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2019-06-22 17:39:10HR and Management: Managing EmployeesEnglishIt’s difficult to attract and retain employees in today’s tight job market. Here’s a guide on creating an effective employee... To Create An Effective Employee Retention Plan?

How To Create An Effective Employee Retention Plan?

14 min read

Payscale rolled out its 2019 Compensation Best Practices Report. The report says that it’s becoming increasingly difficult to attract and retain employees in today’s tight job market.

Nearly half of the employers believe that the employee turnover rates increased in 2019. This is on account of a stronger job market. Furthermore, 66% of the organizations surveyed strongly believe that employee retention is one of the major concerns for them.

Given such scenarios, it has become important to understand why employees leave an organization. Besides, it is also essential to know the procedures adopted by employees to leave an organization. This is so because such scrutiny would help you identify reasons why employees stay within your organization. Furthermore, it will help you devise strategies to alter the decisions of employees planning to leave.

So, you need to keep thinking about ways to manage employee retention at all times. That’s why, employee retention is becoming an important part of an organization’s talent management strategy. This strategy includes manpower planning, hiring, training and development and employee retention.

Therefore, the following section lays down a step by step guide. This helps in developing an effective employee retention plan for your organization.

1. Find Whether Turnover Is A Problem?

As mentioned in our employee turnover article, not all kinds of voluntary turnover are damaging for your organization. If the low performers within your company are leaving, then it is beneficial. This is because it gives you an opportunity to hire new individuals having a different outlook. Moreover, such a turnover leads to reducing labor costs for your organization.

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However, there are cases when star performers tend to leave your organization. It is when such a turnover turns out to be dysfunctional for your organization. This is because it impacts the profitability of your business. Additionally, there can be situations where turnover becomes so high that the costs exceed the benefits. Thus, in all such scenarios, employee turnover can become a challenge for your organization.

Therefore, to know whether turnover is harming your business, you need to conduct employee turnover analysis.

Employee Turnover Analysis

An employee turnover analysis lets you examine:

  • Turnover rate
  • Type of employee turnover
  • Costs and the benefits attached with employee turnover

Turnover Rate

Turnover rate is the percentage of employees who leave an organization during a given period of time. This will help you in determining the number of employees leaving your organization in a given month or quarter as the case may be. Additionally, you may figure out:

  • Type of turnover, that is, voluntary, involuntary, avoidable or unavoidable
  • Kind of employee leaving, that is, part-time or full-time employee
  • Category of jobs experiencing turnover
  • Job levels undergoing turnover
  • Geographic location and other factors like level of performance of the employees leaving your organization

This information gives you a fair idea about the areas that you have to focus on while managing employee retention.

Type of Turnover

The next thing that you should analyze is the type of turnover. That is, whether the turnover is functional or dysfunctional in nature. This is because not every employee leaving your organization is of equal value to you. Furthermore, the reasons of each employee leaving your organization maybe different.

For some work life balance is an important factor to stay with an organization. So say your company provides flexible work schedules to such employees. In that case, such employees are bound to stay longer.

Apart from these, you should also focus on the following aspects of employees disengaging with your company:

  • Level of Performance
  • Skill Set
  • Tenure
  • Membership in underrepresented groups

Such information will further help you in determining the problem of turnover within your organization. Moreover, you will be able to create effective employee retention strategies.

Costs and Benefits Attached With Employee Turnover

In order to develop retention strategies that give good returns, you need to know the turnover costs. Furthermore, you need to analyse whether the turnover costs exceed the benefits derived out of such a turnover. Such information is helpful in comparing turnover costs with investment in retention strategies. Thus, this comparison helps in determining the amount of resources to be invested in retention.

There are innumerable resources that give you cost-benefit metrics to calculate the turnover costs. Such metrics help you to take appropriate measures with regard to employee retention.


After costs and benefits, it’s important to know whether such a turnover is high or low. This is done by comparing it against industry standards. That’s where benchmarking comes into the picture.

Benchmarking gives you information about the intensity of the turnover challenge within your organization. There are two ways in which you can undertake benchmarking. One is external benchmarking and the other is internal.

External Benchmarking

This allows you to compare your organization’s turnover rates against industry and competitor rates. Say your organization’s turnover rates are extremely high as compared to the competitors. Then your organization is not competitive. However, say such rates are relatively low. Then your organization has an edge over all the competitors out there.

Internal Benchmarking

The other way to compare turnover rates is through internal benchmarking. Under such a scenario, you track your organization’s turnover rates over time. Say the turnover rate is increasing in general or among groups or locations in particular. Then this could be a warning signal.

Needs Assessment

Once you determine the problem of turnover, next you need to assess the demand for labor. Not only that, you also need to know labor availability that would replace the departing employees. Such an assessment can be undertaken by evaluating external and internal needs.

External Needs

External needs assessment helps in determining the trends prevailing in the industry and labor market. These are those trends that could have an impact on demand and supply of human capital. Take for instance trends like industry growth. These would lead to an increase in demand for employees valued by your organization. On other have you have trends like dramatic technical innovation. These would lead to decrease in supply of skilled employees. This is because individuals having such a technical skill set would be very few.

Internal Needs

Internal needs assessment helps you evaluate the tactical approach to be adopted by your organization in the near future. Furthermore, it helps to determine the requirement of labor. This is done based on the strategic approach adopted by your organization. Say your organization plans to expand in the near future. Such an approach would lead to an increase in demand for labor. Whereas strategic plans like outsourcing the work would reduce the demand for labor.

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2. What Strategy Should Be Adopted?

Turnover analysis, with benchmarking and needs assessment help in determining turnover intensity within your organization. Such information helps you develop effective retention strategies and goals.

Such strategies can be of two types: broad-based strategies and targeted strategies. Broad based strategies are quite generalized. These help in reducing turnover rates in general. For instance, you set a target of reducing employee turnover by 5% within your organization. This is a broad-based strategy.

Targeted strategies on the other are quite specific. These cater to issues leading to employee turnover within a particular organization.

The following table guides you on the kind of strategies that you should adopt under varied circumstances.

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Employee Retention Plan displaying the strategies to be adopted to retain employees

As per the above table, it is important to note one thing. Both broad based and targeted retention strategies are not necessarily adopted individually. Such strategies can be implemented simultaneously as well. This is done to cater to specific issues within an organization.

Hence, following section explains what are broad based and targeted retention strategies in detail.

Broad Based Strategies

As mentioned above, broad based retention strategies cater to the organization as a whole. That is, these help in managing employee retention in general. Some of the examples of broad based strategies include:

  • Improving working environment,
  • recognizing employees for their work and
  • giving pay increases

There are various sources that can give you information to develop broad based retention strategies for your business. Such sources include:

  • conducting research on retention,
  • considering best practices and
  • undertaking benchmarking surveys.

Research on retention helps you determine elements that drive turnover within your organization. Furthermore, strategies adopted by industry practitioners can also be of great help. These can guide your organization in terms of developing effective strategies. Similarly, benchmarking surveys too can be undertaken . These give you a fair idea about the type of broad-based strategies to be adopted to influence retention.

Broad Based Strategies

Unlike broad based retention strategies, targeted strategies are quite specific in nature. Such strategies deal with particular issues that lead to employee turnover within an organization. However, to develop such strategies, you need to have relevant information. Such information can be collected from the following sources:

  • Exit Interviews
  • Post Exit Interviews
  • Focus Groups
  • Linking Survey Responses With Business Outcomes
  • Predictive Turnover Surveys
  • Qualitative Studies
  • Targeting Particular Groups

Exit Interviews

Exit interviews help in uncovering reasons as to why employees leave an organization. But this is only possible if such interviews are conducted accurately. Such data can help in retaining those employees that are of great value to your organization. Not only that, such interviews go a long way in building a relationship with departing employees. This further helps in building your company image. It helps the disengaging employees to leave the organization on a positive note.

Exit interviews, no doubt, are a great way to get turnover insights from departing employees. But, they have certain drawbacks. Many departing employees are unwilling to share negative feedback about the company. Now, such a behavior does not reveal actual reasons that instigated the employees to leave. Furthermore, departing employees try to cover up for such an act. They do this by giving reasons that are outside the control of the organization.

The departing employees resort to such behavior because they do not want to leave the company on a negative note. They avoid doing or saying anything negative about the company at the time of departure. This is because doing this would mean sacrificing the company referrals that they can use in future. Furthermore, they do not want to leave any scope for the organization to make them stay with the organization.

So to make effective use of exit interviews, make sure that a neural person, say an HR manager, takes the interview. Furthermore, let the departing employee know that confidentiality would be maintained. Finally, use the data to make positive changes within the organization.

Post-Exit Surveys

Post exit surveys are conducted after the employees leave an organization. Such surveys are conducted sometime after the employees depart. This is because departing employees do not feel comfortable sharing reasons of leaving the company during exit interviews.

Generally, such an interview is conducted over a phone call. Therefore, just as the exit interviews, you have to ensure that a neutral person takes the interview. Furthermore, a structured format should be used in conducting the interview. Also, the interviewee should be ensured that confidentiality would be maintained.

Focus Groups

Exit and post exit interviews reveal reasons that force employees to disengage with an organization. Whereas focus groups with current employees unveils reasons as to why they want to stay. Besides this, such a method uncovers reasons that would have made the employees leave an organization. Furthermore, it gives information about the factors that employees consider most important to stay with the company.

And if focus groups are conducted with valuable employees, then it would be quite helpful. This is because such a focus group would reveal valuable insights. Such insights go a long way in retaining talent that a company values the most.

To conduct focus groups, make sure that a neutral person conducts the same. Use a structured format as well as emphasize confidentiality while conducting it.

Linking Survey Responses With Business Outcomes

Under this method, you conduct anonymous surveys. These are undertaken to know about employees’ attitudes and opinions. After such opinions are known, the responses are accumulated for each business unit separately. Such responses are therefore correlated with the turnover rates and other outcomes of your company.

Thus, this method reveals the factors behind the increasing turnover rates of a particular business unit.

Predictive Turnover Surveys

A predictive turnover survey analyzes the relationship between survey responses and turnover decisions of an individual directly. This is in contrast to the Linking Surveys above that correlate business-unit outcomes with the turnover rates. The predictive turnover surveys are conducted sometime after the employees complete their attitude and opinion surveys. On their completion, you as a manager keep a track of the employees leaving and staying with your company.

Ultimately, the goal of a predictive turnover survey is simple. It is to analyse the relationship between survey responses and subsequent retention patterns. These surveys give you some valuable statistics. These relate to how strong is the relationship between particular drivers and real turnovers within your organization.

This information can be of great help in designing employee retention strategies for your company. There is, however, only one drawback of this method. It is that the employees who are a part of such a survey need to disclose their identity. This is because you need to link such survey responses with their subsequent turnover decisions. That means while conducting such surveys, no anonymity is maintained. Hence, the employees are unwilling to provide open responses during such surveys.

Therefore, for such surveys to be effective you need to assure employees that confidentiality would be maintained

Qualitative Surveys

You also need to consider qualitative methods apart from methods quantifying relationships between turnover and other factors. These qualitative studies help in determining decision making procedures leading to turnover. However, these procedures are quite challenging to understand. Thus, the qualitative method reveals patterns or relationships that quantitative surveys fail to fathom.

These qualitative studies include interviews with representatives of significant employee groups on a repetitive basis.

Targeting Particular Groups

There are different reasons as to why specific employee groups or types leave your organization. For instance, there are turnover challenges at a specific geographic location as compared to the other divisions. Furthermore, the level of job satisfaction at that location is low. And the relationship of employees with that of supervisors is also weak. Therefore, to overcome such a challenge, you adopt a targeted retention strategy of training the supervisors in that particular region.

Hence, you need to adopt targeted strategies if a specific group of employees leave in order to reduce turnover rates.

Implementing Your Plan and Evaluation Results

The third stage of managing employee retention is implementing the plan. Whereas, the fourth stage is measuring the plan’s results.

Let’s take the implementation stage first. Now, how you implement your employee retention plan depends upon the strategies that you have been following. Furthermore, there might be specific situations that your organization has been undergoing. These also impact the plan’s implementation.

Say for instance, there are any changes taking place within your organization. Now, you would want the top management to back your strategy. Furthermore, it is essential to build a communications plan. This is to ensure that the managers understand such changes. Not only that, they should be all prepared to implement the new policies.

Now, before implementing your strategy, try to ponder over the objections that can be raised against the new strategy. And be prepared to deal with all such concerns.

Once the plan is implemented, it is essential to measure the results. Retention strategies call for a considerable amount of investment. Hence, it is rational to evaluate the cost of retention with the results.

How to create an effective employee retention plan?
Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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