• Employee retention meaning and employee retention rate formula
• Why employee retention matters
• Employee retention strategies
· Employee engagement
· Management training
· Skill development and career advancement
· Remote working and employee wellbeing
• Employee retention: on the way to success
Table of contents
1: Employee retention definition
Q. What is employee retention?
Employee retention measures how many employees stay working within their current company in a given time period. (in box)
If you’re looking for an employee retention rate formula, hopefully, this example will help:
A company has 100 people, but an annual employee retention rate of only 60%. Over the course of the year, this company will have lost 40 employees. That’s a lot of people to replace! (in box)
Employee retention: why it matters
Companies put a lot of focus on hiring the right people, but making sure they stick around is just as important. Although some employee turnover is unavoidable, a low staff retention rate can cause significant damage for several reasons – often interrelated. Here are three consequences of a low employee retention rate:
Loss of knowledge and professional connections
When valuable employees leave a company, they take valuable information with them. Although handover processes might attempt to mitigate this, often there’s simply more information than can be successfully transferred.
Long-standing employees have years of expertise and experience to call on when making decisions – this knowledge is invaluable.
In client-focused industries, a lot of decisions are also likely to depend on relationships between employees and external partners. A low employee retention rate means that businesses will need to spend significant time and effort rebuilding these connections.
Loss of money
Studies focusing on employee retention have found that, on average, the cost of losing one employee amounted 33% of their annual salary.
That’s money that could be better spent investing in skill development.
Hiring people is an intense process that can take resources away from where they are needed. A poor employee retention rate requires businesses to frequently hire new employees, who will – however qualified and enthusiastic – require training and supervision before they can really handle things alone.
This takes up the time of current employees and can lead to other work tasks and goals becoming sidelined. Unfortunately, recent additions are more likely to make mistakes or complete inaccurate work that costs the company.
Loss of staff morale
A low employee retention rate can become a circular problem. Frequent departures may make employees more aware of their own dissatisfaction, or insecure about whether their position is secure and valued. They may also have to work extra to train new staff or deal with staff shortages. This makes them more likely to look for new opportunities, exacerbating the situation.
DIAGRAM – a circle, showing circular motion: low employee retention rate (arrow towards) loss of staff morale (arrow towards) low employee engagement (arrow towards) employees leave (arrow towards)
The knock-on impact of these losses is why the importance of employee retention rate shouldn’t be underestimated.
However, businesses experiencing low employee retention rates shouldn’t panic. Read on for employee retention techniques that can help get things back on track and create a loyal workforce.
Employee retention ideas and strategies
Implementing employee retention strategies will increase company retention, which will not only save money, but ensure that staff are happier and more satisfied in their roles.
There are many employee retention theories floating around that may seem confusing, but really the cornerstone is simple: make employees feel valued.
Easier said than done? No, with a proper strategy it’s both achievable and straightforward. Across businesses of all sizes and kinds, focusing on four key areas can rapidly increase employee retention and create a happier workforce in general.
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Why is talent management important?
Talent management is an integral part of every organisation. In recent years there has been a monumental shift in power from employer to employee. Organisations must compete for the best talent. Hiring can be a lengthy and expensive process, so ensuring that you manage your talent from the very beginning, even during the hiring process, is crucial for an organisation to thrive. Employee turnover is also very expensive. By implementing talent development programmes, you can nurture and retain your employees.
What are the key components of talent management?
Employee planning and recruitment – by clearly identifying what your organisational goals are, you can identify what employees you need to get you there.
Talent acquisition, mapping and retention – It is important to look at talent both internally and externally. Retaining your employees and hiring from within is a more cost effective way to establish leadership positions. A good way to build an internal talent pool is to establish a talent management programme within your organisation.
Performance management – To help move an organisation forward, the right employees need to be aligned with the right roles, developing objectives for success and supporting their development.
Learning – Learning is more than just training. Effective learning programmes should include activities that support the organisation’s objectives and culture When an employee sees how their growth impacts the organisation, they acknowledge how valuable their role is.
Career development – This relates to the talent retention component of noticing that hiring from within is not only an option but more often than not, the preferable more cost effective option. Provide your talent with the necessary professional development tools, like coaching, that can advance their career.
Succession planning – What happens when positions become available? Who will fill these roles and what needs to be done to get there? Having a plan in place means that the decisions are already made and there will be no disruptions when the organisation needs to fulfil new roles.
How do you identify high-potential employees?
Do not confuse high performers with high potential. Performance is of course important, but is not the only indicator. It requires solicit management input to establish a list of candidates and then confirm with a multi-trait assessment to ensure the list is accurate. This assessment should be in live with the company values. Intuition and performance are both acceptable but these must be paired with high potential assessment methodologies that can measure desired traits, for example agility, flexibility and drive.
How is talent management measured?
A mixture of both quantitative and qualitative metrics should be measured. Quantitative metrics include: turnover, percentage of high potential talent, percentage of external vs. internal hiring, financial and logistical onboarding costs (both internal and external). Qualitative measures include employee and manager satisfaction, employee engagement, exit interviews and performance review comments.
Behavioural Scientist at CoachHub.io
Rosie is a behavioural scientist at CoachHub, where she applies insights from positive psychology, neuroscience and behavioural science directly into digital coaching programmes and an approach that drives individual and organisational transformation. She works as part of the in-house research and development team, the Coaching Lab, and contributes to the advancement of the science of coaching and behaviour change; in addition to working both internally with in-house researchers and with world-class external academic teams to design and execute groundbreaking studies.
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