Even before headlines about the Great Resignation started to appear in 2021, experts were talking about a global talent shortage. A few years ago, Korn Ferry predicted a global shortage of 85 million people by 2030. By November 2021, workers across the US were leaving jobs in record numbers; the Bureau of Labor Statistics reported the highest quit rate since it started tracking the number, with 6.3 million people leaving jobs that month.
The talent shortage shows few signs of waning. As recently as November 2022, the United States had approximately 10.5 million job openings, according to the Bureau of Labor Statistics. In February 2020, the month before pandemic restrictions began in the US, the bureau reported approximately 7 million job openings.
With so many jobs open, keeping the employees you have becomes more important than ever before.
Here are six reasons to focus on reducing employee turnover rates through an employee retention strategy.
1. Reduce Costs
According to Gallup, voluntary turnover costs US businesses $1 trillion annually. Replacing an employee can cost up to two times the employee’s annual salary, depending on the function and role of the employee. That figure can include termination costs, recruiting and training expenses, and other measurable expenses in replacing an employee.
But it isn’t just measurable expenses that cost the company when an employee leaves. If high-performing, long-term employees leave the organization, the company loses productivity, institutional knowledge, and even a future candidate for senior leadership. The soft costs of employee turnover are tricky to calculate but can significantly impact the company’s long-term growth.
2. Improve Productivity
Chances are good that many people who leave your organization voluntarily are also high performers and top talent. When those employees quit, someone has to step in and do their jobs until a replacement is hired, impacting productivity across departments or functions. And hiring a replacement may not result in immediate relief; some studies suggest that it can take up to two years for a new employee to be proficient in a role.
3. Create a Better Employee Experience
In some senses, employee retention isn’t enough. People can stay employed for many reasons, including family obligations or lack of local opportunities. In addition, unusually high retention can sometimes indicate a stagnant culture—where employees aren’t learning or advancing in their roles but just showing up and putting in the time.A better approach may be to improve employee loyalty by focusing on engagement and employee experience. When there’s a concerted effort to connect purpose and community to the work at hand, employee morale and satisfaction will improve, and people will stay longer for the right reasons. Employees will feel strongly connected to each other and take pride in the company culture, which will contribute to long-term retention.
4. Improve Customer Experience
A recent study from the Wharton School of Business at the University of Pennsylvania drew a direct link between increased failure rates of cell phones and high turnover on Chinese assembly lines. On the weeks when assembly lines experienced high turnover, failure rates were 2% to 3% higher on average than on low turnover weeks. These product failures result in hundreds of millions of dollars lost to the manufacturer.
When employee retention is high, companies retain knowledge and skills, resulting in better products and services and fewer failures for end users and customers. In addition, when customers can consistently interact with knowledgeable employees who bring a sense of purpose and energy to their roles, customers will likely walk away more satisfied and loyal to the organization.
5. Improve Public Brand
The most successful brands don’t just produce great products and services; they also treat their employees well and give them a reason to promote the brand. When employees are excited and engaged in their roles, they can quickly become public champions of the organization. Excited and engaged employees will tell friends, family, and colleagues about job openings at their organizations and post positive reviews on sites like Glassdoor. Organizations that employ such public champions may see their companies featured in media as the “best place to work,” which can improve brand image.
6. Stabilize Long-term Growth
Employees who stay long-term can quickly become part of an internal talent pool that helps contribute to and stabilize long-term growth. When companies invest in career development for employees at all levels and in every role and function, they will be more likely to create a strong sense of engagement and better retention. A robust internal pool of top talent can help stabilize long-term growth by preserving institutional knowledge and reducing the need to seek talent outside the organization.
Remember, improving employee retention is about more than offering increased pay or benefits. Rather, focus on meeting the human needs every employee has and drive retention by addressing the non-monetary aspects of employment, such as culture, connection, and development. Also, remember that the first 90 days of employment are often key to keeping people for the long term; creating a great onboarding experience with multiple touchpoints could engender loyalty in new employees that will keep them excited about working for your company.
Your employees are your greatest asset, and keeping a solid team of top talent around you can be a hedge against all forms of uncertainty. As you look toward the future and plan to grow, remember to keep focusing on the people you already have. The many benefits of employee retention will help you grow for years to come.
- Do we know how many people we lose to voluntary turnover each year?
- What is one reason employees give for leaving that we could start to address today?
- Do people recommend our company as a place to work? Why or why not?
- What is one aspect of employee experience that we could start focusing on now?