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  1. ❓ What is employee retention?
  2. ❗️Why should you care about it?
  3. 🚶 Top 5 reasons why people leave
  4. 💜 7 Main drivers of employee retention
  5. 📈 What does employee retention strategy mean?
  6. 🛠 How to build an employee retention strategy in 5 steps
  7. 📝 Expert-backed tips for your employee retention strategy
  8. ➡️ Building an employee retention strategy that works

Employee Retention Strategy 101 (+ Expert Tips From L&D Professionals)

Zuletzt aktualisiert:
22.2.2023
Lesezeit:
17 minutes
Last updated:
February 22, 2023
Time to read:
17 minutes
Learn how to increase employee retention with this strategy guide including examples to get started. Read now.

The Great Resignation is here.

The colossal wave of resignations following the pandemic, dubbed as “The Great Resignation” by economists, is in full swing. 4 million workers left their job in April 2021. 

95% of workers are considering changing jobs and 92% are willing to switch industries for the right role. 
And the mass exodus is not limited to retail or service industries. It is happening at all levels of work. 

MarketerHire, a digital marketing talent platform, reached out to their 20,000+ newsletter subscribers with a survey asking two questions:

  • “Does marketing have a wave of resignations coming?”
  • “Are you personally planning to quit your job?”

78% of respondents said yes to the first one and 48% responded that they were planning to quit. 

Due to this, employee retention rates have plummeted. It hit a record low in March 2020 and continues to fall. 

But why? 

When you look at the reasons listed down by unhappy employees across several reports, some common themes begin to emerge. 

A lack of flexibility, toxic work culture, and most importantly - a severe lack of growth opportunities. 

Now you may think, “Don’t people come and go?” Yes, but here’s the thing: Replacing an employee costs about 33% of their annual salary. Some even report that it costs more than 200% of their annual salary. 

Unsurprisingly, 87% of HR leaders consider improved retention a critical priority for the next five years. 

Before we delve into how to create a great employee retention strategy, here’s a quick rundown of the fundamentals. 

What is employee retention? 

Employee retention is the ability of an organization to retain its best employees and reduce turnover. It can be expressed as a statistic - the percentage of employees that remain in a company over a fixed time period. 

Here’s a formula you can use:

Employee Retention Rate: (Total number of employees - Total number of employees that left/Total number of employees)*100

Employee retention rate: Take the total number of employees, subtract all that left and divide this number by the total number of employees. Multiply it with 100 to receive a result in %.

Why should you care about employee retention?

10 benefits of employee retention. Starting from cost reduction until improved employee satisfaction

Aside from reduced company costs, there are two other reasons why you should care about employee retention - sustained productivity and reduced training time. 

Loyal employees that have been with the company for a while connect with the larger mission and know how to execute tasks effectively. It takes time to bring a new hire up to speed which can cause the overall productivity to dip. 

‍
The ultimate goal of employee retention is to build employee loyalty. But before we get into that, we need to understand what causes employees to leave.

Top 5 evidence based reasons why employees leave 

The pandemic may have exacerbated employee turnover issues but these problems existed well before the pandemic.

Here are the top 5 reasons employees quit: 

  1. A lack of recognition
  2. A lack of appreciation
  3. Getting burnt out 
  4. A lack of flexibility
  5. A lack of career growth

Let’s explore these further.

1. A lack of recognition

Recognition or positive feedback makes an employee feel valued. 

But why do we crave it so much? 

A study from the University of Washington showed that the ratio of positive to negative feedback at work is 1:10. This means that for every positive feedback employees receive, they receive 10x negative feedback.
The same study also showed that people that receive positive feedback are 5x more engaged and productive. 

You may want to flex that recognition muscle and create a culture of giving employees a well-deserved shout-out. But this doesn’t mean you focus more on employees that seem disgruntled at work.

High-performing employees are often neglected since their productivity levels are off the charts and the operating assumption made is that they’re already motivated. 

But 2 in 3 employees say they would quit their job if they didn’t feel valued. 

2. A lack of appreciation

Recognition and appreciation often get clubbed together but there is a thin line between the two. As aforementioned, recognition is acknowledging your employees’ effort through a valuable feedback giving process. On the parallel side, appreciation is acknowledging your employee’s inherent value. 

Appreciating your employee’s talent or the skills they bring to a project can greatly boost their morale. Glassdoor’s Employee Appreciation Survey showed that 53% of employees would stay longer at their company if they felt more appreciated.

3. Getting burnt out 

The popular narrative is “Do what you love and work will feel like play.” But the truth is employees can feel burnt out even if they love their job. Burnout can manifest in different ways — employees may no longer feel engaged, they leave tasks unfinished, their mental and physical exhaustion takes over, or they start skipping work consistently.

This pandemic saw a gradual built in burnout amongst employees. According to this Forbes article, fear of being laid off spurred a high level of engagement from employees at the beginning. But as time passed, their emotional well-being and involvement in an organisation took a hit due to toxic policies. 

4. Absence of flexible work environments

Flexible work isn’t the future; it’s the present. According to Gallup’s research, 37% of workers would switch jobs if that meant being able to work remotely at least for some time. 

On the other hand, a survey by LaSalle Network of more than 350 CEOs and finance leaders revealed that 70% plan on having employees back in office by fall of 2021. When such decisions are made without understanding employees’ requirements, many consider leaving their jobs for a better work-life balance.

5. A lack of career growth

People don’t quit jobs, as the saying goes, they quit their boss. It is the responsibility of managers to design jobs that are too good to leave. This can be done by creating opportunities where employees can play to their strengths. Ask questions like: What kind of projects motivate them? Can you create new roles that will help unlock their maximum potential? Set up your managers to guide your employees through their career path. 

what motivates employees to join a new organisation

Let’s look at Global Talent Monitor’s research. Their survey revealed a strong correlation between the lack of career development and attrition. 40% of employees cited ‘dissatisfaction about the lack of future opportunities’ as the top reason to leave their job. 

Other reasons why employees quit are: 

  • Overlooking mental-health issues at work
  • Inefficient managers
  • Toxic work culture
  • Lack of engagement
  • Lack of clarity on company’s vision

7 Main drivers of employee retention you need to know

7 main drivers of employee retention: What people value most
Source: HBR & SAP

The process of retaining your employees begins while they’re still working at your organisation, and not when they’ve already put in their papers. Opportunities come easy to high-performing employees, and promising cushy perks and paychecks isn’t an enough motivator for them to continue working at your organisation. Let’s uncover some reasons that boost employee retention.

1. Flexible work environment

Working from the office doesn’t always guarantee efficiency. It’s important to understand where your employees can perform at their best, and then create work models surrounding it. Sometimes, this means designing a hybrid work model where your employees get the flexibility to work at their own terms without letting it affect their performance. 

A flexible work environment can take many forms — from choosing to work part-time to working in an entirely remote set up. Job sharing is a classic example of a hybrid work model where two employees are hired to share the responsibilities of one full-time position, with prorated salary and paid time off. This can make hybrid work schedules a necessity.

2. Career development opportunities

Employees bring valuable skills to your organisation, and it is your responsibility to create opportunities that will help develop them. Find areas where your employees could benefit from your guidance — from improving their communication skills to offering role-specific training programs. 

It is a known fact that companies that run L&D programs enjoy higher employee engagement rates. 55% of employees are likely to switch jobs if they feel their employer fails to give them opportunities to flourish.

3. Good leadership

There’s a reason “People don’t leave bad jobs, they leave bad bosses” has become a cliche. A Gallup poll of over 1 million people found that 75% of employees leave because of a bad manager or an immediate supervisor. This, of course, related to who you hire and promote. To minimize the unwanted long-term effect of hiring, it's never hurt to assess the range of skills of the candidate.

Bridgette Hyacinth, a bestselling author and an International Keynote Speaker on Leadership, Management and HR outlined the 4 types of bad managers that cause people to quit. 

But how much of an effect can good leadership have? 

According to Gallup, managers are responsible for 70% of variance in employee engagement. Good management can positively influence that outcome.

4. Positive work culture

Before we delve into what constitutes a good work culture, here are 5 signs of toxic work culture to look out for: 

  • Low employee morale
  • Fear of failure
  • Constant confusion and dysfunction
  • Workplace bullying
  • Cliques and groups

A positive work culture can flip the script. In fact, as counterintuitive as this may sound, creating a culture of error may work in your favor. Error culture means acknowledging mistakes and learning from them. This enables employees to take more risks and enjoy psychological safety that is missing in toxic workplaces.

Not only does a good work culture help with employee retention but it can also help improve the number of active candidates. 47% of job seekers evaluate company culture before joining. 

5. Employee benefits

Beyond the traditional benefits and perks, employees seek benefits at work, lifestyle benefits and particularly the coveted work-life balance. 

Arguably, work-life balance should be a part of company culture but this is now being offered as an additional benefit. 

According to a study by Comparably, ⅓ of workers say that work-life balance is the most important of all benefits.

Some tech giants like Google take employee benefits a step further. They offer baby bonding bucks, fertility assistance, on-site massages and travel assurance. 

6. Structured onboarding

According to SHRM, 69% of employees are likely to stay with a company for 3 years if they experience good onboarding. Research from Glassdoor also suggests that onboarding can boost retention rates to rise to 82% and improve productivity by over 70%.

But a lot of companies struggle with replicating the experience for remote employees. If you’re in the same boat, check out our article - this is the only remote employee checklist you will ever need. 

7. Resilience training

Mental health issues can stem from work due to increased overload, workplace bullying, and financial insecurity.

Experts recommend treating employees as people not robots. Emphasize on their well-being, offer in-house counselling and introduce resilience training to help your employees cope with unprecedented situations.    

Put all of this together and that serves as a foundation for your employee retention strategy.

What does employee retention strategy mean?

Photo of a person attracting little figures with a magnet. Symbolism for the action of attracting employees.
Source

The collective policies a company follows to reduce attrition and retain employees is termed as an employee retention strategy.

Some companies have a retention specialist to spearhead the program but retention is everyone’s job. Because while having a bad manager can drive someone to quit, they can be equally motivated to leave due to a co-worker or their team. 

How to build an employee retention strategy in 5 steps (+Expert tips)

While each company is unique, there are some common patterns that hold true for most.

Employees tend to leave in waves. What’s experienced by one person is usually experienced by others on the team and one person’s departure acts as a wake-up call. 

Typically in a timeline unaffected by a pandemic, employees tend to leave after the 1 year mark because a work anniversary or an important milestone comes up that causes them to question whether they are happy or not.

But you need to examine why your employees leave. There is a mismatch between what employees want and what employers think employees want:

The difference between what employees say they want - and what their employers think they do. "Full appreciation for work done" is #1 for employees while their organizations list this as priority 8.

STEP 1: Figure out why employees leave

Ask them directly. If you want to know why they’re quitting, make sure you ask them the reason in the exit interview or even before that.

Reflect on other resignations. What drove them to quit?

Get employee feedback. In a large organization, it can be hard to gauge what caused a shift in their behavior. You’re better off asking people that closely worked with the departing employee. 

Keep tabs on what employees after they quit. Not in a Big Brother way but just to find out what they do next. If they start working for your competitor, then it’s possible that they didn’t feel valued. 

STEP 2: Measure your turnover rate

You can measure your monthly, annual or new hire turnover rate using the appropriate formulas.

How to calculate turnover rate for your employee retention strategy: Take the employees that left and divide it by the average total number of employees during that time. Multiply by 100.
Source

Compare it to previous time periods and industry benchmarks to understand where you stand. Nobscot has an app, EE Turnover Tracker to give you the industry data.

STEP 3: Measure your retention rate

You can use the formula at the beginning of this article or use this free Google Sheets template by Built In.

Again, it’s vital to know where you stand and compare it to internal and industry standards. 

STEP 4: Analyze employee sentiment

Employee sentiment analysis using NLP and AI can help you automatically analyze employee feedback to quantify the employee experience. 

Now you don’t have to neccesarily take the high tech approach. You can also stick to regular feedback surveys that don’t ask leading questions and analyze it manually. 

STEP 5: Create a strategy that address turnover issues + drives retention

By now, you already know what causes employees to leave and what kind of motivators make them feel valued. Design your strategy around that. Communicate this to top leadership specialists, HR leaders and managers. 

8 Expert-backed tips for your employee retention strategy you can try

If you’re looking for some guidance to create your strategy, stick around. 

We spoke to over 20 L&D professionals, business owners and HR leaders and found out what they prioritize, strategies they’ve seen implemented and results. 

But first, some stats: 

Most successful employee retention strategies: Positive work environment, management, and challenging work are top - before salary
Source

#1. Introduce a hybrid work model

Martijn Vollmuller, Director of People and Culture at Epos Now adopted a hybrid work model and this is why: “Since the pandemic, I’ve found that a lot of the talent we attract and retain are very interested in flexible work hours and this has been a huge factor to why they’ve decided to work for us.”

The result? They received great feedback from the team on their ability to skip time-consuming daily commutes, save costs working from and have a more flexible schedule. 

Twitter made headlines when it announced that employees could work from home forever. Several others followed suit. Spotify when announcing its work from anywhere policy made a very compelling argument - “Work isn’t something you come to the office for, it’s something you do”
LinkedIn also announced the move to a hybrid model recently offering their employees a flexible work environment. 

#2. Offer short-term and long-term benefits

benefits most valued by job seekers

Joe Wilson, Senior Employment Advisor at MintResume, a resume and careers website proposes offering short-term perks like most companies do but also take care of employee retirement plans. He says, “You can offer attractive perks and benefits like health insurance, birthday leaves, performance-based leaves, parking privileges, etc. Other incentives can come in the form of cash, gift cards or in kind (grocery packages). Ultimately, employees will be more loyal to a company if they know that the company can take care of their long term goals.”

Salesforce offers employees special wellness, travel and education programs and also cover the cost of tuition for employees that enroll in university alongside work. 

#3. Create a fair compensation system

Founder of SAS Institute, James Goodnight, said, “Every night 95% of my company's assets leave in their cars to go home. My job is to create a work environment that makes all these people want to come back the next morning.”

One of the things he advocates for is to create a fair wage system. Arguably, the most famous CEO that has put this into action is Dan Price, CEO of Gravity Payments. He took a paycut to raise the minimum wage to $70,000 for all employees. 

LinkedIn post by the CEO of gravity payments asking for organizations to pay their interns.

Daniela Sawyer, Founder and Business Development Strategist of FindPeopleFast.net, shared their top retention strategy.
“We reward the best performing employees in cash, gifts & other packages. We also do it regularly to allow all to get the chance to get rewarded for their performance. We use the employee of the month, quarter, half-year & annual basis with the respective relevant reward weightage.”

#4. Help employees advance in their careers

Unanimously, employee growth and development is a top priority for all the L&D professionals that we spoke to. 

Harry Morton, Founder of Lower Street, has a fully remote team and takes employee development quite seriously.

“Designing in-house training programs and encouraging their constant learning has helped improved our employee retention rates for a simple reason - every employee wants great opportunities to advance their professional career.”

Of course, designing training programs require you to invest a lot of time and money. You can automate the process by using one of Zavvy’s onboarding solutions.

Harry also pointed out helping employees upskill is also beneficial when you want to fill other job roles within the company. It is truly a win-win. 

Katherine Brown, Founder of Spyic, a company engaged in parental control and remote monitoring programs, agrees. 

“You may find that employees are quitting because of changes in technology, the market, or changes in the way their position is structured, for example. In that case, a new learning program could be able to keep them happy enough to stay.”

#5. Create a collaborative culture

Jase Rodley, Founder of DialedLabs, has seen this interesting employee retention strategy work first-hand.

“Balance your team’s workload and create a culture that supports collaboration. To take pressure off the team, we encourage them to collaborate and play to each other’s strengths ensuring that everyone has an equal chance to contribute.“

The first step in creating this work culture requires an open line of communication.

Here’ s what Cody Crawford, Co-Founder of Low-Offset has to say: “Talk and listen very carefully to employees on a daily basis. Happy employees will stay if they feel a part of something - belonging, important and heard. Make sure they have the best of the best in terms of tools and working conditions.”

#6. Optimize the on-boarding process

Jack Miles, Owner, Sarasota Mold Pros, believes that the onboarding process must be optimized and have the following goals:  

  • Establish a positive first impression
  • Establish clear expectations for their work and future at the company
  • Describe what to expect the first week
  • Help new hires build relationships with coworkers and colleagues
  • New hires should have structured opportunities to provide feedback on their job, company processes, and culture
  • Plan for their long-term future and development at the company 

#7. Constant employee feedback

Sam Shepler, a filmmaker turned entrepreneur and the CEO of TestimonialHero has implemented this vital strategy with great success.

“Taking the time to regularly tell your employees what they are doing well and the things they can improve has shown to be highly beneficial when it comes to employee retention. Employees will know that their opinion and work matter; they'll feel like a valuable asset for the company (which they indeed are), and their engagement will skyrocket. 

The best of all is that you won't be spending any money on this; you would only need time and effort to make the feedback sessions successful.”

Michael Hamelburger, CEO of Sales Therapy, reaffirms the need for reviews and feedback.

“Remote performance reviews facilitate a culture of open communication between the employee and the management. It encourages discussion and helps establish the importance of setting goals. In this note, a performance review should be able to inspire employees to raise their productivity and improve their outlook instead of discouraging them. By following a real-time feedback session, we've tremendously helped them adjust under the "new normal" setting.” 

#8. Enhance the employee experience

Joel at atlasGO, a company that brings people together around impact and wellness, believes employee engagement is key to enhancing the employee experience.

“Employee engagement ensures everyone's well connected in the work environment, and it increases the well-being of your employees, showing that you care about them. These can be as easy as simple team-building exercises that can help with workplace productivity and stress, include setting team goals and hosting out-of-office activities.”

Building an employee retention strategy that works

Reducing employee pains and addressing changing employee needs appear to be the key to building an employee retention strategy. 

It can be hard to match compensation and perks when you’re an early-stage company. 

But, remember compensation is not a significant factor in employee turnover. 

Overview of the strategies with the biggest impact on employee retention. Number 1: Frequent recognition

A significant differentiator is investing in continuous employee growth. And you don’t have to do it all by yourself.

Check out Zavvy's solutions to help you reduce onboarding friction, transition to hybrid work seamlessly, and improve employee well-being.

Ready to save thousands of dollars in employee attrition? Grab your FREE strategy session with our learning consultant. 

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Sneh Ratna Choudhary
Sneh Ratna Choudhary

Sneh is an engineer turned content marketer and loves tech startups that get marketing. She is a Content Marketing Manager at Animalz, moonlights as a content marketer and strategist, and hosts a podcast - Bet On People. When she’s not online, she can be found reading books, petting her dogs, or vibing to music.

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