Attracting and retaining is one of the biggest issues companies face. The most successfulorganizations recognize the value of their workforce and are constantly looking forstrategies that will help them hold onto top performers.
Today, increasing labor costs and employee turnover are lowering the profits of businesses.If that trend continues, corporate profitability in the U.S. will hit lows not seen sincethe 1980s, according to a 2020 report by The Conference Board.
Employee turnover is a measure of how frequently employees leave a business, and is typicallymeasured on a monthly, quarterly and annual basis. Turnover rates cover voluntary andinvoluntary turnover. In other words, it counts people who left the company to pursue newjobs or educational opportunities, for personal reasons or to retire (voluntary), as well asthose who the company terminated for performance or behavior violations or as part ofbroader layoffs (involuntary).
What qualifies as a healthy turnover rate will vary widely by industry. The overall annualturnover rate in the U.S. varies depending on the source, but most put it at somewherebetween 10% and 20%. Turnover costs the U.S. economy $1 trillion every year, and replacingan individual employee can bring a bill that’s anywhere from one-half to two times theperson’s annual salary, according to Gallup.
What Causes Employee Turnover?
The many studies that examine turnover each year all point to the same causes of employeedeparture, even if the order of them varies. Employees overwhelmingly leave for more moneyand better benefits, to progress in their careers, to gain a better work-life balance andbecause their manager is ineffective.
Many of these shortcomings could be classified under company culture, which can include acompany’s values, career opportunities, compensationand benefits, work-life balance and the effect of senior leadership. Retention canbe predicted by culture, pay and employees remaining in the same role for too long.
Why Is Reducing Employee Turnover Important?
Reducing employee turnover impacts company profitability. Having enough people with the rightskills is obviously crucial to delivering on business plans and objectives. Additionally,finding the right people is getting more challenging (and costly).
Once businesses identify the right candidates, getting them to actually sign on can provecostly and time-consuming. It’s taking longer to hire people, and most organizationshaveincreased pay for salaried roles while half of others have increased starting pay for hourlyroles. These rising costs offer all the more incentive to cut down on turnover.
15 Tips to Reduce Employee Turnover
With all that in mind, what can you do to keep high performers and contributors with yourbusiness? Much employee turnover is preventable, and small changes in career developmentopportunities, work-life balance, manager relationships, compensation and overall wellbeingcan make a big difference.
Hire the right people.
Some of the blame for poor hires falls onrecruiting. Recruiters must be clear about the organization’s culture upfront,telling the candidate not what they think the person wants to hear, but how thecompany actually operates. But a big part of hiring the right person is making surethat recruiting is looking for the right person from the beginning. Less than halfof workers believe that job descriptions reflect actual job responsibilities, andnearly a third have left a job in the first 90 days because it wasn’t whattheyexpected, a report from Jobvite states.
One way many organizations have improved their success rate with new hires is byallowing peers in that person’s role to make the hiring decisions.Organizationsshould also invest time into getting to know the candidate by whatever meansavailable. In-person visits to the office and opportunities to see how the personreacts and interacts with potential co-workers is ideal, but can sometimes beaccomplished via video, as well. If possible, considering making certain rolesremote to increase the pool of available candidates and boost the chances you findthe ideal fit.
Keep up with the market rate and offer competitive salaries andtotalcompensation.
Pay and benefits are key reasons people take jobs andshow up for work every day. It’s also a top reason why professionals changejobs.It’s therefore no surprise that higher pay tops the list of what wouldconvinceworkers to stay, followed by time off and benefits.
Companies should start by offering an appropriate starting salary that will attractqualified and talented candidates. They should also offer regular raises and monitorwhat other companies pay for similar roles, especially when it comes to hard-to-filljobs. Organizations should expect to pay more for those with in-demand skills, andmore are offering bonuses that are tied to project completion. Establishing talent managementprocesses that identify top performers and correcting pay imbalances byconducting racial and gender pay equity analyses can also limit compensation-relatedturnover.
Closely monitor toxic employees.
Toxic co-workers are those who areoverly critical, often blame others, gossip, undermine colleagues and only look outfor themselves. These types of employees can push high achievers out of theorganization — a survey by McKinsey revealed trusting colleagues and leaderscanhave a positive impact on employee engagement, well-being and quality of work withthe company. There is a direct link between relationships and turnover, and the old“one bad apple spoils the bunch” metaphor applies here.
See AlsoFactors Affecting Employees’ Turnover Intention in Construction Companies in Klang, Selangor | KnE Social SciencesEffects of High Employee TurnoverEmployee Turnover: Comparing Rates Across IndustriesSpotting toxic employees can be tough, but it’s crucial. How do you find them?Lookfor the traits described above and then initiate conversations with those employeesto see if it’s possible to change their behavior. Check in with other membersofthat person’s team to see if they’re encountering issues with theirtoxic colleagueso you can address the problem before it’s too late.
Reward and recognize employees.
This is an easy turnover reductionstrategy to tackle. Simple “thank yous” and notes of appreciation— either spoken orwritten — for the work employees put in every day can go a long way. Givingstaffmembers new opportunities is another great way to recognize them.
An employee’s manager has an outsized impact here. Workers whosemanager’s feedbackleft them with positive feelings are significantly more likely to be engaged, andonly a small minority of that group are actively looking for a new job.
But feedback from colleagues is equally impactful. Seventy-five percent of employeessay that receiving recognition makes them want to stay at their current organizationlonger(opens in a new tab). It’snot hard to see why peer-to-peer recognition programs are sosuccessful, particularly when they leverage technology.
Offer flexibility.
Employees are increasingly concerned with jobflexibility, so giving them more latitude here is another way to boost retention.According to online job board Flexjobs, about 30% of workers reported leaving a jobbecause it did not offer flexible work options, and another 80% said they would bemore loyal to their company if they had flexible work options.
Flexible work isn’t only telework or remote work. It can include flextime(whereemployees are required to work a standard number of hours, but can choose when thoseare), a compressed workweek, part-time schedules or a job-share where workers rotatedays working from the office. Although effectively managing remoteworkers does pose its own challenges, leaders should explore whether any ofthese options might be effective for their organization.
Prioritize work-life balance.
Work-life balance is a struggle formany employees and can lead to burnout that leaves them looking for another role.More than half of workers say employers encourage them to work on the weekends orafter hours, and 30% have found themselves working on a project past midnight, perJobvite. That trend is more pronounced for older workers, those who are married andthose who have children.
Flexible scheduling and remote work are two ways employers are trying to help workersachieve better work-life balance, which can increase retention. The number ofworkers who said they left a job because of the commute has increased by 400% overthe last decade according to the Work Institute, something remote work can helpaddress. Giving employees time off, and respecting that time off, is also crucial.
Key to ensuring work-life balance becomes integrated in the company’s cultureismaking it clear that everyone can take advantage of policies meant to keep employeeshappy — and feel comfortable doing so. Without that, well-meaning efforts riskbreeding resentment among those who don’t take advantage of these policies andfeelings of guilt and inadequacy among those who do. To avoid this issue, topleaders should stress that work-life balance is a company-wide priority.
Pay attention to employee engagement.
It’s critical to always keepan eye on employee engagement, because higher employee engagement translates tolower turnover rates. Many of the efforts businesses launched to improve engagementfocused on meeting their social and emotional needs. They manifested themselves in anumber of different ways — interesting physical spaces, free food, annualcompanytrips and more. But those things have failed to move the engagement needle much.Engagement is influenced by a number of things, but a big factor is the relationshipthe employee has with his or her manager, which Gallup says accounts for 70% of thevariance in employee engagement.
Not all companies operate in industries that inspire easily inspire a heartfeltconnection to the work. But those businesses can still discover and cultivateindividual employee motivations to find out how the organization can best leverageits employees to accomplish its goals. Employee engagement surveys and focus groupsare excellent places to start — providing that management evaluates theresults andactually acts upon them.
Define and develop corporate culture.
Corporate culture can meanmany things, but it generally refers to the shared attitudes and beliefs that definea workplace and affect the experience of employees. Culture plays a central role inhow much employees enjoy their job. And if you consider that the Society for HumanResource Management reports that nearly one-quarter of people dread going into work(opens in a new tab), you begin tounderstand the importance of culture.
Culture is more important to retaining certain groups of employees — nearlyhalf ofpeople with advanced degrees and those with children cited culture as very importantin the Jobvite report. You can’t change or strengthen a culture without firstidentifying what type of culture the company has. There are lots of tools andconsultancies that can help with this. One of them is the University ofMichigan’sOrganizational Culture Assessment Instrument (OCAI)(opens in a new tab), whichbreaks culture into create, compete, collaborate and control. The most importantthing is being honest about and communicating openly about the organization’sculture as it is — not as it aspires to be — with new hires and currentemployees.
Standardize performance reviews.
Another not-so-surprising turnoverpredictor are unproductive or infrequent performance reviews. The traditionalperformance review — a static, annual or biannual event consisting ofreviewing anExcel spreadsheet with static goals — doesn’t exactly inspire. In fact,it may domore harm than good. About 80% of employees who felt criticized or unmotivated aftera performance review started to look for a new job, according to Gallup.
Making the performance review a collaborative, dynamic and continuous process thatworks to improve the relationship between an employee and a manager, rather than putup walls between them, is the way to go. For instance, functionality in human capital management (HCM)or human resources management system(HRMS) software reimagines the performance review as a process that alignsthe manager and employee on goal setting, offers an opportunity to reflect on theprogress and provides rewards in response to high performance. Tying goals toactionable metrics and viewing them through performance management dashboards helpsmanagers easily automatically updates goals in real time.
Allow opportunities for development and continuing education.
Employees care about training that can strengthen existing skills or build new ones.People looking for jobs in the U.S. said they were willing to forgo up to 12% oftheir salary in exchange for more training opportunities and flexibility, per thePwC survey.
Think creatively when it comes to training. Traditional daylong classroom ortravel-intensive training sessions may not be the best use of a staff member’stimeor the type of engagement they’re seeking. Organizations with outstandingtrainingmake room for it within a person’s “day job” and activelyencourage it. They alsoconstantly try new ways of delivering it (smaller sessions, new media) and measuringits effectiveness.
Don’t overlook the value in training existing workers for entirely new roles.Findingpeople with the right skills for today’s digital economy is a pressing concernfororganizations. This applies not only to jobs that will be eliminated or at leastchanged by automation, but making sure all employees have practical knowledge ofsystems and can use them to innovate. To that end, organizations are focused onupskilling, with half of CEOs telling PwC that retraining and upskilling were thebest options for closing skills gaps. Upskilling programs serve two ends: theyprovide the company with the skills it needs to meet evolving business needs whilemore deeply engaging employees in their work, which drives retention.
A concern that surfaces again here among CEOs is holding onto upskilled employees.Organizations that clearly map upskilling to defined job roles within theorganization and make it simple for workers to find internal positions that could bea fit for people with particular skills can ease this concern.
Develop career paths and opportunities to grow.
One of the majorreasons people leave companies is lack of career growth. LinkedIn reports thatemployees stay 41% longer at companies focused on hiring internally compared tothose that don’t make it a priority. More companies are looking inward, withrolechanges via promotion, transfer or a lateral move increasing by 10% over the lastfive years, per LinkedIn.
Internal recruiting must be standardized and free of fear from employees thatthey’llbe penalized for seeking roles on other teams. One of the major barriers to internalrecruiting is that managers don’t want to let go of good talent. Organizationsthatencourage cross-functional projects, identify skills of existing employees andconnect upskilling to internal opportunities have found these strategies help withinternal recruiting and can convince workers to stick around.
Don’t forget soft skills.
Creativity and the ability to problemsolve are crucial skills for just about any employee. Companies should focus onfinding candidates that possess creativity, persuasion, adaptability and emotionalintelligence.
Certain companies excel at this. Trader Joe’s director of recruitment anddevelopmentsaid on one of the company’s “Inside Trader Joes” podcast thattraining at thecompany is not just to create great leaders, it’s to create content andmaterialthat helps people just be the best version of themselves, regardless of their roleor responsibilities.
Be transparent.
Leaders recognize that better communication withemployees is key to increasing retention. Communication could take on forms liketown halls, more frequent one-on-one meetings between managers and their teammembers and employee engagement surveys. An HBR study showed that senior leadershipcontinually updating and communicatingthe business’s strategy(opens in a newtab) is an impactful driver of employee engagement andcan boost performance.
Some organizations go all-in on transparency, inviting, encouraging and lending toolsto facilitate honest, critical assessment of anyone by anyone regardless of title.True transparency requires that people say what they really think and believes in ameritocracy. Employees are more invested in a company when they feel like they havea voice and have a real understanding of what’s going on with the business.
Focus on onboarding.
Onboarding is often a new employee’s firstintroduction to the culture of an organization. It’s tough to recover from abadonboarding experience. Employees who have negative new hire onboardingexperiences are twice as likely to explore new opportunities early on in theirtenure.
But small improvements in the process have the ability to leave positive firstimpressions that last. Indeed, employees are more likely to stay with the companyfor several years after a good onboarding experience. Better onboarding — andlongeronboarding, in particular — leads to faster time to productivity. The bestonboarding processes don’t park employees in a room for eight hours and callit aday. They pair new employees with mentors and facilitate connections with people indifferent departments. And they continually check in to see how things are going,providing support and resources along the way.
Analyze existing turnover to find issues.
The ability to collect,analyze and act on turnover-related data in real time and compare it tohistorical trends will be essential to finding, developing and retaining your bestemployees. Software can break down turnover numbers by quarter and year, voluntaryvs. involuntary, business unit, department and geography. It can report ontermination root causes, top performer turnover trends and turnover demographics(breaking down turnover by age, ethnicity, gender, etc.) to reveal trends andinsights that can positively influence an organization’s talent managementstrategy.
It’s becoming increasingly important for HR professionals to have data analysisskills so they can evaluate and interpret all this information in a way that canhelp the business. This includes skills-gap analysis and identifying flight risks.
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How Can HR Software Help?
Organizations may choose to implement software with the singular goal of better understandingretention and trying to reduce it. But making a long-term impact on turnover requires acomplete view of talent management processes so HR can optimize the entire employeeexperience, from recruiting to onboarding to performance management and development throughsuccession planning and transitioning.
A cloud-based HR system integrated with finance, CRMand/or project management tools brings all information together to analyze talent trends,track performance to help employees reach key goals and enables them to collaborate withmanagers to complete objectives and gain recognition when they do. This software can supporta skills-gap analysis to develop relevant training programs and identify candidates who maybe a good fit to encourage career development and progression. Organizations can startsmall, such as a tool for peer-to-peer recognition that sits within the same system they usefor their day-to-day work.
It all makes for more engaged employees and an improved employee experience that not onlyfacilitates higher financial and employee performance, but attracts top performers andconvinces them to stay. Referrals from current employees are a key pipeline for new hires,so turnover reduction strategies can both keep existing workers happy and increase thechances of pulling in their talented connections.
Reducing Employee Turnover FAQs
What reduces employee turnover?
Employee turnover can be reduced by implementing a combination of strategies focused onimproving job satisfaction and employee engagement. This includes offering competitivecompensation and benefits, promoting work-life balance, and providing opportunities forprofessional development. Recognizing and rewarding employee achievements, fostering astrong company culture, and ensuring effective communication and management practices alsoplay a key role. Creating a supportive and inclusive work environment where employees feelvalued and have clear career advancement opportunities can significantly reduce turnover.
What does a decreased employee turnover mean?
Decreased employee turnover signifies a more stable and content workforce. It indicates thatemployees are satisfied with their jobs, feel valued, and are likelier to stay with thecompany long-term. This stability can improve productivity, better team dynamics, and astronger company culture. Lower turnover also reduces the costs and disruptions associatedwith hiring and training new employees, contributing to overall organizational efficiencyand effectiveness.
What factor reduces turnover?
Creating a positive and engaging work environment is one of the most impactful factors inreducing turnover. This encompasses aspects like competitive compensation, recognition ofemployee contributions, opportunities for professional growth, and a supportive managementteam. Ensuring employees feel heard and valued and have a healthy work-life balance alsosignificantly reduces turnover. Essentially, employees are less likely to seek opportunitieselsewhere when they are satisfied and see a future with the company.
