When accounting for the costs (both real costs, such as time taken to select and recruit a replacement, and also opportunity costs, such as lost productivity), the cost of employee turnover to for-profit organizations has been estimated to be up to 150 percent of the employees’ compensation package.
Can you afford that?
The U.S. economy is slowly improving. This is a good thing for companies and job seekers alike, though it’s also positive news for employees – employees who may have felt over worked and under-appreciated during the downturn.
Should you be concerned about retention and loss of employees?
A serious issue for many companies
Though employee engagement and retention should always be a focus for any high performing organization, additional focus should be placed on retention strategies during an economic uptick. When employees see external environmental factors such as the economy improving, and more opportunities available to them, organizations have to work harder than ever before to retain good talent.
Many employees are willing to put up with job dissatisfaction during hard economic times for fear of losing their job and or not being able to find an alternative. Though an economic uptick is not a guaranteed sign that employees will jump ship, it is a contributory factor many consider when making a job change.
Though average employee tenure varies by work type and demographic; however, the days of long term tenure with an organization are not what they used to be. Under stable economic conditions, it’s not uncommon for people to move jobs every few years. Factor in opportunities for new jobs presenting themselves, after years of stagnant wages and often increased workload and minimal recognition, and suddenly employee retention can become a serious issue.
It’s not just a poor economy that can lead to dissatisfied employees counting the days until their next opportunity. Many attributes of organizational culture, as well as leadership and management behaviors, contribute to employee dissatisfaction. Many of these attributes often tend to become enhanced and accepted in times of distress.
However, as the economy improves, employee tolerance for many of these behaviors declines. As opportunities arise for employees to change jobs; these other non economic attributes that play a part in retention need to be reevaluated or addressed.
Factors that drive employees away
Organizational behaviors negatively impacting employee retention:
- Lack of honest and transparent leadership;
- Poor communication top down, bottom up, and lateral;
- Inflexible and un-adaptable strategy;
- Reduction in employee growth opportunities;
- Unachievable performance goals;
- Lack of recognition;
- Reduced or non-timely and relevant job training;
- Minimal appreciation for diversity;
- Non merit based pay;
- Culture of distrust.
I often get told “we can’t afford to keep our employees by offering higher pay and benefits.” Sometimes an increase in salary and benefits is not a feasible solution to employee retention, particularly after several years of tough economic times.
Now sure, will you lose some employees strictly due to salary and monitory benefits, of course. That said, you’d be surprised how understanding employees are willing to be if you show them you value them in other ways. That’s not to say money isn’t a driver for many people, though it certainly isn’t the only one.
Factors that help keep employees in the fold
So when options present themselves for employees to leave, what should you do to ensure you retain them, and the costly institutional knowledge they possess?
Organizational behaviors positively impacting employee retention:
- Increase leadership honesty and transparency;
- Re-evaluate and ramp up organizational communications;
- Revisit your strategy and targets;
- Don’t reduce employee growth opportunities;
- Have realistic performance goals;
- Recognize, recognize, recognize;
- Provide training and learning opportunities;
- Value and respect diversity;
- Have merit-based pay systems;
- Create a culture of trust.
With the economy making a turn for the better, it’s largely up to you whether you make your employees want to stay or go. Do you have employee retention strategies in place?
This was originally published on the Tolero Think Tank blog.