There is a reason why the saying ‘people don’t quit jobs, they quit bosses’ is such a well-known phrase in business. A 2019 survey illustrates that 39% of Canadians polled quit a job due to poor management.
But what makes employees want to stay and work within a company? As a business owner or manager, you will need to consider this question to improve your company’s workforce retention rate.
Learn why employees quit, how to determine retention rate, and how to retain employees using the various strategies below.
What is Meant by Employee Retention?
Employee retention refers to how well a company can hold on to its employees, keeping them happy in their current positions. To retain employees means to keep them working within the company. These retention rates are measured for a given period.
A high employee retention rate means your business is doing something right, as it has kept the same employees over time. A low retention rate means a company cannot entice their workers to stay, and therefore much of the workforce have left their positions over time, causing the business to hire replacements.
This rate of retention is an HR key performance indicator that helps businesses measure how well they are doing in enticing employees to stay. HR professionals can use this data to help organizations improve their internal processes and up job satisfaction to keep employees engaged and working for them.
What is the employee turnover rate?
Employee retention and turnover rate go hand in hand. Where retention measures how well a business keeps its employees, the turnover rate measures how often the company must hire and rehire new workers.
Low employee turnover equates to a high retention rate, meaning the business is doing a good job attracting and keeping talent within the company. A high turnover means a company is losing employees and rehiring new workers at a higher rate than they can keep them.
Why is Employee Retention Important?
Businesses need to focus on employee retention rates as it greatly affects the company in numerous ways. Companies can spend thousands of dollars during the hiring and onboarding process. If businesses have a high turnover, that means they are spending a ridiculous amount of money acquiring and training employees throughout a given period. By improving retention, you lower your hiring costs as you won’t need to fill these positions as often.
On top of the high cost of low retention rates, these numbers can turn potential employees off from applying to your business. If many employees leave a company, then there must be something wrong with the place of employment. People don’t just leave a job for no reason. If numerous people have left a company in a short time, it could mean poor management and work culture overall.
On the other hand, if potential candidates see that a business’s current employees have been there for many years, it shows high employee morale and attracts quality talent to your company. Overall, employee retention is a vital metric to look at as it affects a company’s financial standing and its reputation and ability to hire and retain top talent.
What is a Good Employee Retention Rate?
Maintaining employee relations is one of the driving factors to keeping a high retention rate. But what is considered a high or good quality of retention? The retention and turnover rates are two sides of the same coin, so it is advantageous to look at both within a company.
When it comes to retention rates, anything over 90% is considered good. Canada ranks in the top four countries with the highest turnover rates, sitting at an average of 16% in 2018. That number has grown to 21% in the last two years, meaning the number of professionals leaving their companies is on the rise.
To calculate your small business’s employee retention rate, you can use this formula:
(number of employees who stayed for the whole period/number of employees at the start of the period) x 100 = Retention rate %
Why Do Employees Leave?
There are many reasons why employees leave a secure position for another company, or even for no job at all. If your business possesses a high employee turnover and low retention rate, then one of these may be the cause:
- Lack of credit
- Not enough instruction or onboarding
- Lack of ethics/ integrity
- Work-life imbalance
- Unhealthy work environment
- Unmet development/ career goals
If a business’s workforce is leaving at a high rate, then senior management must hire replacements, this is known as employee attrition. To stop employee attrition and increase workplace retention, you can work backwards from these issues and come up with ways to keep your employees happy within your company.
Employee Retention Strategies
Here are ten ways you as a business owner and manager can improve employee retention in a company while also increasing employee satisfaction overall.
Being upfront during the interview
Employee retention strategies can start even before an employee is hired. One way to increase this rate of retention is by hiring the right people for the job in the first place. When conducting the recruitment process, you will want to look for candidates that jive with your work culture and current team members.
During the interviews, you should be upfront with the candidates, giving them a full description of their job duties, expectations, and the business’s work environment. The better you can prepare the applicants for the position, the more likely they will thrive in the organization when hired. However, if you end up choosing the wrong candidate, you could wind up back in the hiring process before long.
Proper onboarding of new team members
The right instruction and proper onboarding can make all the difference to how well employees adjust to a new position. Even though the new hire passed the interview stages, this will be the first time they experience the company as an employee. It’s within the first six months of employment that many new hires tend to leave.
If you don’t help your new workers get off to a good start, how can you expect them to stay within a company when they don’t feel supported? By developing an integrated onboarding strategy and designing your firm’s employee training program with the staff in mind, your new employees will feel welcomed, supported, and excited to learn and work within the business.
The better the first few weeks and months go, the more likely the new hire will stay. Therefore, making a strong first work impression with on-the-job training opportunities is necessary to increase employee retention.
Employee compensation packages and health benefits
Another way to keep employees happy within the organization is through the use of compensation plans and benefits packages. By providing your workforce with health insurance coverage and other benefit packages like retirement plans, you can illustrate your business’s focus on health and wellness. Such a focus helps to attract and retain employees as they gain more out of their work than just a place of employment.
Mentorship opportunities and further learning
Offering an outlet for further learning and career development opportunities is a great way to keep workers engaged and lower the rate of your turnover. When individuals feel there is a chance of professional development and progression within the company, they will inevitably stay there to make it happen, taking advantage of a place where they can grow and learn.
Starting a mentorship program in your business, providing advancement opportunities, or offering tuition reimbursement programs, are a few ways you can show your workforce that you care about their development.
Communication is key to building a healthy and strong work relationship between management and employees and all team members. Poor communication can cause all sorts of issues between management and employees like failure to relay clear instructions causes frustration, which results in lost productivity and revenue, and lack of appreciation and credit.
Whether issuing what is needed for a task, giving credit when credit is due or showing appreciation for employees, managers must clearly communicate with employees. Fostering communication and a positive work environment keep employees satisfied and content within a company when they see they are valued and appreciated for their hard work.
Employee perks can cover any number of activities or benefits, like providing a free lunch for employees or complimentary tea and coffee in the office to thank them for a job well done. A stocked snacks cupboard, a few extra vacation days, a membership to a local gym or fitness facility, or a monthly game night are all things that make your team feel appreciated and included in the company.
Whatever perks you feel like your business can offer, these rewards create a fun and inclusive work space that shows you care for your employees. They will be more likely to care for the job in turn and stay working within your business.
Respect both ways
Since poor people management and lack of respect are leading factors in a company’s turnover rate, businesses should focus on building respect and trust between all team members. Companies must always remember their employees’ human element- people deserve respect and fairness in all aspects of their work environment.
By building a positive and fair work environment, you are more likely to attract and retain hard-working employees as they feel recognized and appreciated within the business. Therefore, to increase employee retention, your business must show respect to its workforce in all aspects and between all workers, no matter the internal hierarchy.
Performance management reviews help both employees and employers, as they create a metric by which to measure progress. Periodic performance reviews help employees to cover the gaps in their skills and work performance. By measuring where the employees sit within the company, they understand your position better and what it takes to move up within the company or desired field.
This knowledge and clear progression path and growth within a company can inspire your workforce to continue to work hard within the company. If your workforce sees opportunities where they are, they will be less likely to seek them out at another organization.
Fostering cohesive unit
Being part of a team and a larger community makes people feel good about what they do and can result in higher employee job satisfaction overall. Many individuals come into a new job for the experience but tend to stay for the people they work with. Fostering a cohesive unit and strong working relationship between all members means creating an environment where people feel accepted and supported.
Team-building activities are a great way to create this foundation of support and trust between the whole workforce. Cultivating these relationships inspires employees to work together and stay within the company.
Using software to streamline workflow and payroll processing
Using technology to streamline internal processes and improve workflow makes everyone’s lives easier. Freeing up time and energy of employees that would otherwise be spent on menial tasks means they can focus on the work activities that bring them the most joy and satisfaction.
Software like QuickBooks Online also helps make the payroll process more efficient, so your employees are assured the proper pay for their efforts. When staff members are paid promptly and accurately, they are more likely to stay within a company that guarantees adequate remuneration for their hard work.
Why not try QuickBooks free today alongside these other strategies to help you keep your employees happy in your business.