Employee Retention Topics

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Retaining employees is an essential part of both workforce optimization and business productivity. Employee turnover generally causes disruption, expense, and recruitment costs, so it is an imperative for most companies to increase retention rates and grow their employment brand and reputation.

Employee turnover costs can be staggering: One estimate , by SHRM, the Society for Human Resource Management, is that it costs $3,500 to replace one $8 per hour employee when all costs-recruiting, interviewing, hiring, training, reduced productivity, etc., are considered. SHRM's estimate was described as the lowest of 17 nationally-respected companies that calculate this cost.

The same report estimated that replacement costs amount to 30-50% of the annual salary of entry-level employees, 150% of middle level employees, and up to 400% for specialized, high level employees.

On the other hand, over the long term, in all organizations, staff replacement is inevitable, necessary or desirable-either through natural attrition through retirement and resignation, dismissal of under-performing staff, or replacement with outstanding, uniquely-qualified candidates.

Retention, as the opposite of staff turnover, is measured by the percentage of workers who remain employed by a specific organization at the end of a given employment period, e.g., contractual, quarterly or annual. Retention policies can be judged by that percentage, except for instances in which the organization lacks flexibility in either retaining or dismissing staff, e.g., because of mandatory government-established retirement age or mandated quotas.

The goal of the HR department in retention should be to decrease turnover to the minimum level possible and develop the workforce into a greater asset through training and rewards for performance and tenure. This will decrease recruitment costs, training costs, and the loss of organizational talent and knowledge. On the other hand, some business models are rationalized by the profitability of rapid turnover of workers, as a result of low-pay "probationary periods", after which staff are routinely terminated, to be replaced by new low-paid workers. In this model, retention, rather than turnover, is to be minimized, if not avoided altogether.

Retention is maximized in a company by creating a "win-win" situation between management and employees, where the needs of the employee are met to the greatest extent possible without sacrificing or losing sight of the needs and goals of the company. There are many and various strategies and incentives that a company may offer to its employees to increase retention and decrease turnover.

Competitive benefits packages that fit the needs of the employees, small perks that are inexpensive but have psychological impact such providing as coffee and bagels in the mornings, contests or incentives, and clear communication of goals and expectations all can go a long way toward employee satisfaction. Promoting from within also provides a positive culture experience. Conducting "stay interviews", similar to exit interviews, can offer insight from tenured employees as to why they have remained with the company and help to build an effective employment brand. A 90-day evaluation period with new hires combined with stringent hiring practices can help to ensure that the post-evaluation period retention rate stays at a high level.

However, a retention rate of 100% is not always a desirable thing, because while staff development and value creation through human capital investment are vital, it is likely that there will be employees who need to be separated from the company for some reason. Moreover, new perspectives, new talents and fresh approaches are a commonly cited rationale for high-level corporate replacements, akin to arguments for breed hybridization on the grounds of "hybrid vigor".
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