Hiring GlossaryWhat is employee retention?
Employee retention: strategies to keep your talent
You put a lot of thought and effort into hiring top talent, but that’s only one part of the employee experience. It’s just as important to consider the retention strategies you’ll put in place to encourage them to stay.
According to the Greenhouse Workplace Intelligence Report, 57% of respondents said that employee retention was a meaningful metric for their employer. Let’s consider why employee retention matters and explore a few ways you can reduce turnover and make a positive impact on employee tenure.
Why employee retention matters
You probably already know that hiring new employees isn’t easy. It takes a lot of resources – both in terms of recruiters’ and interviewers’ time as well as money spent on things like agency fees or job post advertising – to make a hire. And when employees choose to leave frequently or quickly, it means pouring even more resources into replacing them. By some estimates, it costs as much as one-half to two times an employee’s annual salary to replace them.
And it’s not just about short-term financial losses, either. As HR consultant Steve Goldberg wrote, “In HR and talent management, it’s well-known that keeping employee turnover low, especially among strong performers, is essential. It’s not just about the immediate cost like hiring someone new, but also the ripple effects. Losing a team member can affect the productivity of teammates and delay projects. Plus, if the departing employee has strong customer relationships, it can be even more costly and potentially risky for the business.”
We’ve looked at a few of the risks of high turnover, but there’s also an upside to boosting retention. Consider it through the lens of employee lifetime value (ELTV) – the amount an employee contributes to your company’s bottom line throughout their tenure. When you extend how long a high performer stays, you can expand their impact in terms of money they make or save. In one model we shared here at Greenhouse, the impact of retaining a top performer for one more year is a factor that contributes to a $1.3 million return on investment!
Key factors affecting employee retention
Now that we’ve looked at a few reasons why retention is so important, you might be wondering what you can do to improve retention at your company. Here are a few factors that can affect employee retention.
- Effective onboarding and training programs
The experience a new hire has when they first join your company is critical. Employees are 58% more likely to still be at a company in three years if they had a structured onboarding process. Yet this is an area where many employers are falling flat – just 12% of employees strongly agree their employer does a good job with onboarding.
Remember: Onboarding is not just about logistics and paperwork. It should involve setting clear expectations, defining work norms and introducing the new hire to your company culture. Read more about structured onboarding here.
- Creating a positive work environment
It may sound obvious, but a company’s responsibility towards employees lasts long beyond their first weeks or months on the job. If you’re serious about extending employee retention, you need to create a positive work environment – often described as a people-first culture. This can include acting with intentionality about your company’s purpose, values and culture, caring about fair and equitable hiring and focusing on collaboration.
- Recognizing and rewarding employee performance
Positive recognition can be incredibly motivating, yet it’s rare for managers to do this instinctively. It’s a skill they will likely need time to develop and practice. And research shows that it doesn’t happen often enough. Only one in three workers in the US strongly agree that they received recognition or praise for doing good work in the past seven days.
Encourage your leaders to make recognition part of their regular routine and consider providing additional training and support to help them develop this skill. Having clearly defined roles and career ladders also helps your employees set goals and milestones they can work toward and makes promotions and performance rewards feel consistent and fair.
Implementing employee retention programs
So what does this mean in terms of actual practices at your company? Here are a few programs that can have a positive impact on employee retention.
- Design competitive compensation packages
While candidates consider a number of factors, pay is the top motivator when accepting a new job. According to a study by Aerotek, 40.6% of respondents said it matters more to them than anything else. But the Greenhouse Candidate Experience Report highlighted a major mismatch between candidates’ expectations and the compensation packages they’re being offered. 53% of job seekers reported that they received excessive praise and flattery during the hiring process only to be disappointed by inadequate salary and title offers that didn’t match their qualifications, skills and experience.
If you’re committed to creating a standout candidate and employee experience and recruiting top talent, you’ll need to keep your finger on the pulse of what competitors are offering candidates. This knowledge is the key to attracting and retaining top talent and ensuring your employees feel valued. Learn more about creating a competitive compensation package for your candidates and employees here.
- Offer career development and growth opportunities
Offering career development and growth opportunities is a win-win-win: You get to keep your high-performing employees motivated and engaged while also helping your company adapt to future needs and challenges – and you can do it all with a much shorter time-to-hire and ramp-up time.
Maria Culbertson, Senior Manager of Internal & Executive Communications at Greenhouse, put it this way: “As companies continue to scale, the likelihood of finding talent within the walls of your own organization grows significantly. You have entire talent pools of candidates on hand, fully bought into your mission and ramped on your company. So why not go there first?”
- Promote work-life balance
Another key to employee retention is to help your employees avoid burnout by maintaining a good work-life balance. You can do this on a company-wide level by offering flexible work arrangements, the ability to work from home and programs that encourage employees to take time off to recharge.
It’s becoming increasingly common for companies to offer sabbaticals – generally an extended period of paid leave available for all employees who have achieved a certain tenure. Ariana Moon, VP of Talent Planning & Acquisition at Greenhouse, wrote: “With the right kind of preparation and intention, sabbaticals enhance the well-being of the person going out of office and provide an incredible opportunity for accelerated growth and business exposure for the coworkers stepping in and up to support them.”
Measuring employee retention success
Of course, putting these programs and strategies in place is just one step. You’ll also want to look for ways to measure their success so you can continue to make updates as necessary.
If you’re trying to measure your impact on employee retention, you’ll probably find it helpful to benchmark key retention metrics like:
- Employee turnover rate – how many employees leave your organization in a given time period.
- Average tenure – the average amount of time employees stay with your company.
- Retention rate – the percentage of your workforce you’re retaining in a given time period. To calculate this, you’ll first want to set a time frame (such as one year). Take the total number of employees at the beginning of that period, and subtract the number of employees who have left. Divide this number by the original employee total, and multiply that number by 100 to come up with your retention rate.
These numbers will help you understand the situation in broad strokes, but you will probably also want to look at more qualitative data to understand what’s driving these trends. You can gather this type of data from employee engagement or satisfaction surveys. It’s generally a good idea to conduct surveys on a regular basis. This will help you establish benchmarks and it will also send the message that you welcome feedback from your employees. You can also conduct exit surveys as part of your offboarding process.
Once you’ve begun to collect both quantitative and qualitative data, you can start analyzing turnover trends and patterns. Conducting this type of analysis can help you develop targeted retention strategies to address the underlying causes and improve your employees’ satisfaction and retention.
Effective strategies for employee engagement
There’s a clear connection between employee engagement and retention – people who are motivated and inspired by their work are much more likely to stay. So it’s a good idea to actively promote employee engagement as part of your retention strategy.
- Build strong relationships with employees
One of the factors that contributes to engagement is strong relationships at work. You can encourage strong relationships by providing manager training and resources to help people managers create a positive work environment for their direct reports and avoid common missteps (like micromanagement) that can lead employees to feel frustrated or disconnected. You can also look into ways to promote relationship-building outside of an employee’s immediate team, whether it’s by organizing coffee chats, cross-functional lunch and learns or volunteer activities that allow people to connect across teams and departments.
- Encourage open communication and feedback
Encouraging open communication and feedback is another way to foster engagement. We already mentioned how engagement surveys can give your employees the chance to share their experiences and feel heard. Recognition is another powerful activity that can contribute to retention. According to the Betterworks State of Performance Enablement report, 15% of respondents said recognition and appreciation for their work are significant factors that keep them with their current employer.
- Foster a sense of purpose and belonging
Employees want to feel that their work has meaning and contributes to a greater purpose. Help them understand how their individual roles align with your company’s goals and values. You can do this during the hiring and onboarding process by designing interview questions that reinforce your company values and showcasing how the new hire’s team fits into your overall mission and purpose. You can create a sense of belonging by promoting diversity and inclusion, ensuring that every employee feels valued and respected.
Creating a culture of retention
Like many aspects of the employee experience, retention requires constant care and attention. Luckily, there are several steps you can take to create a culture of retention.
- Develop a strong employer brand
LinkedIn found that companies with a strong employer brand attract 50% more qualified applicants, hire 1–2x faster and experience a 28% reduction in turnover. This makes sense – having a strong employer brand creates a shared sense of purpose and motivation for your current employees, and it can help you attract candidates who are aligned with your mission and vision. Learn more about how to develop a strong employer brand here.
- Establish a supportive leadership style
You’ve probably heard the expression that people don’t leave companies, they leave managers. To create the best possible working environment for your talent, it’s critical to ensure leaders are supportive and encouraging and act as talent magnets. Some of the ways leaders can attract and retain talent include being clear on your company’s mission and values, developing an employer value proposition and reaching out to candidates during the offer stage to show their personal investment in having the candidate accept the offer.
- Promoting diversity and inclusion
Diversity in the workplace means having an employee base that’s made up of people from a range of backgrounds, which can include various aspects of identity such as gender, race or ethnicity, age, sexual orientation, religion and educational background. Here at Greenhouse, for example, our long-term vision is a diverse workforce in which traditionally underrepresented groups are fully represented and included throughout the company, including in our management group. Some of the steps we’ve taken toward achieving that vision include:
- Creating a diverse pipeline of qualified candidates
- Mitigating bias in the interview process
- Fostering an inclusive experience for all employees
- Formalizing employee resource groups with budgets and executive sponsors
- Establishing the Greenhouse DE&I Council
- Investing in DE&I product innovations and enhancements like our candidate name pronunciation feature
- Supporting initiatives that build belonging within our greater community
We hope these give you some ideas and inspiration for how you can promote diversity and inclusion – and boost retention as a result – at your own company.
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