Employees everywhere are looking hard at their options. They’re weighing the costs of making a career change, seeing if it’s feasible, and mustering up the courage to quit. It's become such an epidemic that many business leaders have started to call it by an ominous name: The Great Resignation. According to a report from Microsoft, more than 40% of employees are considering quitting their jobs.1 Why? It’s simple. For many of those folks, they’re staring at a seller’s market where their skills are more in demand than they’ve ever been in their entire careers.
But the flip side of that? Those droves of employees shifting gears on their careers comes at a high cost to the businesses they leave. And for those jilted businesses, seeing employees depart ought to serve as a wake-up call to prioritize employee retention perhaps more than ever before.
Before you implement your employee retention strategies, you need to know the answers to these essential employee retention questions: Who’s most likely to leave? What causes them to exit? When will they leave? Why are they leaving? And how does it affect your business?
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Let's answer those and more to help you reduce your turnover rate and build up your company culture.
Who’s Most Likely to Leave?
Of course, employees leave their jobs at different points in their careers for a variety of reasons. But that doesn’t mean you can’t look at your employees and figure out who’s most likely to look for greener grass.
Surely, certain demographics are more likely to job-hop on their way to what they think is the best fit for them and their careers. However, the key for you is to know your workforce well enough to anticipate their reasons for leaving—and to implement the right strategy to keep them around before it’s too late.
If you don’t know those reasons, a good place to start is to perform stay and exit interviews. Your task is simple: Buy coffee or lunch for a handful of current employees and ask them why the heck they stick around at your company. And do that every six months or so. If your company is too big for that to scale, creating an HR survey containing those questions that goes out on a schedule is a good way to keep a pulse on employee sentiment.
And if an employee is leaving the company, an exit interview can give them a chance to get some things off their chest. They may or may not feel better on their way out. You almost certainly won’t. But you’re definitely going to get a few valuable takeaways.
What Causes Employees to Leave?
The first thing to understand is that there are two types of employee turnover: voluntary and involuntary.
Voluntary turnover is when an employee chooses to leave the company on their own terms. This could look like an employee leaving for a higher-paying job, burnout, a new mother choosing to stay home with her kiddo over returning to work, an employee leaving over differences with leadership, or an employee reaching their time to retire.
Involuntary turnover is when the business chooses to end its relationship with the employee for any reason. Firings, downsizing, layoffs . . . whatever you want to call it, that’s what it is.
The problem is that too many companies think their employee retention strategies should only span from hire to fire, when in reality they ought to stretch from hire to retire. Why? Because by aiming to support the whole person and their whole career, you’re more likely to keep them around longer. You probably won’t hit a target you’re not aiming at, you know? It turns out most people know a good thing when they see it, and most people don’t want to have to make drastic changes to their careers just to get ahead or feel valued.
When and Why Are They Leaving?
There’s no employee turnover calendar you can follow or specific time of year to plan for (unless you have a lot of seasonal employees). So, the best form of planning for turnover is to have a strategy that addresses the typical low points employees encounter—things like dissatisfaction, negative experiences, employees looking for better alternatives and planned changes. Here’s what you should do if . . .
When employees are dissatisfied with their jobs or roles on the team, it can be a slippery slope to turnover. You need to keep the pathways of communication open and seek to understand the root of the issue. If employees don’t feel they can express their frustration in a safe and healthy environment, it can turn into an expensive problem for your business. You can easily create that space by scheduling monthly one-on-one meetings and having your employees fill out weekly reports.
They’ve had a bad experience.
Sometimes employees have negative experiences at work. It’s inevitable. Those experiences can lead them to just up and quit, or they can fester over time and create a potentially worse situation. Your job is to look at your work environment and see what’s causing those negative experiences in the first place. Is it leadership? Role clarity? Crappy culture? Were they passed up for a promotion? If you can figure out the cause, you may have enough time to work on a feasible fix.
They think they’ve found greener grass elsewhere.
This one is pretty simple. If you want to keep your employees around, you’ve got to compensate them well and make sure your benefits package beats the competition’s. And yes, that means you’ve got to offer more than just the basics. It will take some creativity but think of it as preventative maintenance. Ask yourself: How can I continuously be improving our employee compensation and benefits package in a way that will make employees want to stick around? Today’s employees want perks, flexibility and voluntary benefits to go along with the conventional benefits package. They want the businesses they work for to be just as bought into them as people as they are into the businesses they work for.
They already planned to make a change.
It’s fairly common for employees to make plans to quit because of changing family situations. And that makes it difficult to keep those employees when their situations do, in fact, change. But there are ways to address the issue of employees leaving for these types of reasons. One way to counter it is to reward employee tenure with better compensation, e.g., annual pay increases. Another is to offer more generous maternity/paternity leave or boost PTO and sick time to allow for greater flexibility.
Questions your business ought to be asking:
- Are your employees’ roles clear to them? Does a lack of role clarity create frustration?
- How are your leader-employee relationships going?
- Do your employees work well together, or is the team dynamic off?
- How committed to your employees is your company, actually?
How Does Poor Employee Retention Affect the Business?
Anyone with any kind of business sense knows that their company won’t be as successful as it could be if it’s constantly hemorrhaging employees. Not only does turnover cost a lot, but it also puts an unnecessary strain on the remaining employees and can limit their ability to bring in revenue.
The Cost of Employee Turnover
Turnover is expensive. When an employee leaves a company, it can cost between 50–75% (or six to nine months) of their annual salary to replace them.2 And based on median salary data from the Bureau of Labor Statistics, just one median-salaried employee quitting can cost a company more than $38,000.3 How? Recruitment costs, training their replacement, potential lost revenue, the burden put on other employees . . . And obviously, if you end up paying any severance, that makes it even more expensive.
So, yeah. That’s not sustainable when over 40% of employees are currently thinking of quitting.4
The Strain on Remaining Employees
It’s not hard to figure out that when your business is losing employees, the burden of the work they leave behind falls on your remaining employees. And that increases stress and can create frustration. And if it’s MVP types that your company is losing, it can start to sow seeds of doubt among their peers. Employees start asking themselves, “Is there something wrong with leadership? If they are leaving, does that mean I should think about leaving too?” These are things your business can’t afford to have happen. That initial shock of their peers leaving can easily turn into a snowball effect your company can’t afford.
The Effect on Revenue
The simple math is that fewer hands on deck equals less closing power. Poor employee retention strategies can create chronic, revenue-impacting shortages that will continually limit your business’s success. Your employee retention strategy just isn’t something to leave on cruise control. The integrity of your team is directly correlated to the effectiveness of your employee retention strategies.
5 Employee Retention Strategies Your Business Needs Right Now
1. Pay Them What They’re Worth
Too many companies pay their employees below market value and wonder why they can’t keep their people around. You can’t expect employees to feel great about working at your company if you pay them less than they deserve. And if you aren’t competitive with compensation in today’s job market, you’ll put yourself out of business.
2. Make a Regular Habit of Recognition
Nothing is worse than an employee doing all the hard work to produce the results for their leaders, just for leadership to completely gloss over it with no recognition. Employees aren’t just job-doers—they’re people who need to feel appreciated. And let’s be clear: Incorporating more recognition into your employee retention strategy doesn’t necessarily mean putting plaques up on the wall for employee of the month. A lot of times, employees just want some good, old-fashioned genuine appreciation—in private conversation and in front of their peers. And there are countless ways to show it without costing the company a ton of money.
3. Don't Pass Up Talented Internal Employees for External Hires
OK, here’s the thing. Yes, a lot of times there are more experienced and qualified prospects on the outside. But if you don’t even look at the employees you already have to fill positions of need, you’re simply doing it wrong. Your employees need to have an opportunity to grow in their careers at your company if they’re going to stay long term. It’s just common sense. Without a clear path to career growth at your company, they’ll feel like their job is just a step along the way to their ideal landing spot.
4. Do Whatever It Takes to Build Trust
Employees need to feel like they have the trust of their leaders. When they’ve got that leeway to flex their muscles and use their skills and talents, they’ll find more satisfaction in their roles. Simple as that. Now, clearly trust is earned. But the point is that when you trust your employees—and they trust you—they’re going to invest a lot more in your company. And that’s the crux of them sticking around and your company maintaining a healthy culture.
5. Offer Life-Changing Employee Benefits
Sounds like a high bar, right? Actually, it’s not. The days of the status quo employee benefits being enough are over, yet so many companies out there think just offering those conventional benefits will cut it. Here’s some truth: If you want to be competitive when it comes to both recruitment and retention, you have to offer life-changing benefits. Consider adding a benefit like financial wellness, which teaches employees how to budget, get out of debt, save for the future, and retire with confidence. You could also take a more targeted approach to your benefits if you’ve identified certain demographics that leave your company at a higher rate than others. Think about benefits like assistance with childcare, an HSA company match, company-paid-for long-term disability insurance, or even student loan repayment and/or tuition assistance.
Now Is the Time to Act if You Want to Keep Your Employees Around
Employees leaving at record rates may not last forever, but the reasons for them doing so are sure to become the new normal. So, business and benefits leaders need to respond by adjusting their strategies to that new normal if they’re going to stand a chance at keeping their talent in house. And a great first step in light of an employee retention crisis like The Great Resignation is adding a financial wellness benefit to your company’s benefits package.
But why financial wellness first? With so many employees quitting for just $1 an hour more somewhere else, it’s clear that money issues are at the core. The right financial wellness benefit—Ramsey SmartDollar—shows them how to give themselves the raise they want without having to make a huge leap like a job change. And that doesn’t just help them solve their money issues, it makes them less likely to leave your company.