The Importance of Employee Retention
Many organizations state that their people are their greatest asset. This is true for any business large or small. Companies that are often listed as “the best places to work” focus on not only providing great work conditions but also take the time to ensure that their employees are highly engaged. It’s these companies that have come to realize that employee retention is an important part of being a successful business.
In fact, employee retention should be a key part of your HR plan because skilled talent is not only hard to find, it can be challenging to retain as well.
Focusing on Employee Retention: What’s the Big Deal Anyway?
What happens when one of your most valuable employees comes to you and tells you that they are leaving the organization? What happens when a couple of key employees decide to leave? You will no doubt be able to replace them, but it might take weeks, months or even years for the new staff members to get to the same level as your departing employees. Any time a key employee leaves there is an unavoidable disruption in productivity and while hopefully this disruption does not impact the level of service that you are providing to your customers, customers may in fact experience a decline in service levels. As we all know, high employee turnover, correction any employee turnover, can be costly for any organization, large or small.
Having the ability to improve employee retention can mean great cost savings for your company. There have been a number of studies that have shown that losing an employee can cost a company tens of thousands of dollars or in some cases 1.5 to two times the employees’ annual salary. Of course turnover rates can vary by industry. Retail, customer service and the hospitality industries tend to have higher turnover rates, in some cases as high as 40-50%. As a result some organizations attempt to prepare or even come to accept high turnover. They try to make it easy to replace people that leave with what they feel are polished training programs meant to make it easy for someone to step in. While it’s probably not the best strategy, some organizations can get away with it. Regardless there is still a cost associated and again you run the risk of alienating your customer-base if service levels decline.
The cost of losing an employee can be evidenced when you consider these factors:
- Lost productivity – it can take a new employee weeks, months or even years to become as productive as a departing staff member
- Declines in customer service – dissatisfied customers can spread a bad experience ten times faster than they share a positive one.
- Cost of hiring a new candidate – there are associated costs with hiring a new staff member. Advertising the job posting, interviewing, screening candidates and negotiating salary and compensation are all areas that will impact hiring a replacement worker.
- Cost of onboarding a new person – you can have the best onboarding process in place, but it is still going to take time for a new staff member to get up to speed in their new role and to understand your company.
- Morale – when a person leaves a position there can be an impact on morale with the remaining staffers. In fact, other employees who experience high turnover may themselves become disengaged and ultimately leave as well.
For the most part, the longer an employee is with an organization, the more valuable they are. There is a customer impact, a productivity impact and an economic impact on the value of employees over time.
There are a number of other benefits of reducing employee turnover:
- Maintaining service levels – there is less risk to your customer base by having experienced staff
- Maintaining production levels – if you become short staffed, you run the risk of having to pay Over Time or having to take other employees from their jobs to help fill the void. If you reduce employee turnover, you don’t have to worry about spreading your team too thin.
- Cost Savings – as mentioned above there can be a great cost in having to replace an employee. Having a strong employee retention plan can help reduce and eliminate some of these costs.
- Improved Morale – no one likes to be part of an organization that sees a recurring exodus of staff. Even in those industries that have high turnover, there is an impact on morale anytime a person leaves an organization.
As you think about your staffing needs for 2019, you may want to spend some time revisiting your employee retention plan. If you do not have a retention plan, there’s no time like the present to create one. Keeping your employees engaged can go a long way in retaining your staff and building your very own dream team!
Need help creating an employee retention plan? Contact us today to set up a consultation. Speak with one of our experienced HR specialists and work on improving employee engagement today!