Why Employee Retention is Critical and How to Make It Grow
As a human resources leader, you might already know that we’re in the midst of an employee retention crisis.
According to the 2018 Retention Report from Work Institute, an estimated 42 million people (i.e. one in four employed professionals) left their jobs in 2018, and nearly 77% of that turnover could have been prevented by employers.
The study found that employees are leaving sooner than ever before. First-year turnover, defined as the percentage of employees who leave during their first year of employment at a job, was 40% — the highest rate in eight years.
What’s the cost of employee turnover? According to Work Institute, an estimated $600 billion in turnover costs in 2018, with the cost expected to rise to $680 billion in 2020. An added factor is historically low unemployment rates, which give employees flexibility and choice in searching for new jobs if they’re not happy and engaged at their current ones.
According to Danny Nelms, President of Work Institute, “Employers must embrace the employee-in-control marketplace and understand conditions that must change in their workplace if they want to reduce costly turnover, keep workers, and expand their businesses in a time of economic growth.”
Let’s take a look at some suggestions and success stories on improving employee retention.
Create open lines of communication
It’s important for employers to maintain open lines of communication throughout the organization; especially vital are open lines between employees and the leadership team. Employees look to leadership to set the direction of the company and keep them informed of strategic shifts, changes at the top, new partnerships, and more.
In addition to transparency and information, employees want an open channel to communicate concerns, share suggestions, and provide feedback. If walls or barriers are erected between employees and executives, employee morale can suffer — and that, in turn, can lead to higher turnover.
In a Glassdoor post titled “The Retention Secrets & Strategies of Top CEOs,” Gireesh Sonnad, CEO of Silverline, notes the importance of transparency and consistent communication. According to Sonnad, “One of the best ways to foster trust and employee engagement is simply to listen and discuss feedback. In addition to a complete open-door policy, I hold office hours every other week with the primary purpose of supporting that feedback mechanism.”
Sonnad finds it critical to answer any and all questions presented to him. In addition to office hours, Sonnad travels to meet with employees and contractors throughout the country. These face-to-face meetings are what he calls the “Vision and Values Tour”.
Use exit interviews wisely
By the time an exit interview becomes necessary, it’s likely too late to make improvements to retain that particular employee. However, the information gained during exit interviews can be used to make improvements to prevent repeat occurrences and stem attrition. By making improvements, employers effectively decrease the frequency of future employee turnover.
A post on the FourUsAll 401k blog details the employee retention efforts of the Cincinnati Children’s Hospital. Exit interviews revealed that stagnation and dissatisfaction were the primary reasons for employee turnover among nurses.
According to the post, “To address this, Cincinnati Children’s Hospital changed their nursing employment structure to allow for pay based on experience, and to incentivize nurses to obtain advanced degrees.”
The results were impressive: a 34% overall reduction in employee turnover and an 11% reduction among positions that had the highest turnover cost.
Consider the potential for employee loyalty during the hiring process
We’ve seen multiple candidate types: one candidate stayed at jobs for ten, eight and 12 years, while the second candidate hopped from job to job with an average tenure of less than 1 year. Which candidate is more likely to leave in the first 12 months?
In an article at CIO titled “Employee retention: 8 strategies for retaining top talent,” Dan Pickett, CEO of Nfrastructure, stresses the importance for candidates to build a track record of longevity.
According to Pickett, “You’re looking beyond what’s written on the resume. Have they worked at a company for many years through ups and downs? That speaks to loyalty, perseverance, engagement.”
Pickett considers candidates who have activities outside of work, which can demonstrate their commitment to a team or a cause. Activities can indicate that candidates stick to something they care about.
Create pathways for professional advancement
A SHRM article titled “To Have and to Hold” details the employee retention efforts of Indiana University Health. After working a year at the health system, nurses can choose from several professional pathways to pursue.
According to the article, “They can choose from a wide array of options, including management, research, and quality control, and the hospital provides support such as mentoring, tuition reimbursement, and e-learning classes to help them meet their goals.”
To assist with ongoing education and professional development, the health system raised its education allowance for nursing degrees from $3,600 to $5,250 per year. While the high-stress nursing profession has a 15% turnover rate nationwide, Indiana University Health’s turnover rate is just 13%.
A difference from 15% to 13% is substantial, as each percentage point saves the average hospital $337,500, according to the article. In addition, “Nurse departures cost the average hospital $4.4 million to $7 million in 2017, according to Nursing Solutions Inc.”
The same SHRM article highlights the efforts of professional services firm PricewaterhouseCoopers (PwC), which gave employees greater opportunities for training and knowledge expansion.
According to the article, “PwC also began providing various types of digital training to its employees to expand their knowledge in such fields as artificial intelligence and data insights. The idea isn’t to make employees topic experts, but rather to broaden their knowledge to better serve clients.”