Employee Retention strategy

An employee retention strategy does not exist in isolation. Although it is aimed at attracting a world class workforce, it needs to be coupled with an appropriate corporate culture that, among other things, recognises the value of the individuals.

An employee retention strategy is designed to prevent as much unplanned employee turnover as possible. Some staff turnover is inevitable as people leave organisations for a variety of reasons such as relocating to suit changes in personal circumstances.

A good employee retention strategy will positively impact the bottom line, as the organisation will save time and money on staff development. It is generally less expensive to train and develop current employees than it is to seek, interview, recruit and onboard new hires, who also require time to reach a good performance level.

An effective employee retention strategy is far more than getting people to stay in the organisation, it plays a fundamental role in growing and developing staff, enabling the organisation to achieve its objectives.

The cost of losing employees has been estimated to be between 6 and 9 months’ salary. If the employee is critical, their departure can have an impact on team productivity and employee morale. The impact is even greater if it significantly affects the team dynamic and productivity to the extent that wider adjustments are required.

There is not a universal solution to an employee retention strategy although they all have the same intent, which is to minimise employee turnover.  The components of the strategy must be designed specifically for the organisation as every organisation has a unique workforce.

According to a 2023 LinkedIn Survey by Resume.AO, ConocoPhillips has the highest employee retention rate of all organisations analysed, with an average tenure of 10.6 years. Alongside good employee benefits, they also offer universities scholarships to attract young talent, and challenging and rewarding projects worldwide, which makes them an attractive employer for military veterans looking to transition into secure and interesting work. 

Not everyone can offer benefits that an organisation like Conoco Phillips can. However, in very competitive markets where the search for talent and need to retain good people is crucial, organisations need to address their employee retention strategy more than ever before.

The leadership of an organisation is crucial in retaining talent, especially as markets change and organisations evolve. Key factors at the leadership level, to both attract new talent and retain the existing workforce include:-

By being transparent about the challenges and changes they face and how these will impact the organisation and its employees, the Leadership Team can increase trust and reduce uncertainty.

These days many employees want to understand the purpose of their work. Having a clearly defined purpose, a clear vision and well-articulated strategy for navigating market changes inspires confidence and a sense of individual purpose among employees.

Demonstration and understanding of employees’ concerns and challenges by active listening and appropriate actions go a long way to providing a positive work environment, Employee empowerment.

In all organisations, but especially those with a flat structure, empowering employees to take initiatives and contribute to the organisation’s efforts boosts morale and engagement. One key element is to enable individuals to take personal ownership of their career by providing opportunities for professional development and growth.

Especially during challenging times, showing recognition and appreciation enhances loyalty and commitment to the organisation.

Leaders who demonstrate adaptability, resilience and a positive attitude can inspire their team to do the same and this behaviour sets a tone for the entire organisation. For all leaders, matching their words with behaviour is crucial. Effective leadership during difficult market conditions, when people may consider leaving, strengthens the organisation and builds resilience so the organisation can thrive in a dynamic environment leading to increased employee retention.

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The two fundamental reasons employees leave organisations are to find better opportunities or improved work conditions.  There are several well-known reasons that lead up to employees quitting, the major ones being:- 

A huge part of employee retention is ensuring the organisation can retain the appropriate number of employees, with a suitable skillset. It should be recognised that, at times, organisations may want some people to leave for a variety of reasons, changing market conditions, restructuring, or loss of a key account. Whatever the reason, the decision on who should be retained and who should leave should be aligned with the organisation’s objectives, based on performance and in line with employment legislation.

A well-designed employee retention strategy also allows the organisation to manage underperforming employees out of the business, for this the following should be taken into account: -

It is essential to establish clear and measurable performance metrics to help employees understand what is required of them and to allow a manager to undertake objective assessments regarding performance.

By offering training and professional development opportunities, employees are more likely to stay than go, but for those who can’t achieve a recognised professional standard or want an “easy life” and intend to coast in their careers, they may be better off elsewhere.

A system of frequent and regular (more than once a year) feedback and review where constructive feedback can be provided by the manager will encourage employees to improve and remain focused, while at the same time provide reasons for managing underperformers out of the business.  This links directly with the need for clear performance metrics so feedback can be evidence based and transparent.

These are not always financial, although they can include bonuses, but public recognition or public acknowledgement and promotions also come into the mix. The humble thank you or personal note can be worth far more than a financial bonus in many circumstances.

Employees need to feel valued and supported and work in a culture where they feel comfortable expressing their opinions, challenging others and having their views respected.

Clear processes and procedures can be put in place to measure performance, underperformance can be identified and addressed through additional training with improvement plans, and ultimately, if necessary, a structured exit strategy. Additionally, measuring performance can help identify those exceeding performance so credit can be given.

Understanding why employees leave is critical to continuous improvement.  By conducting exit interviews and using that feedback to improve employee retention strategies provides real value to the organisation.

Considering how these elements can create a strong and tailored employee retention strategy that at all times retains top talent; develops emerging talent while addressing underperformance in a fair and structured way will make your organisation a very attractive place to work.

In today’s business environment, organisations must adapt their workforce structure in response to market forces. The approaches many organisations adopt lead to effective employee retention strategies.

To stay competitive, companies invest in training programmes that will enhance the skills of their existing employees. SFIA is a Framework that can be used to identify an employee’s current skills and then help address the skills gap to prepare the workforce for new technologies and processes to compete more effectively in the future.  Professional certifications also play a key role in providing validation and motivation to employees.

Flexible working arrangements are becoming more critical. Models such as remote working and hybrid working attract and retain talent.  This flexibility increases employee satisfaction and productivity and is likely to grow in importance over the coming years. Although organisations will need to find solutions to the challenge of encouraging creativity and innovation.

To compete, many organisations are reducing layers of management and building project teams to increase agility and speed in decision making. This management structure creates a more collaborative environment and empowers employees, should they want to step up, to take on more responsibility.

Organisations are outsourcing non-core activities and implementing automation for repetitive tasks. This reduces costs and increases efficiency while allowing the permanent workforce to focus on more strategic, value-added activities, although we do need to guard against any reduction in engagement between teams.

Initiatives can lead to a more innovative and adaptable workforce. By actively seeking to create a diverse talent pool, the organisation will benefit from varied perspectives, more creative ideas and greater market competitiveness.

By offering support for things such as mental health, stress management and healthcare shows a commitment to employee wellbeing and is rewarded by increased employee satisfaction employee engagement.

Cross functional teams that can quickly adapt to changes and work on specific projects can help organisations remain responsive to market demands and provide opportunities for professional development, particularly in a flat structured organisation.

Many leading organisations have introduced comprehensive initiatives to retain and develop employees for the future. If you want to retain your key staff and attract people with the skills needed to compete in your market, you should consider some or all of the above strategies.

Designing an employee retention strategy is no different from any other corporate change programme. It involves the following 7 steps: -

1. Define objectives – clearly define what you aim to achieve with your programme, which could include not just reducing turnover but also increasing morale and improving productivity.
2. Develop criteria – this will ensure all employees are aware of the objectives of the programme and might include a focus on teamwork, innovation, customer service excellence, as well as outstanding performance.
3. Define recognition methods – these could include monetary and non-monetary rewards, so it is useful to think of a mix of formal rewards, public acknowledgement and also informal recognition within the organisation.
4. Engage employees – involve employees in the design of the programme by setting up some advisory groups within the business who can provide feedback on the types of recognition they value most and ways of staff members being able to nominate their peers.
5. Communicate the programme – clearly communicate the details of the programme to all employees using traditional channels such as emails, meetings and internal newsletters as well as any interesting approaches more relevant to your organisation.
6. Implement and monitor – launch the programme and monitor its effectiveness by collecting feedback and make adjustments as needed to ensure the programme remains effective and relevant.
7. Celebrate success – by highlighting stories or recognising employees and the impact of their contribution.  This should help maintain enthusiasm and engagement to the programme.

External factors could significantly impact employee retention. Although they are beyond the control of the organisation, consideration should be given to how the organisation could address them. Some key external factors that could impact employee retention are:-

In economic downturns or recessions, it may be necessary to reduce hiring, introduce a redundancy programme, or other cutbacks that will affect job security and employee morale. Conversely a boom economy may increase job opportunities in your organisation and beyond, which could lead to a higher staff turnover as employees seek better opportunities.

Availability of skilled labour and demand for specific roles can increase retention. If there are a limited number of opportunities available in a competitive labour market, skilled employees may leave for better packages if your employee retention strategies are considered inferior.

Technological changes require employees to continually update their skills and if you fail to provide adequate training and development opportunities, employees will probably seek these opportunities elsewhere. If you do have well recognised training and development opportunities, especially support for professional and academic qualifications, they could be magnets for people wanting to join, and remain in, your organisation.

With the increased emphasis on work/life balance and remote working, employees’ expectations have changed. Companies that adapt to these changes and provide interesting work are likely to retain employees and increase their workforce.

Any changes in laws, tax policies and industrial relations can impact employee retention. Stricter labour laws might improve job security while unfavourable tax conditions or labour laws could lead to individuals wanting to leave your organisation.

Understanding the impact of external factors can help the organisation develop more resilient employee retention strategies so they can adapt more readily to changing conditions.

While employee retention strategies can significantly improve job satisfaction and reduce staff turnover, there are limits to how effective they may be.

Measuring the impact of an employee retention programme is essential. Unless the organisation is clear about the benefits it is delivering and how well it is received by the majority of employees, it won’t be able to adjust and refine the programme.  The following key performance indicators should be considered:-

Participation

If you have an employee recognition programme, track the number of employees engaged with it and assess the frequency of how often people are recognised.

Employee feedback

Through regular surveys or focus groups, gauge employee satisfaction with the retention programme.

Retention rates

Monitor staff turnover before and after implementing the programme to help determine its effectiveness.

Performance metrics

Retention programmes can lead to higher improved performance and more engagement, so changes in productivity and quality of work and other performance indicators are important.

Millions of employees from multiple sectors around the world have left their jobs since the pandemic. According to a survey from the Boston Consulting Group of more than 11,000 workers across eight countries (the UK, US, Canada, France, Germany, Australia, Japan, and India), more than a quarter (28%) were planning to leave their job in 2024.

Numerous reports around this so-called ‘Great Resignation’ point to inadequate salaries, limited career development, poor work-life balance, bad health, and unhappiness with management as some of the reasons staff are leaving.

Introducing a well-structured employee retention strategy could stem the flow of talent from your organisation, directly benefitting your bottom line by reducing the following consequences of losing your talented employees:-

1. Reduction in expense:  Replacing employees is expensive and surveys suggest it costs anywhere from 15% to over 200% of an employee’s salary as well as the effort in finding, interviewing, onboarding and training your new employee.
2. Lost knowledge:  When experienced employees leave, their knowledge goes with them.  Few organisations collect institutional knowledge so it’s available for their colleagues / new starters. This tacit knowledge is lost forever and can lead to low productivity and confusion for the people left behind.
3. Reduced productivity: Especially if a position remains unfilled for some time.  Other employees may pick up the slack, but this will have a negative impact on them and overall productivity will fall. It also takes time to bring a new hire up to maximum productivity level and some research suggests it could be between 1 – 2 years before this is achieved.

If you want to continue to compete in the increasingly complex business environment, you will undeniably need a well-considered and adaptable employee engagement strategy.