Put simply, employee retention is the art of holding onto your staff once you’ve hired them.
And, in 2020, it’s more important than ever.
Because more and more companies are waking up to the competitive advantages being a "people" company brings. The "churn and burn" approach to hiring—particularly towards non-office employees or customer service positions—results in poor customer service.
This is an issue, because customers are placing increasing value on good service. With the advent of smartphones, it’s easier than ever to find a competitor company to buy from, or in the case of consumer goods, to avoid the shop altogether and order online.
You can hold onto employees, more or less, by treating them nicely, listening to their concerns, and providing them with a few incentives to stay put.
If you’re an HR professional or a CEO, you probably don’t need us to tell you that.
What you might find useful, however, is an in-depth guide to employee retention in the modern workforce and how to maximize your employee engagement efforts. And in order to make sure there were no stones left unturned in creating the most comprehensive guide, we also asked some industry leading experts and businesses to contribute to our blog post on employee retention.
- A bit more detail on the importance of employee retention today and how it helps you remain competitive
- How to build effective employee retention strategies
- The exit interview, and how to turn it into your secret employee retention weapon
If, as we’ve discussed above, employee retention essentially means "treating your employees right," it’s an end in itself, not just the means.
From an ethical standpoint, no company should treat their employees poorly. Meeting your colleagues’ basic needs and providing them with a safe and stimulating workplace is the right thing to do for its own sake. You probably agree—and this sense of fairness might well be why you're reading this article in the first place.
But it’s not just a nice thing to do.
Attracting talent to your company—and keeping it once you’ve found it—has so many advantages. For example, according to Herzberg's famous Two-Factory Theory, employee retention and employee motivation are interdependent. You can find out more about this in the Vantage Circle HR blog. Furthermore, a strong employee retention strategy will:
- Reduce operating costs
- Improve customer service levels
- Allow you to out-compete your competitors for the best people
It’s no secret that having a "churn and burn" approach to attracting talent is expensive.
Eye-wateringly expensive, to be precise—think six to nine months salary as a conservative estimate. Then you need to consider the impact of not having someone there to do that person’s work, whether that’s a slowdown on a massive project, higher overtime costs as existing staff pick up their work, or a reduction in staff morale as they struggle with increased workloads.
(Source: Turnover costs for a large company).
Companies tend to get the importance of this for salaried positions and execs, but there’s often a bit of a blind spot when it comes to their non-desk workforce and the real cost of losing an employee.
Sure, replacing a senior-level manager will be more expensive than replacing a single bus driver. But what happens if your bus drivers’ morale becomes so low that two or three quit per month? It all adds up.
"Losing talented staff can also have emotional consequences on those who stay, effectively reducing productivity by decreasing morality and motivation," says Rochelle van Rensburg of the Ezzely Blog. "Maintaining essential talent is therefore mission-critical to organizational effectiveness for all these reasons. So staff retention puts companies ahead of their competitors, not just by means of reducing recruiting and reskilling costs, but more importantly, by keeping the top performers, which results in all of their specialized knowledge and expertise remaining in-house."
And, crucially, your mobile workforce is often interacts most with customers. They are the public face of your company, and their happiness will reflect in the level of service they give your customers. Happier, more engaged employees deliver better customer service, and build up a bank of operational knowledge that helps them respond to queries quicker and more effectively than a steady stream of new hires ever could.
It’s not an exaggeration to say that an active employee retention strategy is more important than ever.
There are two key reasons for this:
Firstly, it’s easier than ever for your customers to look elsewhere if they feel that your levels of service don’t match their expectations. We live in an age where essentially any information you want is available via a few taps of a smartphone screen.
Dissatisfied with a hotel stay? Booking.com can recommend thousands of others.
Bad experience in a taxi? A quick Google gets you all the phone numbers of other local firms.
Poor customer experience at a theme park? TripAdvisor lists other attractions—and offers users the opportunity to leave an off-putting negative review.
You get the idea.
Despite this, customers still want to be loyal. Millennials (26-39 year-olds, give or take) will want to stick around if your brand fits in with their personal values. Don’t throw away this potentially loyal market - putting an appropriate employee retention plan in place will help ensure that you can continuously provide the first-class customer service your customers expect.
Secondly, it’s easier than ever to browse jobs via online jobs boards. If your workforce isn’t happy they will move. Don’t assume that they will sit in their job miserable because there aren’t any other options. There are many reasons why employees leave and the reasons why managers leave might be different than the causes that make frontline employees jump ship.
Your competitors may well be waking up to the benefits of being a "people company," and will more than happily snap up the staff you can’t retain. Your loss will be their gain.
We’ve established that a strong employee retention rate is crucial to remain competitive in the 21st century. How you go about doing this is worth examining in some depth.
Consider that central concept of "treating your employees right" as you think about this. Remember - you are an employee too! As you go through the process of creating your employee retention strategies, keep asking yourself, "would I be happy with this?" or, "does this seem reasonable to me?"
Here are a few points you’ll need to cover when creating an employee engagement plan. Every industry - and every company is different, so tailor these to your specific circumstances. And remember, the employee experience starts even before the first day at the interviewing stage, but to set each new starter up for success, getting the onboarding right is crucial. We won't discuss this topic today, but we recommend checking out this Definitive Guide to Onboarding.
But before we jump into the specifics, let's quickly touch on the foundation of any working relationship: trust. As Kayla Lopez from the recruitment firm Viqtory.com reminded us, "If your employees trust you and the organization they tend to embrace the workplace; this begins before the employee is even hired. Transparency is something that we need to willingly support in order to gain trust. A workforce that trusts you will be engaged, a workforce that is engaged will retain. Trust is the foundation of all strong partnerships."
Now for the details...
We’ll start with the basics.
If your pay rates don’t match with your competitors’, you’re going to have a bad time keeping hold of your high achievers.
Take a quick look at what your competitors pay for equivalent positions. If you have access to enough information (Glassdoor is a good starting point), try and build a league table of what similar companies to you pay, and where you rank.
Obviously, aiming for the absolute top is ideal if you can afford it, but you don’t have to offer the best salary offer out there. There are plenty of other ways to encourage your staff to stay put (more on that below), as long as you can land respectably in the middle of the table. For someone working in a frontline job, it is difficult to give your best at work knowing you could get $5.00 per hour more for the same job elsewhere—even if there’s free pizza every Friday.
It’s also worth noting that even a super generous wage packet won’t persuade your employees to stay if you’re otherwise a nightmare to work for.
Consider this step the cornerstone of all your employee engagement efforts. Not enough by itself, but essential in building something lasting and meaningful.
You might not be able to take it to Silicon Valley levels of free three-course meals for breakfast, lunch and dinner, unlimited holidays, and puppy creches.
You can, however, offer a benefits package or a performance bonus scheme tailored to the size of your business, your budget, and your business objectives. The key here is to prioritize the benefits that would have a tangible difference to the lives of your employees, and add the fancy stuff on if you have money to spare.
These could include:
- Childcare vouchers: we’re all aware of the struggle to find affordable childcare. Help your workforce with their work-life balance (and keep it diverse—most of the people who end up quitting jobs for childcare reasons tend to be women) by offering vouchers to help with the cost.
- Health cover for employees and dependents: an absolute must if you're US-based, although even if you live in a country which has some form of universal health care, giving employees the opportunity to go private is very appealing.
- Flexible working: if the type of work you do accommodates it, flexible working is like gold dust to your staff. A "work your hours however you want" policy helps people manage childcare commitments, fit in dentist appointments, and reduce the stress of trying to juggle work and life commitments.
- Lunch program: Most of the lunch break is spent buying, prepping or reheating food. Offering a tasty and healthy in-house solution, such as the online canteen Smunch, allows your employees to capitalize on their break time and share a meal together. Ultimately, this will improve your company culture and cross-departmental communication as well.
"Don't underestimate the importance of time away from work," advises Norberts Erts, Co-Founder of CakeHR. "At a 2015 survey, when asked which workplace perk they think their employees are most interested in receiving, 41% CFOs said better benefits, and only 19% said more vacation days. In a separate survey of workers however, vacation days edged out other perks such as better benefits, scheduling flexibility, and training or professional development. The survey of workers found that paid time off topped most employees wish list – something that most CFOs, managers, and employers are often oblivious to. Offering additional vacation time shows employees you’re committed to helping them achieve greater work/life balance."
Once you’ve got the basics sorted, some nice-to-have options include:
- Above average PTO allowances
- Free gym memberships and cycle to work programs
- Personal development funds
Your employees know their workplace better than anyone else. Make the most of it.
If your employees feel involved in shaping their workplace and consulted on major decisions then they will be reluctant to leave it.
The key to this is to carry regular, easy-to-complete employee engagement surveys so you know exactly what the mood on the ground is and how to improve it.
Employees will hold an enormous amount of goodwill towards a workplace that listens to their concerns and acts on them. Equally, they will reserve a special sort of resentment for those that send out survey after survey, only to ignore the results.
It’s therefore essential to have a solid plan in place for your employee engagement surveys, or they will backfire spectacularly. Here are a few points to bear in mind:
- Small, regular surveys are better than long, annual ones. Only giving your employees one chance per year to raise issues will result in bottled up frustrations spewing out come survey time. Not only does this result in surveys that skew unhelpfully negative, but it also means that your HR team will face an uphill struggle
- Another point about designing surveys that you can respond to effectively: keep it targeted. Focus each of your quick-answer surveys on a specific area—facilities onsite, for example, or about relationships with line managers.
- Use short answer questions: "yes/no" or "on a scale of 1-5" formats make it easier for people to respond immediately. Long-form feedback can be helpful, but having lots of long-answer text boxes on your survey will put people off completing it. A good compromise is to have an optional "any specific comments" box at the end of the survey.
When you’ve processed the surveys, share the results and shout about what you’re doing to act on feedback. Employees will appreciate the transparency, and it’s important to signpost what you’re doing to address the concerns they raise—or they won’t bother to participate in future surveys.
Try and create a "feedback culture" in your company by encouraging people to come forward with suggestions for improvements any time they want. Surveys highlight pain points as they are reactive; an anonymous suggestions box (either digital or real-life), on the other hand, will bring out the more innovative side of your workforce.
These suggestions might be small—a new way of organising the break room fridge, or the introduction of free coffee Mondays—but the opportunity to improve the workplace in this way will work wonders for your wider staff’s sense of allegiance to it.
Moreover, the importance of creating a culture of empowerment and autonomy cannot be underemphasised (and it goes hand-in-hand with a feedback culture). As Bonnie Clarke, CEO of Remarkable, put it so well:
"Organisations need to enable people to have the headspace to think about being better – about improvement, innovation, change and responsiveness. In a world where customers have a louder voice and have more choice, the challenge isn’t just to be good, it is to be better; and to be better we need more people in jobs where they have the autonomy to think, not just to do their jobs.”
If your coworkers are your friends, spending time at work doesn’t seem so taxing.
This is where the fun stuff comes in—the away days, lunchtime yoga, the free breakfast bar, the Christmas party and the like. Providing regular activities which both improve employee well-being and foster friendships is an excellent way to make everyone feel like part of the team.
If you have a mobile or non office-based workforce, don’t forget to make efforts to include them too! They might not be in the office that often, so having regular get-togethers or breakfast clubs when shifts change is a great way to build a sense of belonging that might not be there already.
Obviously, base these activities on what your own workforce would like, but some ideas include:
- Regular lunchtime sports clubs (running, yoga, five-a-side, badminton are good starting points)
- Away days and team-building weekends
- Semi-regular opportunities for free food. Depending on the size of your team, you could offer lunch on the company each Friday, pizza parties when teams hit their targets or just because
- Big events like Christmas parties and family fun days. If you run awareness weeks for things like diversity, mental health and stress, why not run some exciting events for these too?
- Recognition of key milestones. If there are particularly busy periods throughout the year (like the Christmas rush for anyone working in retail or hospitality), put on an event to recognize the hard work your employees put in. This could be a full-on party, or simply just giving your staff the nod to take off after lunch on a quiet day. The gesture will be appreciated either way.
This step does, however, come with a big flashing warning sign that says: don’t bother doing any of these without doing the steps listed above first.
Because these are fun and exciting, and sound super trendy when you put them on your Careers page, people often use them in place of paying a decent wage, or offering flexible working hours, or acting on employee feedback.
Needless to say this won’t work, because all the lunchtime yoga in the world won’t persuade someone to stick around when they’re underpaid and workplace conditions are otherwise terrible. Use these activities as the icing on the cake.
One of the best ways of figuring out what’s going wrong with your employee retention efforts is asking your colleagues when they leave.
Seems counter-intuitive, and rather frustrating, doesn’t it?
And in some ways, it is. No amount of collecting and aggregating exit interview data, tweaking your employee engagement plan and making changes in your company to reduce employee turnover will change the fact that, for that particular employee, your efforts weren’t enough. For HR people and line managers, that stings sometimes.
Still, if you can take your losses on the chin, this is a real opportunity to do better for your colleagues, and identify and fix any major issues that push people to leave.
There are three main reasons why exit interviews are so effective at flagging up things that need to change:
Regardless of how many times you reassure your colleagues that your pulse surveys are anonymous and that helpful suggestions are encouraged, they will still be a little suspicious.
The worry that surveys aren’t really anonymous, or that speaking out about a key workplace bugbear will get them labelled as a troublemaker, will be a constant thorn in the side of your employee retention efforts.
(As a side note, if this attitude is pervasive then it might be time to take a look at your workplace culture. A little reticence is natural. An all-encompassing dread of speaking up might indicate something a little more sinister).
The exit interview is a different kettle of fish. They’re leaving. There are no raises or opportunities for promotion in the pipeline. This is their opportunity to "tell it like it really is."
Listen, even if you think they’re being unfair and bitter.
Problems brought up during exit interviews tend to have weighed heavily on an employee’s decision to leave. In other words, they’re big issues you need to address urgently.
Multiple exit interviews help build up a better picture of life on the ground.
Of course, there’s always the chance that one particular employee just, for whatever reason, didn’t have a good time.
That’s where keeping data from previous exit interviews comes in.
For example, if an employee complains about their line manager being unbearable, it might just be a clash of personalities. Equally it could be because that line manager is difficult to work for and too demanding. It’s difficult to say without further info.
So. Run some analytics.
How many other employees from that line manager’s team have left over the past year?
Did they say anything in their exit interviews?
Have they been flagged to HR for anything previously?
If so, you might want to investigate further.
This is why it’s important to conduct an exit interview for every single person that leaves the business. If you restrict it to management positions, people based in HQ, or full-time workers, you’re missing key sets of data that could be useful in improving your employee retention strategy.
An exit interview, conducted well, helps you identify wrong turns in your employee journey map.
You’ll probably have some sort of employee journey map already.
You might call it something different. We’re referring to the plan you make that starts at the hire phase and ends with the offboarding phase when the employee leaves. This normally includes guidelines for each stage they go through with your company. For example:
- Offer letter and contract sent
- Start date agreed two weeks in advance
- First day: tour of premises, fire safety, welcome coffee or lunch
- First six weeks: all e-learning to be completed
You get the idea. Here's a basic template you could expand on:
(Source: Trends in Employee Journey Maps)
The exit interview provides an excellent opportunity to ask your employees about various stages in this plan, to see whether they’ve been carried out to your expectations.
Ask specifically, and don’t be afraid to go right back to the start of their employment. Ask them whether they felt welcomed in their first weeks, for example. Ask them whether they were given clear and regular feedback on their performance, and compare that to your notes on how your employee journey should pan out.
It could be that, despite your meticulous efforts in planning it, your employee journey map isn’t being adhered to by managers in the wider organisation. This could be why your employees are leaving - this map provides guidelines on how to make sure people feel safe, supported and included at work. If people don’t follow it you’re going to have problems.
Your employee journey map is important. If it isn’t being followed, you need to correct that as soon as you can. Exit interviews are the best way to do this.
If a lot of your workforce are remote or mobile, don’t insist on a face-to-face interview at HQ.
There are several free video calling apps available, so why not make use of them? An employee is more likely to feel comfortable talking to you if you’ve made accommodations for their situation.
If they’re more comfortable talking to you, they’re more likely to be honest with you, and that’s exactly what you want.
Go for a relaxed vibe. Making things too formal will only stifle conversation.
If you’re conducting a face-to-face interview, it’s a nice touch to provide some sort of refreshments; hot drinks and a pastry, maybe. The employee will appreciate the gesture, and it will encourage a more conversational feel, which is exactly what will get them to open up.
You will know, from previous exit interviews if there are any particular pain points in your employee experience.
Ask about them. You’ll then be able to establish:
- Whether these are still issues
- What progress you’ve made on them, and how effective your efforts to tackle them have been.
If the structure of the interview is entirely created by you, you could miss something important.
By allowing employees space to expand on their own concerns, you give yourself the opportunity to pick up on potential issues that aren’t on your radar. Sure, a lot of this could be specific to that particular individual, but you should investigate nonetheless—otherwise you’ll never know whether it’s the iceberg tip of something bigger.
People leave for all sorts of reasons—not all of them negative.
You might want to leave the door open for talented employees, in case they want to return at some point. You might also consider that talented former employees can be great source of referrals.
You want these to be your company’s cheerleaders, even after they’ve left. A good exit interview can make this relationship. A poor one can ruin it.
Of course, there’s also the possibility that the employee leaving has been less than stellar. In this case you should see the exit interview as a chance to smooth things over, and divert potentially negative Glassdoor reviews or social media mentions.
- An employee retention strategy is important because it makes your employees happier. Happier, more engaged employees perform better in general, and deliver better customer service.
- The cost of employee turnover is measured in increased operational costs and decreased institutional knowledge.
Bearing this in mind, the question you should be asking yourself isn’t "can we afford to expand our employee retention efforts?"
It’s "can we afford not to?"
An engaged, happy workforce with a low churn rate isn’t just a nice thing to have.
It’s not just something you can boast about on your Careers page.
It’s a competitive advantage—and people are only just waking up to this fact. Because now more than ever, people value good customer service. If you can provide that, you’ll have a serious head start on your competitors.
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