Jump to section
The Great Resignation is in full swing, and companies are now faced with two challenges: how to navigate the new world of work, and how to attract and retain the best talent. With “Help Wanted” signs popping up everywhere — in every industry — employees have more options about where to go than ever.
For some employees, the pandemic was the catalyst to finally change careers. For others, lockdowns affected their industry, making their livelihoods unreliable. But for others, the current economic climate has provided an opportunity to redefine what matters to them at work and the chance to pursue it.
In some industries — and some positions — demand currently outstrips supply. Workers in food and hospitality and retail as well as transportation and logistics are taking advantage of this mismatch. They're seeking employment that has better compensation and working conditions.
That leaves companies desperate to understand the driving factor behind employee retention. A recent study of CFOs found that talent retention outstrips nearly every other internal risk in 2022. And — spoiler alert — retention isn’t just about paying people more money (although no one will say no to that).
Learn what your company should be paying attention to if you want to boost employee retention — and strategies that actually work.
What is employee retention?
Right now, companies are concerned about their rates of employee attrition and turnover (the number of employees that leave their job over time). Some industries naturally tend to have higher turnover, so a “good rate” varies from company to company.
Human resources departments are concerned with the number of people who both voluntarily and involuntarily leave their jobs. Leaving voluntarily can mean that they're not satisfied with some aspect of their job — whether it’s their role, compensation, or work environment.
Leaving involuntarily often indicates systemic issues. People may be unclear on the expectations of their role. There may be poor communication with management, not enough resources to do the job, or a mismatch in the hiring process.
Although attrition happens in any company — no matter how great it is — a revolving door of employees is a red flag.
What is employee retention?
Employee retention is the number of employees that stay with their company in a given period of time. Typically, these employees only count as “retained” if they are happy, engaged, productive, and not looking for other work. Employee retention strategies help organizations prevent high turnover, usually through boosting employee engagement and providing competitive benefits.
In short, the longer that people work for you, the higher your retention rate. The more often you find yourself hiring and firing for the same role, the lower your retention rate.
Why does employee retention matter?
Employee retention is key to your organization's competitiveness, productivity, and culture.
Without the right talent in place, your company can’t grow or execute on its strategy. Without the right people in place, your company can’t attract the other people that it’s going to need. Without the right people in place, your company can lose the cultural magic that makes it special and gives you an advantage over competitors. High employee retention adds significant value to both the company's bottom line and to its culture.
Here are three reasons why understanding your employee retention rate is important:
1. Your team is better and more productive
Companies that can retain their employees benefit from people that not only know their role, but can work well as a team. These people often grow to be influential leaders within the organization. They not only can fulfill their rules well, but they're able to train others — making hiring and onboarding easier.
2. Improves company culture
It's very uncomfortable to work in an environment where you feel like you could be fired at any moment. And hiring new faces can be exciting, but it can also make you feel like you don't actually know anybody. High retention boosts camaraderie. It's good for employee morale and improves productivity. Less hours are spent processing incoming and outgoing employees.
3. Reduces expenses
Acquiring new employees can be costly. And even once they’re in the door, each employee represents a significant investment of time and training. When those employees are happy with their jobs, companies are awarded with higher commitment, skill, and morale. High turnover means that employers lose the benefit of both employee skill and on-the-job experience.
What is the key to employee retention?
The idea behind employee retention is simple. If people are doing work that they care about, in an environment that they feel good in, and are being compensated well for it, they stay. When these factors are missing, people are generally on their way out the door.
All three of these factors are critical. People will leave jobs they're passionate about that pay well because of toxic environments. People will leave jobs that are meaningful with supportive environments if they don't make enough to live comfortably. And if a job pays well and has good workplace dynamics, but the work doesn't feel meaningful, employees begin to get bored and dissatisfied.
Understanding what matters to people and what causes them to leave their jobs is the first step to building an effective employee retention strategy.
Why are employees leaving?
For years the reasons that people quit their job held steady. It was generally because of a lack of upward mobility, a bad boss, or to pursue a new opportunity presented itself.
But the Great Resignation has shown some startling new trends. People are now looking for better pay, healthy work-life balance, and better working conditions. Since it's a candidate's market, it’s easier and safer than it’s ever been to leave your job.
If you're responsible for hiring or attracting talent at your company, learning why people leave their jobs can help you understand what they're looking for in a new role or how to keep them engaged in their current role. And it's not always about money.
Here are 7 common reasons why employees quit:
Micromanaging is a common sign of a toxic workplace. When people are micromanaged, they are more likely to have anxiety, don't work as effectively, and are less satisfied with their jobs. As Brigette Hyacinth neatly sums up for LinkedIn “When talented employees are micromanaged, they often do one thing; quit.”
2. Company values mismatch
If the company isn't engaged in the work that the employee wants to do, they'll start to look for something that's a closer match for what they care about. But even if the company is mission-driven, people will leave if those values are not reflected in their day-to-day work experience.
3. Feeling unappreciated
When people don't feel valued at work or recognized for what they do, they become jaded and disengaged. In some work environments, they may begin to feel like they only ever get called out for doing something wrong. This type of environment will damage psychological safety.
4. Inadequate compensation
We know that meaning matters, but so does money. Being able to care for yourself and your family is a basic need of every employee. If the pay and benefits aren't competitive, they'll have no choice but to seek better compensation elsewhere. Moreover, they may begin to feel that they're being taken advantage of.
5. Feeling stuck
People want to feel that they're growing and changing. Growth within a company not doesn’t just provide opportunities to learn and earn more. It also reinforces that the company recognizes their value. When people feel like they've hit a wall in their careers, they begin to think that the only way to move up is to move out.
6. Poor communication
Poor communication in the workplace can take a number of forms. It might be constant confusion or being unsure about what's expected of you. It might mean unproductive meetings or feeling that you can't be honest with your manager. Communication is critical to a functioning workplace. If people feel like they can't communicate with their coworkers, they won't stick around.
7. Work-life balance
Work is only one part of what makes us tick. Ideally, that work is an expression of what we care about and the difference we want to make in the world. But even when our work is fulfilling, we all have responsibilities and interests outside of work.
When a job is so demanding that it leaves no time for the rest of our lives, our work begins to suffer — and so does our mental health. If companies and managers don’t encourage self-care, their teams burn out. When that happens, they may feel like the only way to get better is to quit.
How has COVID-19 changed employee satisfaction?
In our work with our Members, BetterUp tracks something called the eNPS, or employer net promoter score. eNPS measures how Members feel about their employer. It’s a measure of sentiment, favorability, and loyalty. When we looked at the data from 2020 and 2021, we found that since the start of the pandemic eNPS hit both its highest level and its lowest on record.
Between February 2020 and April 2020, favorability towards employers skyrocketed over 200%. That means people liked their employer twice as much. In the early stages of the pandemic, companies prioritized taking care of their employees’ health and well-being. They spoke often about the importance of leading with compassion.
But two years into the pandemic, we’re still wondering what exactly the “new normal” is supposed to look like — and when, if ever, it’s planning to show up. If anything, life has gotten more complex. We are learning to live with a tremendous amount of uncertainty. Work-life balance is suffering and employees are under extra stress.
For employees that are caregivers, concerns about childcare and workplace flexibility has caused some to put their careers on hold. Others have been driven out of the workforce altogether. Those that are still employed worry about pandemic-related disruption to their industries or jobs.
And for those who have continued to work throughout the pandemic, whether in or out of the office, there are still challenges. People who've been going into the office worry about contracting the virus and passing it along to their families. People who have to work from home are restless, isolated, and tired of being on the computer.
The rapid changes in how we work over the last two years has prompted people to re-examine what's important to them. This might mean a new understanding of what makes them willing to stay in a job.
9 employee retention strategies
If you want people to stay, you'll likely need to overhaul your entire people process — start to finish. There really is no “quick fix” or putting a Band-Aid on employee retention.
People often think of work-life balance as keeping your job separate from your life. But the relationship between work and life is getting more complex. Work is taking a new role in our daily lives (and in our homes).
People will want to stay at the jobs that improve their lives. If they feel that they are growing and taken care of at work and doing work that's important to them, they'll want to stay.
Here are 9 ideas to consider when developing your employee retention strategy:
1. Start with onboarding
Retention begins on the very first day.
Have you ever walked into an office and immediately knew that it wasn't the place for you? Have you found yourself just as confused and out-of-place on day 60 as you were on day one?
A smooth onboarding process makes people feel welcome and improves their trust in the organization. They’ll feel like they're working with competent people who care about empowering them to be successful at their new job. They’ll feel safe enough to ask questions and work to learn.
2. Pay attention to communication
In any relationship, it's important to pay attention both to what's being said and what's not being said. Communication is at the heart of what makes teams work effectively. It empowers colleagues to collaborate, helps workplaces run smoothly, and eases issues when they arise.
Investing time in developing your communication skills can go a long way towards resolving (and preventing) the issues that lead to poor retention and high turnover.
3. Hire for values first, workplace culture second, and skills third
You can teach most job-related skills, but it's much more difficult to teach values or personality. Hire people who you want to work with and who you feel genuinely want to work with you.
At BetterUp, we don’t hire people that we feel are a good “culture fit.” We hire people that live our values and (maybe even) embody them more than we do. We embrace the idea that we grow by surrounding ourselves with great people who challenge each other, respect each other, and feel safe enough to take risks in their roles.
4. Ask for feedback
If you want to know how things are going in your workplace, just ask. You should make it as easy as possible for employees to provide you with feedback. Show them that you value their feedback by listening. Implement their suggestions whenever possible. This helps build trust and foster a sense of ownership in the workplace.
5. Make well-being a priority
Investing in employee well-being helps to decrease burnout and improve morale. But aside from being great for the employee, it’s also great for the company. Leaders have learned that focusing on well-being helps them both take care of themselves and lead their teams better.
It's important to invest in well-being in more than one way. Employee wellness programs are a valuable addition to the workplace, but they don’t replace breaks and vacations. Make sure that your team is set up to work comfortably and efficiently from home. Model taking time off for both your physical and mental health.
6. Offer competitive benefits
Do some research (and hire a consultant if necessary) to determine what a competitive salary range is for your employees. Make salaries consistent and fair. Make sure employees know about all parts of their compensation. That includes bonuses, reimbursements, stock options, and stipends. Make the process of qualifying for them as transparent as possible.
Healthcare and wellness benefits are important parts of compensation. Offering benefits that support the whole person is a form of employee appreciation.
7. Provide autonomy and choice
Show that you trust your employees by letting them work in the way that they see fit. That might mean remote work, flexible scheduling, or encouraging different people to take the lead on new initiatives. This builds trust, morale, and leadership skills.
8. Treat them like people
If there's anything we learned from the pandemic, it's that employee well-being can't be separated from productivity. Treat your people like people. Understand that they have good days and bad days, and those don't make the difference between good employees and bad employees.
Everyone has potential, and people develop into that potential when they feel supported and safe. If you provide that environment, they'll be much more likely to stay.
9. Invest in the whole person
Employee benefits help to take care of the person and their family, but you can also support them in other ways. Consider offering coaching, training, continuing education, and opportunities for learning. Growth is an important component of job satisfaction in both a workplace and a career.
Prevention is the best employee retention strategy
The best way to improve employee retention is to prevent them from quitting. It may seem overly simple, but it's true. Again, if people are happy with the work they do, who they do it with, how they do it, and what they get paid for it, they'll often stay at their jobs for a long time.
Don't wait until someone has a foot out the door to start talking about retention. This can come across as insincere and is often insufficient. Leaving a job isn’t an overnight decision. Once someone has gone through the steps of interviewing for and lining up another position, it will be difficult to get them to return.
Attrition can also be contagious. You can mitigate this by making sure that people leave the right way. Celebrate their contributions to the team and ask them about their experience working with you. Exit interviews can be a valuable source of feedback and help you prevent more employee turnover.
Consider "staying" interviews as well. Periodically interview the people who don't leave to find out why they stay and what they think about when they consider leaving. Your current employees are likely being contacted by recruiters all the time — why do they stay? Learn and share these findings.
Offer opportunities multiple times a year to talk openly about employee experience. You can host meetings, open forums, or even send out an anonymous survey. Partnering with a company like BetterUp can provide access to coaching, which is a way to support your employees. It also provides leaders with access to high-level data, measuring employee satisfaction, burnout, engagement, and other factors that directly impact retention.
Implementing and measuring your retention efforts
To measure your retention efforts, you'll first need to know where you start. Use the formula in this article to determine whether or not you have a high retention rate.
You should also compare your turnover rate to that of the industry on a whole. Check this resource to compare your company’s turnover rate with the average of your industry.
Retention is something that happens every day that a person chooses to work for you. There's no list in the world that will tell you what gets your team members to stick around. You have to talk to them. You have to communicate with them. They are your single best source of information when it comes to your company culture and why they continue to show up — or not — to work.
It doesn't end there. Retention is an ongoing conversation. And the best way to improve it is to be proactive about it.
Investing your time and energy into keeping your people happy is a worthwhile endeavor. Your employee retention strategy is at the heart of what makes your company productive, profitable, and a place where people can thrive in their careers.
BetterUp Staff Writer