February 4, 2022
Catherine Daly
5 Benefits of Employee Retention
10 minutes
In the two decades before the COVID-19 pandemic, the employee resignation rate in the United States never surpassed 2.4% of the total workforce per month. The rate rose steadily through 2021, peaking at 3% in November. More than 19 million U.S. workers quit their jobs between April and September 2021.
The pandemic set in motion the greatest workplace disruption in generations—employers everywhere are still feeling the repercussions. The Great Attrition—also known as the Big Quit or the Great Resignation—is an economic phenomenon whereby employees voluntarily resign from their jobs in large numbers.
The Great Attrition began in 2021 as some employees re-evaluated their priorities during the ongoing pandemic, opting for a career change. Others quit after the government refused to provide necessary worker protections, resulting in wage stagnation as the cost of living increased steadily. Employees are tired, grieving, and seeking a renewed purpose and social connections with colleagues.
The bottom line is that there is no one reason for the Great Attrition. But leaders must make an effort to understand their situation. Consultancy firm McKinsey and Co. warns that “by not understanding what their employees are running from, and what they might gravitate to, company leaders are putting their very businesses at risk.”
Source: McKinsey
Employee retention is more important than ever
The Great Attrition is likely to continue for the foreseeable future. Fifty-three percent of employers say they are experiencing greater voluntary turnover than they have in previous years, and 64 percent expect the problem to continue—or worsen—over the next six months.
There are more job openings with people moving out of and across industries. Greener pastures may even tempt employees that are considered to be happy and engaged.
It is more important than ever for employers to be thoughtful and creative about retaining the talent they have already invested in hiring and training, developing skills to fill critical gaps, and attracting new people.
What are top-performing organizations doing to lower their attrition rate? Find out in "The Retention Revolution: Top Tips for Companies Looking to Attract and Retain Talent."
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Benefits of employee retention
Here’s why employee retention is important: Employee retention is the outcome of strategies and processes an organization creates to keep its top talent engaged, happy, and remaining with the organization. There are many benefits of employee retention, but we have curated the top five here:
1
Reduce costs & create efficiencies
The cost to replace an employee can be up to twice the cost of the employee’s annual salary. Some of these costs are incurred from advertising the job opening, interviewing and screening candidates, and onboarding and training new hires. Other costs are incurred from lost productivity, effects on team morale, and customer service or sales issues.
Large U.S. businesses lose at least $1 trillion each year from voluntary employee turnover—much of which existing workers say their managers or organizations could have prevented.
Investing in employee retention and developing better management strategies is a better approach. Organizations can reduce costly attrition by rerouting the HR budget from recruitment initiatives to people and leadership development and employee satisfaction.
2
Boost employee morale and motivation
Aside from the obvious costs of attrition, hidden costs like the impact on morale are hard to equate—but no less important. The departure of good people places an unnecessary burden on remaining employees who acquire the extra workload. Often, employee attrition causes a ripple effect where remaining employees question if they, too, should leave, further exacerbating the problem.
By focusing on retention and engagement strategies, employers can lift employee morale, enable greater connectedness and engagement, and create more positive atmospheres in the workplace.
Employees are looking outside the traditional factors of pay and title when evaluating whether to remain in their roles. In recent studies, 34% of employees said corporate culture was the main reason they were looking for a new role, 92% said they’d be more likely to stay with their job if their managers showed more empathy, and 59% are less likely to seek out a new job if they are engaged.
3
Improve customer experience and drive revenue
One of the lesser-known benefits of employee retention is that it directly impacts revenue. Gallup reports in The State of the American Workplace that engaged employees are more likely to improve customer relationships, with a resulting 20% increase in sales.
That’s because retaining good employees in customer-facing roles will result in better customer relations. Over time, customers develop trust—and even friendship—with their main contacts in an organization. Hiring new employees to fill their place takes time and rebuilding the trust with customers takes even longer. Further, new employees may take longer to get things done or be more prone to customer service mistakes as they ramp up in their roles, which can damage the customer experience.
Thus, when good employees leave, customers may consider leaving too—negatively affecting the bottom line. Worse still, they may share their negative experiences online, putting the company’s entire reputation at risk.
Employee retention strategies, like offering meaningful employee development, show employees they have a solid career path ahead of them. Engaged, satisfied employees will be more inclined to provide great service to customers knowing it will also benefit their long-term goals.
4
Strengthen company culture
Whether it’s good or bad, your company has a culture. Company culture comes about in one of two ways:
- It is defined, nurtured, and protected by leadership from the beginning of an organization
- It is created by a collective sum of the behaviors, beliefs, and experiences of people
Culture plays a vital role in hiring and retaining valuable employees. By creating good employee retention strategies, organizations can build a more wholesome company culture, ultimately improving the business’s value. Engaged employees who are aligned with an organization’s culture have longer tenures and strengthen the organizational culture, fostering positivity across the organization.
5
Create better outcomes for DE&I initiatives
In-depth analysis by Gartner found employees who work remotely or on a hybrid schedule perform at equal levels compared to employees who work in the office.
Despite this, many managers believe that people who work from the office are higher performing and more likely to be promoted than those who work from home. Further, in a hybrid world, women and people of color prefer to work from home compared to white men.
Forcing a return to office may mean gender wage gaps will widen, the degree of diversity within leadership teams will weaken, and employee attrition rates will continue to climb.
By intentionally focusing on employee retention—particularly of underrepresented talent—employers can better include these employees in critical conversations and ensure they have equal access to career opportunities and other networks that drive career growth.
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How enterprise discussion management can improve employee retention
Many leaders are out of touch with how happy or engaged their people are—especially in remote or hybrid work situations. To create effective strategies and reap the benefits of employee retention, employers must try to understand why employees are leaving in the first place.
In a 2021 survey, the top factors employees cited as reasons for quitting were that they didn’t feel valued by their organizations or their managers or because they didn’t feel a sense of belonging at work.
However, every organization is unique, so employers should conduct their own internal discussions to gain insight on morale, employee satisfaction, motivators for potential attrition, and current perceptions of employees’ experiences. Gallup suggests gathering data on the following areas as a starting point:
- Employees’ overall experience of working in the organization (role, team, supervisor, job duties, advancement and development opportunities, and so on)
- Aspects of the work culture
- Initial reasons for joining the company
- Reasons they may consider leaving
- Professional goals
Using an enterprise discussion management solution like ThoughtExchange, leaders can gather this data quickly, easily, and frequently! They can gauge opinions and experiences from across their organization anonymously using patented technology that helps overcome any leadership bias.
Leaders can then create informed strategies to combat attrition and gain employee retention benefits.
If you’re interested in learning how to improve employee retention with enterprise discussion management, get in touch with us.
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