Retaining Talent In Today’s Market

Employee retention has taken on a new significance amid one of the tightest labor markets in the past 50 years. The robust job market has given employees the confidence to seek new opportunities, while employers are wrestling with rising compensation and heated competition for new hires, both salaried and hourly.

An estimated 41 million people voluntarily quit their jobs last year. By 2020, that number will jump to 47 million, or roughly 1 in 3 workers. Each employee departure costs about one-third of that worker's annual earnings, including expenses such as recruiter fees, temporary replacement workers and lost productivity. To engender loyalty, companies are trying every tactic, from raising salaries to bolstering benefits to offering more training and education. 

Why People Quit
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According to the Work Institute, a Franklin, Tenn. based consulting firm, inadequate career development is the leading reason people leave their jobs, with 21 percent of those interviewed citing it as the driving factor. Those employees expressed frustration with the lack of growth, development opportunities and advancement in their jobs. The second largest reason (12 percent) for individuals leaving their job is due to inadequate work-life balance, travel and scheduling preferences. A close third ranking (11.3 percent) is due to manager behavior. Employees reported a lack of positive and productive relationships. The fourth largest reason employees quit is due to relocation, or a physical move out of proximity of the job (10.2 percent).  Ranking fifth at 9.6 percent, is compensation and benefits. Employees reported that they were promised total rewards and what they actually received created enough of a factor to leave their job. 

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The Cost of Replacement

The business ramifications of employee turnover are enormous. Each departure costs about one-third of that worker’s annual earnings. Here’s where that money goes:

Companies in competitive industries and markets face a never-ending quest to find the right mix of benefits to retain workers. It's tricky because so many offer the same perks, such as 401(k) matches, free food, unlimited vacation and flexible work schedules.

Retention Strategies

Managing for employee retention involves strategic actions to keep employees motivated and focused so they elect to remain employed and fully productive for the benefit of the organization. A comprehensive employee retention program can play a vital role in both attracting and retaining key employees, as well as in reducing turnover and its related costs. All of these contribute to an organization's productivity and overall business performance.

Socialization. Turnover is often high among new employees. Socialization practices—delivered via a strategic onboarding and assimilation program—can help new hires become embedded in the company and thus more likely to stay. These practices include shared and individualized learning experiences, formal and informal activities that help people get to know one another, and the assignment of more-seasoned employees as role models for new hires.

Training and development. If employees are not given opportunities to continually update their skills, they are more inclined to leave.

Employee engagement. Engaged employees are satisfied with their jobs, enjoy their work and the organization, believe that their job is important, take pride in their company, and believe that their employer values their contributions. One study found that highly engaged employees were five times less likely to quit than employees who were not engaged.

Inclusive environment. Creating an environment in which employees want to work and feel valued. Several studies have suggested that fair treatment by a supervisor is the most important determinant of retention. This would lead a company to focus on supervisory and management development and communication skill-building.
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Practices that contribute to retention arise in all areas of HR, and all roles within an organization will need to work together to develop and implement multifaceted retention strategies. Broad-based and targeted strategies, or a combination of both, may be appropriate depending on the circumstances.
 
Adapted from SHRM.