It's only February and "employee retention" and "employee engagement" are already emerging as top HR buzzwords of 2018. In this post I'll explore ten data-backed reasons why employee retention must be at the top of your priority list this year.
1. The Real Cost of Employee Turnover
A indicates it can cost up to 20% annual salary to replace a mid-level employee. That means replacing a manager making $40,000 would cost your business $8,000! And these figures increase substantially for high-level positions. CAP estimates the cost to replace an executive level employee to be 213% of annual salary. This translates to $213,000 in expenses to replace an executive making $100,000.
Beyond these alarming stats, there are Some indirect costs of employee turnover include:
- Onboarding and training a new employee
- Lost productivity
- Negative employee morale
Proactive investments in employee retention can save your organization the significant financial burden that comes along with turnover.
2. Time Value of Employees
It's important to the longer they're part of your team, the more value they provide. As employees become increasingly familiar with the systems, products, processes, and teammates at your organization, they'll drive more value. The figure below demonstrates this phenomenon.
Figure 1: Economic Value of an Employee to the Organization over Time (C) Bersin by Deloitte
If you have to replace a top performer, it could take their replacement years to scale up to the same level of productivity. When employees turnover, you're losing the value from all the time, money, and other resources you've invested in them.
3. It's a Job-Seeker's Market
For companies with high turnover, replacing employees has become increasingly difficult due to jon market conditions. Extremely low unemployment rates () has a created a "job seeker's market". In a job seeker's market, attracting and hiring talent becomes more difficult because candidates hold most of the power throughout the search and negotiation processes. In this job market, employee retention should be a top priority as replacing turned over employees will be incredibly costly and time-consuming.
4. Increasing Turnover Rates
The Burea of Labor Statistics shows over the past four years. As this trend continues, employers need to be more vigilant of turnover. One cause for increased turnover is the larger presence of Gen Y and Gen Z in the workforce. On average, and 21% of Millennials have changed jobs in the past year. In today's workplace, employee retention efforts are a critical component to tackling increasing turnover rates.
5. Tough Competition
Small-to-mid-sized businesses are often competing against big-name players in the space. Sometimes it seems like these larger players have infinite resources: more resources, more money, a bigger sales/marketing budget, and more. But you just might have an underestimated your biggest competitive advantage: your team! For small businesses, a stellar team can be the differentiator between you and major competitors. Investing in employee retention will mean you can better attract, develop, and retain your top performers.
6. Employee Morale
Frequent turnover can have a negative impact on your entire team's morale. When team members see frequent turnover they can lose faith in the organization. A more intentional approach to employee retention can help avoid negative morale.
7. Protect Your Greatest Assets
For any business, your two more valuable assets are your people and your cash. Paying attention to employee retention can help you protect both! A strategic approach to retention can help you protect your cash by avoiding the financial consequences of employee turnover (recruiting costs, employee training, lost productivity, etc.). For small businesses, anticipating and managing cash flows can be a challenge. Strategic employee retention helps prevent unexpected changes to cash flows (for example, a top sales performer quitting). Additionally, a high-impact employee retention program helps you invest in and retain the top performers that help your business thrive.
8. Good People Practices Directly Correlate to Financial Gains
High-impact employee retention practices have been shown to directly correlate with increased revenues. In a , she estimates the purposeful onboarding and retention of a top sales performer would bring in an additional $1,300,000 in revenues over a three-year period.
Figure 2: via Maia Josebachvili.
9. Customer Success
When you're unable to retain employees, you'll constantly be onboarding and training new employees. And when several inexperienced employees are working, mistakes are more likely. These mistakes can ultimately harm relationships with customers. Beyond this, when a customer's point-of-contact changes, they take notice and ask why.
10. Your Employer Brand
A study by Jobvite showed that and career sites prior to applying. If your company neglects employee retention, you're more likely to accumulate less favorable reviews on Glassdoor, Indeed, and other career sites. Potential job candidates may be skeptical of a company with high turnover. These reviews can have a big impact on your ability to attract talent in the future.
Here are some key take-aways from this post:
- Neglecting employee retention can have a big impact on your bottomline.
- Replacing turned over employees is difficult, time-consuming, and expensive.
- Your workforce is one of your company's greatest assets, and it should be invested in accordingly.
- A great retention strategy can pay off with big financial gains.
- If you're interested in creating a high-impact, low-cost employee retention program register for my free upcoming webinar "How to Build a High-Impact Employee Retention Program Without Spending a Penny."