction?

Understanding the key performance indicators (KPIs) essential for tracking employee retention and satisfaction is pivotal for organizational success. These KPIs provide actionable insights and help in fine-tuning strategies to maintain an engaged workforce. Here are the most critical KPIs to monitor:

Employee Turnover Rates : This metric measures the rate at which employees leave the organization within a specific period. A high turnover rate can indicate dissatisfaction and issues within the workplace.
Employee Net Promoter Score (eNPS): This KPI gauges employee loyalty and satisfaction by asking how likely employees are to recommend the company as a place to work. A high eNPS reflects a positive work environment and high employee satisfaction.
Average Tenure: The average length of time employees stay with the organization provides insights into retention effectiveness. Longer tenures usually signify a stable and satisfied workforce.
Job Satisfaction Levels: Typically measured through surveys, this KPI indicates how content employees are with various aspects of their jobs, including tasks, work environment, and company culture.
Absenteeism Rate: High levels of absenteeism can be a red flag for low employee morale and dissatisfaction. It’s vital to monitor and address the causes of absenteeism.
Internal Mobility Rate: This measures the rate at which employees advance or move into different roles within the company. High internal mobility can indicate effective career development programs and employee engagement.
Training and Development Participation Rates: Tracking how many employees engage in training and development opportunities can demonstrate the organization’s commitment to professional growth and its impact on retention.
Employee Engagement Scores: Through regular engagement surveys, this KPI assesses how emotionally invested employees are in their work and the organization. High engagement scores often correlate with high retention rates.
Exit Survey Feedback: Analyzing the feedback from exit surveys can uncover underlying issues driving turnover, providing opportunities for improvement.
Turnover costs : It's essential to track the costs associated with employee turnover, including replacing an employee, recruitment, training, and lost productivity, to understand its impact on the company's bottom line.

Monitoring these KPIs allows organizations to proactively address potential issues, enhance employee satisfaction, and implement effective retention strategies, thereby ensuring a motivated and high-performing workforce.

How to reduce employee turnover ?

Reducing employee turnover requires a multi-faceted approach that addresses the underlying causes of dissatisfaction and disengagement within the organization. Here are some effective strategies to consider:

Create a positive work culture: An inclusive, supportive, and collaborative work environment boosts employee satisfaction. Encourage open communication, recognize achievements, and foster belonging.
Invest in career development opportunities: Employees are more likely to stay when growth opportunities are available. Offer training, mentorship, and clear advancement paths to keep them motivated.
Offer competitive compensation and benefits: Fair and competitive pay is crucial. Provide additional benefits like healthcare, retirement plans, and flexible work arrangements.
Prioritize mental health and well-being: Burnout and stress can lead to turnover. Offer resources like mental health counseling, wellness programs, and promote a healthy work-life balance.
Regularly gather feedback: Use pulse surveys, focus groups, and one-on-one meetings to understand and address employee concerns promptly.
Provide strong leadership: Leaders who show empathy, integrity, and transparency greatly impact satisfaction. Train them in effective communication and management skills.
Recognize and reward achievements: Appreciated employees are more satisfied. Implement recognition programs to acknowledge accomplishments at all levels.

What are the outcomes of an effective employee retention strategy ?

An increased employee retention rate has numerous benefits for organizations, both financially and culturally. Here are some of the consequences of increased employee retention:

Cost savings: Employee turnover is costly, with recruitment, onboarding, and training expenses adding up quickly. By retaining employees, organizations can save significant amounts in these areas.
Higher productivity: Satisfied employees are more productive and motivated to perform at their best. This leads to higher quality work output, better customer satisfaction, and overall business success.
Stronger company culture: A stable workforce creates a positive work culture characterized by trust, collaboration, and support. This can attract top talent and improve the organization's reputation as an employer.
Increased knowledge retention: As employees stay longer, they accumulate valuable knowledge and experience. This institutional knowledge is vital for organizational success and can be lost when employees leave.
Improved employee morale: A high retention rate indicates a happy workforce, leading to higher job satisfaction and overall well-being of employees.

By focusing on these KPIs and implementing effective strategies, organizations can create a positive work environment that promotes employee satisfaction, engagement, and retention. As a result, they can reap the benefits of a loyal and high-performing workforce, which ultimately leads to business success.