What is an employee retention strategy?
Employee retention refers to your organization’s ability to prevent voluntary and involuntary employee turnover, and an employee retention strategy is a plan businesses develop and implement to reduce employee turnover rates. The employee retention program generally includes company policies and programs that help organizations attract and retain qualified employees.
Although some turnover is inevitable and acceptable rates vary between businesses and industries, an employee retention strategy can help optimize retention and reduce expenses related to hiring and training.
Related: Why Employee Attrition Matters
The importance of an employee retention strategy
High turnover rates can be expensive, inconvenient and harmful to the overall success of a company. High employee turnover forces a company to spend resources to recruit, hire and train new employees, and it can cost up to 33% of an employee’s yearly salary through both direct and indirect costs.
By targeting internal pain points such as workload issues, interpersonal challenges or feeling undervalued, an effective retention strategy can provide numerous benefits. These include:
- Increased employee loyalty
- Reduced hiring, training and staffing costs
- Improved morale and workplace positivity
- Increased productivity
- More skilled workforce
- Better brand reputation
- Enhanced customer experiences
- Improved employee experience
13 Effective Employee Retention Strategies
Consider these employee retention program examples for your organization:
1. Focus on the hiring process
Choosing the right candidate for the position is a key part of employee retention. If an employee isn’t a good fit for their role, they’re more likely to leave your organization regardless of the other retention strategies you use. Focus on the hiring process by creating a job description that clearly describes the expected qualifications, skills and experience for the position as well as your workplace’s environment and culture. By creating a clear impression of what working at your organization looks like, you’re more likely to attract candidates who are a great fit and deter those who aren’t.
2. Offer a competitive salary and benefits
Employees often leave when they don’t feel they’re appropriately compensated. Use Indeed Salary to understand the average salary for the position, and make sure you’re within that range.
Benefits and perks can also help make a compensation package more competitive. Many modern employee benefits relate to enhanced work-life balance and personal wellness, which in turn can help employees feel more motivated to work and loyal to your organization. Employees value benefits such as flexible work arrangements, paid meals, insurance, retirement accounts, cell phone stipends and memberships to gyms or health clubs and will often include them when comparing compensation packages between prospective employers.
3. Invest in your employees’ careers
Employees who feel their employers are invested in their career and professional development are often more likely to be loyal to their organization. In addition to helping employees feel supported and valued, professional development incentives and opportunities allow them to continually hone their skills, progress in their careers and retain a competitive edge. These investments likewise benefit your organization, as you’ll gradually nurture and develop a highly skilled workforce that feels committed and motivated for a future with your business.
4. Train effective leaders
Employees spend much of their time at work interacting with management. If they have a bad experience or don’t feel like they’re receiving clear, supportive or effective guidance, they’re more likely to leave the company. Focus on training management with an emphasis on skills in leadership, communication and teamwork.
Related: How to Manage Employees
5. Encourage a culture of open communication
While problems in an organization can’t always be avoided, the process in which the company responds to them matters the most. When employees can openly communicate with management and discuss their problems or concerns, satisfaction rates tend to increase.
A culture of open communication can also encourage trust among middle and upper-level management. Create a culture of open communication by welcoming employees’ requests and feedback to foster feelings of personal value and belonging.
6. Create clear work expectations
Just as it’s important for employees to have the opportunity to share their concerns, employees also want to know how they’re doing professionally. When employees don’t fully understand their duties or how their performance is measured, employee morale tends to decrease.
Setting clear goals and objectives and regularly discussing progress toward those goals not only motivates employees but also gives them clear expectations and helps them better understand their role. Annual reviews can provide the environment needed to discuss role objectives, progress and overall evaluation.
7. Understand what makes employees leave or stay
Understanding the reason why employees leave is an important part of avoiding turnover. Exit interviews can help you understand the driving factors behind an employee’s decision to leave. Keep track of the most common reasons for leaving, and address reasons that indicate internal issues, such as unsatisfactory compensation or a toxic work environment.
It can also be helpful to consider why your current employees are staying. Continually get feedback from employees about the things they enjoy the most and the things they feel could be improved about the company through strategies such as employee surveys or one-on-one meetings. This can help you understand the company’s culture as a whole.
8. Encourage professional work relationships
Employees who feel more connected with their teams are often more motivated regarding shared goals or objectives. Encourage and develop work relationships among employees through employee outings and events and team-building activities. For example, company-sponsored sports teams or volunteer events can be a great way to encourage a sense of community and collaboration within your company.
9. Emphasize the importance of work-life balance
Employees who feel like the demands of their job are affecting their personal lives are more likely to find alternative employment. Allowing for greater work arrangement flexibility through remote or hybrid work, for example, can improve employee satisfaction rates, and some surveys suggest that 64% of employees would forgo a $30,000 raise if they didn’t have to work in person.
To support work-life balance, consider the following benefits and strategies for employees:
- Childcare assistance
- Remote or hybrid work options
- Regularly reviewing workloads
- Emphasis on productivity rather than hours
- Subsidized commuting costs
- Gym memberships, mental health services and other extended health benefits
10. Provide advancement opportunities
An employee won’t stick around for long if they have no room for advancement. Some people might be content in an entry-level position forever, but most people are eager to progress in their careers and to access more rewarding challenges, opportunities and compensation.
Focus on hiring from within when you have a new position. Work with your employees on a career path that lets them pursue new opportunities with your company. Knowing these opportunities are available motivates your employees to work harder and stick around longer.
11. Bring your values to life
Research shows that your organization’s culture and values are accountable for about 21.6% of employee satisfaction in comparison to other factors, and this number only goes up for higher incomes. It’s clear that employees are increasingly prioritizing employers who share their values. To attract and retain well-aligned employees, demonstrate your company’s values through the work you do.
Depending on your organization, that could translate to a number of initiatives. For example, you may take efforts to reduce your carbon footprint, provide employment and education opportunities to marginalized groups or sponsor local charity events.
12. Create a mentor program
Building a mentor program or buddy system into your onboarding process helps employees learn more about the organization and how they fit and provides a go-to person for support and guidance.
Mentor programs don’t have to be exclusively for new employees. Your existing employees might want a mentor if they’re trying to advance, switch to a new department or grow within their role. Having a mentor in a higher position helps the employee understand how to get there.
13. Recognize achievements and milestones
Compensation is great, but employees who never receive recognition for their work and accomplishments may feel unfulfilled and frustrated. Knowing that management sees their efforts can motivate employees to work harder and stay with the company.
Speak up when you see an employee doing something worthy of recognition. Sharing recognition with the team at meetings or via email gives the employee wider appreciation. Having a plan to celebrate birthdays, work anniversaries and other milestones can also improve morale and encourage employees to stay.
FAQs about employee retention strategies
What are red flags for employee retention?
Certain behaviors may suggest that employees are more likely to leave your organization. Watch for these red flags:
- Unmotivated work attitude
- Frequent absences or lateness
- Drop in quality of work
- Overwhelmed or burnt-out employees
- Below-median compensation
Who is responsible for employee retention strategies?
In general, HR is responsible for developing and creating an implementation plan for policies that drive employee retention. Other parties, such as coworkers or clients, can also affect retention but aren’t responsible for it.