How to Increase Employee Retention Rate

There are ways to increase employee retention rate, meaning significant savings for your company by spending less money on hiring, training and development.

Employee Experience

Leen Sawalha

VP Product & Growth

Thursday, July 10, 2014


Companies have lately been putting a lot of effort and energy into attracting human capital. The “war for talent” has been on the rise, especially with globalization and the looming labor shortages. But what happens when you actually get them? What about the great, high-performing employees you already have? What’s the point of attracting great talent if you can’t retain them for the long-run?

Having a good retention rate doesn’t only mean keeping your high-quality performers, but it also means significant savings for your company. With turnover being one of the highest costs associated with human resources, executives are demanding action from their HR professionals to implement retention plans and policies.

With that being said, how do you go about increasing your employee retention rate? Let’s take this a few steps at a time…

Identify the positions with the highest turnover rate, and your top-performers

It stands to reason that you can add the most value to your organization when you address the largest problem. Identifying the positions with the highest turnover rates will allow you to focus your efforts on your largest cost and, therefore, have the most significant impact.

Calculate your turnover rates by adding the total number of employees who have left the organization (whether voluntarily or involuntarily) over a specific period of time (per year is a common measure), and divide that by the total number of employees that you have (either in your organization, in that department, or who occupy a similar position).

If the whole point is to retain your best talent, then why not identify who they are! Use performance evaluations and supervisor feedback to determine who your best resources are. Make an effort to understand their values, interests, needs, and motivations. Armed with this information, you will be able to develop retention plans that are appealing to your top-performers. Being recognized for their performance also makes your company more attractive to employees.

Focus on the managers

And by that I don’t mean your best manager (which isn’t a bad idea, either!), but focus on the managers of your employees and especially your top-performers.

According to “The Father of Employee Retention”, Roger Herman, 75% of employees who leave an organization voluntarily do not quit their jobs, but their bosses. Make your managers aware of their impact when it comes to retaining employees, train them in retention strategies, and hold them accountable to their retention rates.

Evaluate your supervisor’s managerial style, and determine if it’s the appropriate type for the team they are managing.

Reinforce employee loyalty and performance

It’s obvious that you need to reward and compensate your employees properly if you want them to remain with the organization. However, it is important that you not only offer them competitive compensation plans, but that you also reward them for their loyalty and performance. To ensure maximum reinforcement, reward your employees fairly, consistently, and differentially based on their performance, as well as their results.

Recognize your employees’ preferences, values, interests, and needs for different types of rewards and work benefits (e.g. time-off, non-monetary rewards, pension plans, life insurance, flexible work-hours, etc…). Identify their sources of motivation, and reward them for capitalizing on their strengths and overcoming their weaknesses.

Consider using assessment tools to gain more insight into their motivating factors, values, and natural reflexes. “Promoting from within” whenever possible is also a very effective reinforcer of employee loyalty and performance.

Provide feedback, training, and development

Why? It’s simple – talented employees want more. They want to be able to do more, develop their skills, become better, and feel like they are part of the organization. Provide your employees with the training they need to develop themselves within the organization.

Consider their preferences before you shove them into any training program. Assess their abilities and goals, and determine what they want to do. Not only will your employees fulfill their needs to develop themselves, but they will also become more loyal and involved with the organization that is allowing them to grow within in.

Providing proper feedback is also crucial to retaining your top performers. Talented and highly motivated employees want to know how they are perceived; especially by their superiors. However, it appears that supervisors do not provide as much feedback to their top performers as they do for their other employees.

It is pertinent to remember that feedback does not only include bad feedback. Recognize your employees’ performance, congratulate them, reward them, and remember to do it consistently.

Implement effective communication programs

There are many, many things you can do to improve your employees’ retention rate; from succession planning, to mentoring programs, to career development strategies, etc… But how do you determine which one(s) will add the most value to your organization?

The implementation of HR policies and programs is costly and time consuming. While there are many practices you can use, it is essential that you focus your efforts and energy into the ones that work. Implementing an effective communication program for your employees will allow you really pinpoint what it is that your employees want.

Armed with this information, your organization will be able to satisfy its employees’ needs, allow them to feel more involved, more committed, more loyal, and ultimately, increase your employees’ retention rate.

Increasing your employees’ retention rate will result in a better performing organization. In the long-run, lower turnover rates mean less money spent on hiring, training and development. It will also mean keeping your high-quality employees who have already proven to be great performers within your organization.

Perform the necessary analysis to ensure your retention rate continues to improve; identify your top performersassess their abilities, needs, and preferences, and focus your efforts on things that work.

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