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It’s hard to predict the exact cost of employee turnover because there are so many intangible and often untracked costs.  However, even if we accept the most conservative figures, the results are staggering. There’s no wonder that companies are looking for Employee Retention Strategies to reduce turnover. We’re going to highlight some of the most proven employee retention techniques, such as recognition programs, that keep staff members happily employed for the long-term, but before we do, it’s important to consider the true cost of replacing talent.

What is Staff Retention?

Business Dictionary’s employee retention definition is, “An effort by a business to maintain a working environment which supports current staff in remaining with the company.” In other words, employee retention is a set of policies that ensure job satisfaction and employee engagement to reduce the costs involved with hiring and training a staff replacement. Successful employee retention strategies benefit both the employee and the brand in many ways, including:

  • Facilitates a positive work environment.
  • Increases morale and makes employees’ job experiences more pleasurable.
  • Builds employee loyalty and trust towards the company.


There are many reasons for employee retention program implementation, but the main reason is that the price of replacing an employee can be tremendous.

How Much Does Turnover Cost a Business?

According to business expert Josh Bersin of Bersin Deloitte, here are the factors that should be included when calculating the ‘REAL’ costs of losing an employee.

  1. Hiring Costs: Advertising, interviewing, screening, hiring, headhunter agency, and others. Estimated to be equal to 25-33% of one year’s salary for senior positions.
  2. Onboarding Costs: The cost of integrating a new employee, as well as training and management time.
  3. Productivity Loss: It may take a new employee one to two years to reach full potential.
  4. Performance Loss: Employees may decrease performance before leaving, and their departure may affect the performance of other employees at the workplace.
  5. Decrease in Morale: Employees who see high turnover tend to disengage and have low morale.
  6. Lost Business: Losses due to errors and poor service from new customer service agents who are less qualified, and don’t have the experience to deal with resolving issues effectively.
  7. Long-Term Training Costs: Training costs invested into the employee over a 2-3 period of employment averages around 10-20%.

There are some other expensive potential costs that are often less considered, such as:

  • Threat of Lawsuit
  • Bad PR from a Disgruntled Employee
  • Potential for Employees to take Clients to New Firm

If your organization tracks these associated costs, you can calculate your price of turnover with real numbers.

However, most are happy to accept the average from studies (such as SHRM) which predict that every time a business replaces a salaried employee, it costs between 6-9 months of that employee’s annual salary. For an employee earning $40,000 a year, that’s $20,000-30,000 in recruiting and training expenses. For higher paid employees, this cost is even greater. In fact, for high-earning employees and executives, the cost is estimated to be up to twice their annual salary.

Research suggests that:

  • At a $60,000 annual salary, the replacement expense increases to $30,000-45,000 (according to Human Resource Management Study).
  • The Centre for American Progress reviewed 30 case studies and they found that it typically costs 20% of an employee’s salary to replace them.

If you find yourself recruiting, the actual amount of lost revenue may vary, but what cannot be denied is that it is much more cost-advantageous to keep employees happy and excited to be employed at your company.

Staff Turnover – Why Employees Leave

These costs should be taken into consideration when you are having conversations around employee training & development, engagement and recognition.  You may think it’s expensive to invest in such things, but the investment is minimal when compared to the price of replacing dissatisfied employees.

In order to come up with effective employee retention strategies, we must first understand why employees leave. The top 13 reasons that employees disengage to find employment elsewhere are:

  1. They don’t like their boss/manager.  If you only get one thing right – make sure it’s your leaders. According to a survey by PayScale, a whopping 87% of employees don’t trust their bosses. Great managers are motivated to lead, and inspired employees are much happier under a manager that they respect and admire. Coaching and feedback are essential for growth and building, and having the right managers in place can make employees more likely to stay with your company.
  2. They do not feel valued or appreciated. An employee who gives their best effort everyday but receives no recognition will likely depart at some point. A study by Office Team suggests that 66% of employees would leave their job if they did not feel appreciated.
  3. Poor relationships. Employees spend a large portion of their day around their peers, managers and executives. Having valuable relationships at their place of work makes their day more enjoyable. It is much easier to be dissatisfied in a place where you have no personal connections to anyone than it is in a place where you have built friendships and positive relationships.
  4. No company vision.  The CEO may know where the company is going but do the employees? Employees crave purpose and pride — they want a sense of how their individual efforts contribute towards the big picture.
  5. Lack of career development opportunities and advancement. Employees stay where they have an opportunity to grow and advance. If your staff feels as though they have reached the ceiling of their potential within the company, they may begin looking elsewhere for new opportunities where they can meet their personal and professional goals.
  6. Disillusionment. Sometimes employees have a negative sense of how they are doing in life compared to their peers in the organization. Anniversaries and milestone birthdays are occasions that can initiate reflection and result in new job searching.
  7. Micro-management. Employees want to be trusted with their job, and given the respect that they can manage their tasks without a manager hanging over their shoulder. A disgruntled employee once said, “If you treat me like I’m a 5-year-old child – I tend to act like one.”
  8. Tired, Burned Out, Overwhelmed. Managers often don’t notice when an employee is burning out, or feeling overworked or stressed. Every employee has a breaking point and when their stress level gets too high, turnover is more likely.
  9. Low company culture. Studies show that employees who rate their company’s culture as “low” are 15% more likely to leave. Qualities of a bad company culture include rudeness, assigning blame, backbiting, playing favorites – old boys club, and resentment.
  10. Lack of equality.  Every employee of the business should be treated with an equal level of respect and recognition. Those who feel like others receive special benefits, although they give an equal amount of effort, are more likely to leave and pursue opportunities where their efforts are better recognized.
  11. Low morale. Engagement and disengagement are infectious. Inspired employees will find it hard to enjoy working in an environment where everyone else is unmotivated, uninspired, or disengaged.
  12. Job did not meet expectations. Employees expect that their job will meet the claims that was made to them during the candidacy and interview period. When jobs do not meet their expectations, employees grow a mistrust for managers, executives, and the brand itself.  
  13. Job misalignment. It is critical to match the right employees to the right job responsibilities. Those who feel like their skills are not a right match for the job may become less confident in their work and overwhelmed with the tasks they are responsible for.

employees-gives-2-thumbs-up.jpgWhat is a Good Employee Retention Rate?

Ideally, it would be great to never lose an employee, but that is never the case. Whether due to retirement or relocation, every business will have some level of turnover. While many studies will suggest that 10-15% is a healthy rate, it also depends on which employees are a part of that percentage. More productive employees for example, are far more valuable than less productive employees. Therefore, losing 10% of your more valued employees each year may be considered “high turnover” while losing 15% of less productive employees may be considered healthy. Realistically, the ideal rate for any company is one that is manageable enough so that performance and engagement of current employees are not negatively impacted.

Employee and Talent Retention Strategies

So what can be done to retain employees in the first place? What are some best practices to help organizations with their retention of staff? If you want to keep your best people, you must think carefully about how you treat them.  The more talented they are, the more choices they will have as to where they want to be employed. The key to long-term retainment of employees is to make them WANT to work for you.

    1. Benchmark your employee turnover and the costs associated. Identify how many employees leave the organization each year and measure the true costs of turnover for your company. This will help you to justify investment costs associated with employee retention strategies.
    2. Don’t assume employees are happy OR engaged. Create and deploy surveys to get to the heart of the matter. Measure the current state of the union and consider exactly what employees want as motivators. Often, there is a vast disconnect between what employers and employees think.  For example, 89% of senior managers say that their organization is good at showing appreciation to workers. However, over 30% of employees gave their firms low marks.
    3. Create a high-feedback environment.  Employees, particularly millennials, want to know how they are doing performance-wise, regularly and in the moment. Consider rewards & recognition platforms designed to align company & employee values to drive desired business results.
    4. Implement formal rewards & recognition programs. Install an integrated platform with recognition, innovation and engagement tracks. Make rewards and recognition more engaging with in-demand incentives and gamification.
    5. Engage your workforce. Engaged employees are emotionally ‘connected’ to the organization. They thrive and strive because they are motivated and inspired, and mostly, because they WANT to. Important levers to drive engagement are:
      • Better management and leadership. With the right leaders in place, a highly engaged workforce is mostly free of obstacles. Although you will still need incentives and purpose, great leaders will be able to implement these elements easily for maximum employee performance.
      • Incentives.  Gamification is a win/win for organizations. Earning bonus incentives such as travel or paid days off will drive satisfaction and performance throughout the organization.
      • Rewards and Recognition Platform. Find a good rewards software platform that creates public recognition opportunities on the “wall of fame”, collaboration and idea sharing, soft skill training, referral programs, and leaderboards. ProformaSI’s software offers the ability to earn points and badges to be redeemed for a variety of gift cards and merchandise through the shopping mall, advance passes to prestigious clubs, and much more. Also, the software’s buzzfeed celebrates milestones and important events, engaging the workforce and driving employee retention.
    6. Purpose.
      • Autonomy – employees have some power to decide, and to choose their work, behavior, and goals.
      • Competence – they have the training and development needed to thrive in their role.
      • Higher purpose –their purpose is linked to bigger picture goals.
    7. Hire an Outside Firm (such as Joberate) to help identify employees who are ‘most likely to leave’ through a variety of intelligence scores. This emerging science could be compared to the way that credit scoring can predict which consumers will fail to repay loans.
    8. Conduct exit interviews. There is a good chance that the information gathered during these interviews are honest, as they come from a place where the employee has “nothing to lose” by telling you their exact thoughts.

Does your organization have an excellent employee engagement program, or could you be doing more to increase employee satisfaction and decrease turnover? Contact ProformaSI today to see how we can help you boost performance and loyalty of your most talented employees!

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