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How to create an effective employee retention plan
The unemployment rate is low, and your workers are likely being courted by other companies. Here's how to create retention strategies that will make your workers want to stay put.
Replacing employees is expensive. When someone quits, not only do companies find themselves short-handed, but they...
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may spend up to a third of the worker's salary to find a replacement, according to consulting firm Work Institute. And with today's labor market so tight -- the unemployment rate dropped to 3.8% in May, according to the Bureau of Labor Statistics (BLS) -- organizations that aren't serious about retention are risking real money. BLS reports around 7 million jobs are available, so workers have plenty of opportunities to jump if they want to.
Retention rates vary from industry to industry based on factors such as age, pay, experience and skills, said Dick Finnegan, CEO of C-Suite Analytics, an engagement and retention strategy firm in Longwood, Fla. For example, he said, in 2017, the average quit rate across all sectors was 26%, an all-time high. "Having that many quits would be devastating for tech or healthcare, but wonderful for fast food," he explained.
Whatever business you're in, creating an employee retention plan isn't a science, and it isn't easy. The effort involves many moving parts, including the company's attitude toward retention itself. Some companies, said Brent Skinner, principal human capital management (HCM) industry analyst at Nucleus Research in Boston, see turnover "as just a cost of doing business that they're willing to absorb." Those firms often don't realize "they could actually save money by lowering their employee attrition rates."
Becky Cantieri, chief people officer at SurveyMonkey in San Mateo, Calif., sees retention as a key factor of success. "The best way to build great products is to have a passionate and dedicated team, so employee retention is vital to every company's bottom line," she said. "Studies show that close to half of HR professionals list retention as their top challenge, so for HR teams, employee retention is an ongoing priority."
Employee retention in a competitive market
In a labor market as competitive as today's, keeping workers on board involves more than just making them happy on the job. HR also has to engage employees enough to avoid the temptations being dangled in front of them by other companies. For example, ADP recently reported that many workers see bigger wage increases when they switch employers rather than stay put. That higher salary on its own can be a powerful incentive to leave.
Yet, industry experts like Skinner say enough best practices have been established to guide HR as it creates a employee retention plan. To him, the three most important components are building a positive employer brand, maintaining a solid culture and using the right technology to support your workers. Cantieri gives high priority to a sense of inclusion and belonging, work-life integration and engagement.
Bruce Tulgan, founder of workforce consulting firm RainmakerThinking in Whitneyville, Conn., noted that "money's always a factor," but so is "a supportive environment and, in particular, a supportive leader, manager or supervisor." In addition, he said, giving workers some control over their own schedule is "a huge factor."
Also, it's important for your employee retention plan to be personalized. "The No. 1 reason employees quit their jobs is that they don't trust their boss," Finnegan said. "There are many other reasons, but if you have one hammer and one nail, hit this one."
Employers make a big mistake "when they rely on engagement and exit surveys, which produce one-size-fits-all programs, like employee of the month, town hall meetings and career fairs," Finnegan said. "By the next day, no one remembers because they've returned to their jobs." It's there -- on the job -- where retention and engagement happen, he contends, because that's where workers deal with bosses and colleagues, as well as the work involved in the job itself.
"Consider that, when companies rely on programs, they're eliminating managers from their solutions," he said. "Yet, the surest way to improve retention and engagement is for those same managers to build trust with their teams."
Employee engagement, experience and a personal touch
All of these views have a common thread: A successful employee retention plan has a lot to do with analyzing how employees feel about going into the office each day. "Employees want an experience where they can use their talents, grow and have a lasting impact," Cantieri said.
Brent SkinnerPrincipal HCM industry analyst, Nucleus Research
A significant chunk of that experience depends on the technical tools HR provides employees to work with. According to a survey conducted by payroll services provider Paychex, 73% of full-time workers in the U.S. expect their organizations to provide "a high level of self-service," meaning technical tools that enable them to complete a range of HR-related tasks, such as changing addresses, checking time-off balances, submitting vacation requests, checking paystubs or accessing 401(k) accounts.
To some, such tools are table stakes when it comes to providing a stellar employee experience. "If your self-service experience for employees isn't in order, that's the first place to start," Skinner said. In his mind, each tool should be "as accessible as possible and easily navigable, and also rich and robust in terms of what it enables the employee to manage."
Important as that is, the lynchpins of employee retention plans are the relationships among middle managers, supervisors and their subordinates. Technology has a role in fostering those relationships as well.
"When a manager recognizes and acknowledges an employee's hard work, it fosters good will and a feeling of engagement on the part of the employee," Skinner said. "Intrinsically, that's a factor in promoting retention."
In that context, mobile HR applications are important because they facilitate a manager's ability to communicate recognition and acknowledgement. In fact, Skinner suggested that the simple fact that technology is in place "might get the manager to think about recognizing and acknowledging the employees when he or she might not otherwise have done so."
In addition, mobile apps make it easier for employers to consistently communicate with their workforce, another key component of building an engaging experience. "I think messaging is key," said Chad Sowash, co-founder of Catch 22 Consulting in Columbus, Ind. However, he cautioned, when it comes to employee communications, the message outweighs the medium. Employees appreciate relevant information, he said, "not these crazy, bulk email blasts of nonsense that some employees might get on a daily basis." Information curated to specific audiences are more effective than general messages, he believes. "I don't care about engineering stuff if I'm a sales guy, and if I'm in engineering, I don't want information on X, Y and Z in sales."
Measuring to see what works
Finally, the success of any employee retention plan depends on getting into the workforce's collective head. Many HR leaders use frequent surveys to gauge their workers' moods, including Cantieri, who believes they "get at the why, enabling us to find the reasons behind what is working and what is not working."
In addition, Shebani Patel, people analytics leader for advisory firm PwC in San Francisco, believes face-to-face encounters, such as "stay interviews" and focus groups, are "great ways to get proactive around retention strategies" because they provide insight into why people stay and why they might be tempted by another opportunity.
Then, of course, there are analytics. Skinner said more vendors are developing tools to pull information from across the corporate ecosystem, looking at everything from real-time performance management to productivity in order to provide a sense of the level of employee engagement and identify ways to improve it.
"I think HR can only do so much when it comes to retention," Tulgan said. "I think that making the value proposition clear and the fully loaded value of the job is very important. Giving people the ability to act on and monitor and change their benefits is very important. There are other technologies enabling telework that HR may or may not control and technologies that enable flexibility -- which can be very, very important to retention -- but HR may or may not own that."
Put another way, an employee retention plan must be approached holistically: It depends on culture, leadership and tools that touch every part of the company's operation to make it work.