The cost of employee turnover
According to SHRM (Society for Human Resource Management), the cost of losing an employee can be up to double that employee’s annual salary – depending on the type of role and their level of experience, of course. And while that may sound extreme, it’s pretty believable once you break it down into chunks.
For example, try to put a dollar amount on these items:
– Finding and recruiting a replacement
– On-boarding and training the new starter
– Lost productivity getting them up to speed
And that list goes on. But there’s more to it than just the outright expenses you incur. There are knock-on effects that are really hard to price up.
For example, how do you put a price tag on the institutional knowledge somebody has taken away with them? You learn far more than just your job when you spend time with a company. Then, you’ve got the interruptions to your service, which have a domino effect on customer satisfaction – another deeply embedded cost right there.
And what about the negative impact this has on your company culture, too? When an employee leaves – no matter how amicably – it sends a message to the rest of your staff: Something out there was better than being in here.
So, sure – you can try to put a price sticker on turnover. Many companies have! BrightHR estimates that the average cost of replacing an employee is around £30,000. But there’s a lot more at stake than just your cold hard capital.
What causes employee turnover?
If there were a single, easy answer to the question of “what causes employee turnover”, then we’d have already told you in the first paragraph of this article. Unfortunately, the answer isn’t very simple – or, rather, it isn’t very simple to address.
But is that because the times they are a-changing? No. These days, employee turnover is caused by the same ingredients it has been caused by for decades. And that’s because whilst the workplace may have changed, people are fundamentally driven by the same things – they want to be happy, engaged, well paid, and feel like they’re making progress.
William H. Mobley concluded, in his 1977 paper, that the most frequently cited reasons for voluntary turnover were dissatisfaction with pay, benefits, and opportunities for advancement.
These are still true today. And in our experience, we can further break these down into 6 key factors:
– Poor management
– Lack of professional development opportunities
– Poor workplace culture
– Uncompetitive compensation and benefits
– Limited opportunities for advancement
– Poor work-life balance
If your employees are suffering from the above? Then it’s highly likely they’re looking for a way out.
Let’s be clear: Here’s exactly why you should be investing in employee retention
OK, how about we drop the doom and gloom for a few minutes. We promise you, there’s a positive message to this article! And really, the positive message is this: If you invest in employee retention, you can reduce employee turnover.
Seems simple, right? Well, it is! Investing in employee retention can lead to:
– Increased productivity
– Lower turnover costs
– Improved company reputation
– Stronger company culture
– Increased employee satisfaction
– Improved customer satisfaction
And one of the best places to start when it comes to investing in retaining your shining stars, is employee engagement. A 2015 report by Steelcase found that investing in employee engagement led to three awesome outcomes – increased productivity, improved customer satisfaction, and lower turnover rates.
Of course, it isn’t all about launching engagement initiatives. In fact, those alone won’t cut it – and there are some fundamentals you should focus on, too.
Getting the basics in place
We’ve talked about the high cost of employee turnover, and about the benefits of investing in retention – specifically, engagement as a tool for retention. So now let’s focus on some best practices you can follow to help really get a handle on it. By implementing these strategies, you can create a happier and more productive workplace that employees will want to stay in.
Good compensation and benefits. Offering a competitive compensation and benefits package is vital. This not only helps attract top talent, but it also ensures that your current employees feel valued and appreciated.
Promote a positive culture. Fostering a positive workplace culture that promotes teamwork, respect, and open communication can go a long way in creating a supportive and welcoming environment.
Invest in professional development opportunities. This is another important strategy. Providing employees with opportunities to learn and grow not only improves their skills, but it also demonstrates your commitment to their success.
Encourage work-life balance. We know that you want your employees to be productive – but it’s about working more effectively, not for longer hours. Encouraging a work-life balance is crucial, as overworked and burnt-out employees are more likely to leave.
Provide recognition and appreciation. Providing recognition and appreciation for a job well done is a simple but effective way to boost morale and retain employees. Celebrating individual and team accomplishments can help create a sense of pride and loyalty towards the company.
By implementing these best practices, you’ll be well on your way to creating a workplace where employees feel valued, supported, and motivated to stay for the long haul.
Communication is key
Beyond the basics, there’s one thing that trumps all. It’s a cliché, and you’ll have heard countless people say it. But we’ll say it again: communication really is key. For almost anything in life, to be fair. But especially when it comes to retaining your people!
A study by Saks, A. M., & Ashforth, B. E. (1997) found that supervisor communication was positively related to job satisfaction, affective commitment, and perceived organizational support. What does this mean? It means that if your managers are communicating effectively with their teams, then your team members will feel like you care about them – they’ll be happier at work, and they will stick around for longer!
Some tips to keep communication in tip-top shape:
– Be clear and consistent. Nobody likes to second-guess what you’re trying to tell them, and nobody likes to deal with a Jekyll and Hyde type of manager. Communicate clearly and consistently – and have your managers learn how to do the same.
– Encourage open and honest feedback. Employees need to feel comfortable sharing their thoughts and ideas, even if they don’t align with the company’s current strategies. Managers should actively seek out feedback and listen to the responses they get.
– Provide regular updates on company developments. Regular updates on company developments, whether it’s through email newsletters, team meetings, or one-on-one conversations, can help keep everyone on the same page.
– Promote an open culture of transparency and trust. Managers should be transparent about company goals, strategies and challenges. This can help employees understand the big picture and feel more invested in the company’s success.
Getting communication right throughout your organization is important for employee retention. And this means going beyond simply improving communications from head office, or issuing a mandatory training course on “good communication”.
Making sure your managers are on-board is what will be key here. Your employees often live and die by the relationships they have with their managers, meaning communication on a team level can be the difference between keeping your people, and constantly publishing new vacancies.
The impact of remote work and COVID-19
Let’s take a moment now to look at a recent curveball. The COVID-19 pandemic has left a lasting impact on the workforce, with remote work becoming the norm for many businesses. But while remote work has enabled companies to continue operating during the pandemic, it has also had a significant impact on employee turnover.
One of the biggest challenges is the changes in work routines and schedules. Employees may have become used to the flexibility that remote work offers, and may now find it difficult to adjust to returning to the office and traditional working hours.
Another challenge is the increased isolation and decreased workplace camaraderie that has come with remote work. The lack of in-person interaction can make it harder for employees to feel connected to their co-workers, and to the company’s mission. This can have a negative impact on employee morale and job satisfaction.
It also goes without saying that remote work can make it difficult for employees to maintain a healthy work-life balance. Without clear boundaries between work and home life, it can be challenging to switch off from work, leading to burnout and increased stress levels. Come on, tell me you’ve never been guilty of sitting at the kitchen table at 10pm catching up on emails?
The need for new retention strategies to address these challenges is more crucial than ever. You need to support employees as they continue to adjust to new work routines and schedules brought about by the pandemic – some will thrive, but others will wither without your attention.
If you’ve stayed as a mostly remote workforce, then it helps if you can explore new ways to foster that “office spirit”. For example, by looking at these 24 virtual office games that can bring back that Friday feeling!
Furthermore, you should encourage employees to disconnect outside of their working hours. That means no checking emails, no firing off instant messages, and certainly no updating reports once the kids are in bed! And if people are struggling to do this, you may wish to offer additional services to support their mental health – such as counselling, or other wellness programs. Harvard Business Review goes into decent detail about some of this here.
Ultimately, companies that are able to adapt and provide support for their employees in the post-COVID world will be better positioned to retain their top talent and thrive in a competitive marketplace.
Sorry, your job isn’t quite over – it’s time to review, analyze and act on your data
As we’ve seen throughout this article, the costs of employee turnover can be significant, both in terms of the impact on productivity and the bottom line. That’s why it’s so important to take steps to retain your best employees. However, it’s not enough to simply implement retention strategies and hope for the best.
To truly be effective, these strategies need to be regularly evaluated and adjusted to meet the changing needs of your employees and the market.
As McKinsey & Company (2021) notes, regularly evaluating and adjusting retention strategies is key to staying up-to-date with changing employee needs and market conditions, and to continuously improving the work environment. This means gathering and analyzing data on employee turnover and engagement, measuring the effectiveness of your retention strategies, and identifying areas for improvement.
The Society for Human Resource Management (SHRM) (2018) similarly emphasizes the importance of regularly gathering and analyzing data on employee turnover and engagement to help organizations continuously improve their work environment.
By taking a data-driven approach to employee retention, you can make sure that your retention strategies are effective, and that you’re providing a workplace that employees want to stay in.
So, don’t forget to regularly evaluate and adjust your retention strategies, and to gather employee feedback to inform your decisions. By doing so, you can reduce the costs of employee turnover, increase productivity, and build a strong, engaged workforce that will help your organization thrive.