Employee Retention & Turnover: How to Keep Your Talent

Dec 14, 2023 | Employee Engagement, HR Trends

Employee turnover rates cause countless headaches for HR staff—and rising turnover can even threaten a company’s future. Worse, HR staff and company leaders may struggle to grasp why turnover is happening. And without this understanding, it’s virtually impossible to halt turnover and retain employees.

Fortunately, there’s ample research to help us understand the most common reasons why employees resign. We’ll examine the key factors contributing to turnover and how to implement proven employee retention strategies. By taking these measures, you can maintain a stable, engaged, and committed workforce.

Table of Contents

1. The Importance of Employee Retention

2. Key Factors Driving Employee Turnover

3. Strategies to Increase Employee Retention

4. FAQs on Employee Retention and Turnover

The Importance of Employee Retention

Employee turnover has a critical impact on the success of a business. First, a high turnover rate significantly disrupts productivity. Workflow slows when teams are constantly adjusting to colleagues’ departures and waiting for new hires to get up to speed.

Second, turnover brings a high cost. An employee departure can cost between 6 and 9 months of that person’s salary. The cost of recruitment and lost productivity are major contributors to this high price tag. Moreover, high employee turnover can jeopardize a company’s longevity and competitive advantage. A business might have difficulty responding to disruption when high turnover slows its ability to innovate, for example. And in manufacturing, research has shown that each percentage point increase in turnover rate can increase product failure by 0.74–0.79%

Turnover is a critical issue for most companies today. Just consider these findings from Gallup’s research:

  • 49% of employees are watching for, or actively searching for a new job opportunity.
  • 57% of employees believe now is a good time to find a new job. (However, this is down from 70% in 2022.)
  • Just 27% would recommend that others apply to work for their company.

Given these sobering statistics, companies may be dealing with a turnover rate that’s 50–75% higher than normal. And it can take up to 14 weeks to fill a role—an increase of 75% since 2021, according to Robert Half.

Let’s examine why employees are departing their organizations, so you can address the root causes of the problem and increase employee retention.

Key Factors Driving Employee Turnover

Employees attending a meeting
Credit: Ivan Samkov/ Pexels

Leaving a job is a very personal decision that is always influenced by a combination of factors. The following were the biggest reasons why employees left their jobs in 2022, according to Gallup:

  • Dissatisfaction with pay and benefits (20%)
  • Lack of advancement and development opportunities (13%)
  • Issues with their manager or leaders (13%)
  • Need to relocate (9%)
  • Personal factors like family or medical needs (9%)
  • Unrealistic expectations at work (6%)
  • Poor job fit or uninteresting work (6%)
  • Disrespect in the workplace (5%)
  • Poor work/life balance (4%)

Gallup’s analysis then examined key themes emerging from these results. They found the broader theme of engagement and culture to have the most bearing on employees’ decisions to leave, influencing 40% of them to depart. An engaged employee is much less likely to seek a new job. Next came the theme of wellbeing and work/life balance, shaping 26% of decisions to leave, followed by pay and benefits at 20% and relationship with managers and leaders at 13%. 

When looking for new jobs, improved wellbeing and work/life balance topped the list of requirements in 2022, Gallup adds. Increasing salary and benefits held the second position, followed by the ability to use one’s talents, higher job security, and increased inclusiveness.

Strategies to Increase Employee Retention

Manager meeting with his employees to understand how to increase employee retention
Credit: Diva Plavalaguna/ Pexels

Here are some key ways to reduce turnover and retain employees in your organization. These retention strategies will address the root causes of turnover outlined above.

Revisit Your Compensation Structure

Employees today prioritize equity—and transparency—in compensation. Unlike in the past, they’re likely to share salary information with one another. Evaluate your compensation structure periodically to stay current with industry norms. Think about adding rewards like bonuses or stock options as well.

Make sure you offer a competitive paid leave policy, too. Educational assistance is another popular option, and strong mental health benefits are crucial.

Consider offering additional perks, like credit repair, financial planning, or home-buying guidance. By doing so, you’ll enhance overall well-being along with job satisfaction.

Show Empathy for Their Needs

Managers should show empathy for employees’ needs, asking about their concerns. By placing employees’ well-being at the top of the priority list, they’ll boost their loyalty. For instance, if employees feel overwhelmed, managers can help them balance their workload. When their manager genuinely listens, employees are 62% less likely to feel burned out.

Asking specific questions will elicit a more detailed reply:

  • How has your workload been? Does it feel balanced? 
  • How do you feel when starting work in the morning?
  • What barriers do you feel like you’re confronting, in terms of personal success?

Be fully present during these conversations, conveying that you care in your tone and body language. Genuinely listen and ask follow-up questions to reach a real understanding.

Experiment with Different Career Pathways

Discuss outside-of-the-box ideas for career progression with employees, urge Helen Tupper and Sarah Ellis in Harvard Business Review (HBR). “The purpose of a high-quality career conversation should be two-fold: to give employees the permission to be curious about where their career could take them and the practical support to make progress,” they assert.

Here are some other ways to help them explore alternative career pathways:

  • Discuss ways they can leverage their strengths in future roles.
  • Connect them with mentors and colleagues in roles they aspire toward.
  • Let them work on an assignment in another department (facilitating what Tupper and Ellis term “borrowed brilliance”).
  • Redesign job roles, when feasible.

“Managers should normalize conversations with employees about their next role, building discussions of potential career options into goal-setting and performance conversations,” write Lauren Smith, Jamie Kohn, and Iga Pilewska in HBR. Too often, this subject is treated as taboo. They add, “HR leaders can facilitate this by putting together potential career paths for each role, including lateral moves with similar skill sets.” 

Further, HR should talk with all managers about what different potential career paths can look like. HR can also share tips for opening regular conversations on career aspirations.

Raise Awareness of Internal Opportunities

Just 51% of employees are aware of internal opportunities. And just 17% say their manager helps them identify and apply for a new role internally. In some cases, this may stem from the manager’s fear of losing talented employees who are helping them achieve performance metrics, say Tupper and Ellis.

What’s the solution? Implement an internal system for sharing notifications of openings related to their interests, Gartner advises. All employees should have open access to these announcements. Employees should be encouraged to specify their own interests within this system (even if these interests diverge from their role). Democratizing access to these opportunities will improve employee retention.

HR should work to address another inequity, too. “The top barrier preventing candidates from pursuing a job opening internally is a pre-identified favored candidate,” asserts Gartner. While succession planning is important, a failure to explore the merits of multiple qualified candidates can lower employee morale and cause talented employees to leave. Further, if other high-potential employees don’t receive the same opportunities to learn and grow, they’ll depart the organization.

Foster Equitable Growth Opportunities

The majority of employees are excited to learn new skills to further their careers. A LinkedIn study found that 94% of employees would stay with their company if it supported their growth. Tailor developmental opportunities to employees’ career aspirations and emerging needs, working with them to create an individual development plan.

Help employees create time blocks for learning, making it part of their weekly duties. Otherwise, they may feel they have no time for development. Work with each employee to set several SMART learning goals for the quarter. Then provide opportunities like virtual training, mentorship, and stretch assignments, coupled with continuous coaching from their manager.

Hold Stay Interviews

“Fifty-two percent of exiting employees say that their manager or organization could have done something to prevent them from leaving their job,” says Gallup. “But only about a third of former employees said they had a conversation with their manager about leaving before they quit.” Hold periodic stay interviews to ask about their experience on the job and satisfaction level. For example, ask questions like these:

  • What do you enjoy most about working here? What do you like least?
  • What would make your work more rewarding?
  • What might entice you to leave?
  • What are you eager to learn about?
  • What talents of yours are underused in your role?
  • How is your relationship with your manager?
  • How can we better support your growth?

Then, follow up by implementing the necessary changes to retain employees.

Use Software to Shape Growth

Software solutions can promote continuous growth when used regularly. Adopt instant feedback tools that let managers share real-time feedback throughout the day. Use quality analytics tools and goal-tracking solutions to measure individual progress. This will show whether you’re providing the right developmental support. And since 70% of companies say they need to link talent management choices more closely to performance management, this will support decision-making processes.

Additionally, use performance evaluation software to structure meaningful conversations that enhance employees’ growth.

Survey employees to learn about their job satisfaction level and what could improve it, too. Anonymous surveys can reveal whether employees are considering leaving—and what would entice them to stay.

Measure Results

Establish your baseline employee retention rate, then track how it changes as you implement these strategies. The Society for Human Resource Management (SHRM) presents the following equation for calculating the retention rate for a particular time period:

# of employees who remained employed for the entire period /

# of employees at the start of the period) x 100

They calculate turnover as follows:

(# of separations during the period /

average # of employees during this period) x 100

For example, if 3 people on a team of 9 left and were replaced, you could calculate the turnover and retention rates as follows:

Retention = (6/9) x 100 = 67%

Turnover = (3/9) x 100 = 33%

Finally, measure managers’ success based largely on employees’ development rather than just team results, Tupper and Ellis advise. This will prompt managers to encourage employees to apply for opportunities and wholeheartedly support their growth. 

Additionally, monitor rates of absenteeism, which can serve as a barometer of engagement. High rates of absenteeism may predict potential turnover.

FAQs on Employee Retention and Turnover

Here are some questions we often hear on retention. 

What retention rate should you aim for?

In general, a 90% retention rate is a strong goal, although it depends on your industry and track record. Aiming for 100% retention is too ambitious. A minor amount of turnover will always be natural; people may leave for various reasons beyond your control. Set a target that feels reasonable for your company. You could set a goal of improving retention by 5% per quarter, for example. Assess your progress and set a new goal for the following quarter.

Is turnover always a bad thing?

Change can be beneficial; some amount of turnover can bring in fresh ideas and skills, if you’re able to recruit new talent effectively. Plus, you may occasionally realize that an employee isn’t the right fit for your company. In such cases, turnover is healthy. The key is to keep turnover from getting out of control.

Can you recover from a very high turnover rate?

Yes, it’s absolutely possible to bounce back if you take effective action. Leverage the strategies shared above with current employees. At the same time, work to build your employer brand by making developmental opportunities and benefits known to new recruits. Help them see what makes you special from day one, then follow through, and they’ll be likely to stick around.

Leveraging all of these retention strategies will nurture a positive workplace culture where all employees can thrive. As you put them into action, you’ll have more engaged employees with greater loyalty to your organization. Adopting the right developmental strategies, enhancing equity, and offering generous rewards will allow you to retain more of your talented employees. They’ll continue to learn and grow within your organization, preparing them to step into more advanced positions and enhancing the success of your business.

Learn more about how software can help you increase employee retention—demo our product.

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