Employees leave their positions for many different reasons, so it is not unusual for organizations to experience some level of turnover. However, a high amount of employee turnover can indicate serious problems with the way the business is operated, and it can have a significant impact on profitability.
What Is Employee Retention?
Employee retention refers to an organization’s ability to keep its employees from leaving for other jobs and is typically expressed as a rate. For example, a company that has a 90 percent annual employee retention rate managed to retain nine out of every ten of its employees and lost just one.
This article will help you understand what employee retention means to modern business.
It Can Increase Employee Morale
Employees spend a significant percentage of their time at work, and their surroundings can have a big impact on their job satisfaction. Working in a revolving-door environment can be very dispiriting as employees must constantly deal with the loss of people they have formed connections with.
Employees who stay with the company are often required to take on more responsibilities or a greater workload to compensate for the loss of staff, which can negatively impact their satisfaction and motivation.
Another component of turnover to consider is its contagious nature. When employees are surrounded by coworkers who are job hunting or discussing moving to other companies and then following through, it can encourage them to do the same.
They may begin to question why so many people are leaving or commiserate with their reasons for seeking other jobs, and coworkers who have moved on may later recruit former colleagues to come on board with their new employer.
Retention Can Increase Productivity
One of the most concerning negative effects of persistent turnover is the loss of productivity it causes. It can take a year or even longer for new hires to approach the level of productivity an existing employee offers as they take time to learn the processes and get comfortable in their roles.
It can also take them time to form relationships with their coworkers, which can hurt team productivity in the interim. In client-focused roles, there is also a loss of productivity stemming from the necessary time for new hires to build relationships with customers.
While an organization is dealing with understaffing due to turnover, employees who are required to assume extra responsibilities may suffer from burnout and their output may be lower in quality. There may also be delays in completing their work or delivering work to customers; all of these productivity issues can harm the reputation of the business.
These productivity losses can be largely avoided by effective employee retention strategies. Workplaces that attain a high retention rate tend to employ workers who are more engaged, and by extension, accomplish more. They also benefit from strong teams of coworkers who are more efficient and productive, as well as better customer relationships.
It Can Lead To Higher Revenue
The increases in productivity that come from a low-turnover workforce can amount to significantly higher revenue, but there is another component of high employee retention that can boost the bottom line: reduced hiring costs. Between the costs of advertising open roles, interviewing and screening employees and onboarding new hires with training and management oversight, the expenses can add up quickly.
According to a Gallup Poll, the cost of replacing a single employee can be anywhere from one half to double their annual salary – an estimate that they point out is on the conservative side. If a company’s annual overall turnover rate is 26.3% and that organization is employing 100 individuals with an average salary of $50,000 per year, they could experience turnover and replacement costs in the range of $660,000 to $2.6 million per year. Keeping just one employee on board under these conditions could save the company anywhere from $25,000 to $100,000.
Retention Creates A More Positive Customer Experience
A customer’s perception of their interactions with an organization matters, whether it is the first interaction or support after a sale has been completed. All of these interactions depend in no small part on the employees they work with, whose own experiences are influencing the way they engage with customers.
Turnover affects this impression in many ways. New employees often require extra support, which means that they can take longer to accomplish everyday tasks and may need to consult with other employees to solve any problems that arise.
They are also more likely to make customer service mistakes due to their lack of experience with the organization. As a result, customers may form a negative opinion of the business, and those who choose to share their dissatisfaction on social media or via word of mouth can seriously harm the organization’s reputation.
High employee retention has the opposite effect. Teams that have been working well together for many years will come across as capable and confident, and their higher morale will often be apparent to customers.
Retention Keeps Knowledge and Experience With The Company
Any time a seasoned employee walks away from an organization, they take the unique knowledge that they have gained out the door with them. If they have not passed this institutional knowledge to their coworkers, the organization could lose certain information and skills forever.
When a senior employee departs the company, their loss can also affect succession planning. Unfortunately, it is often an organization’s highest performers who are the most in demand and at risk of turnover regardless of market conditions. Therefore, focusing on retaining experienced and senior employees who are capable of solving complex issues can benefit a company considerably.
Request An Employee Retention Strategy Consultation With Business Benefits Group (BBG)
A highly researched and well-devised employee retention strategy fosters loyalty among top talent and enables businesses to maximize productivity and profitability. Contact the experienced employee retention consultants at Business Benefits Group (BBG) today to find out more about our retention strategy services.