Hiring GlossaryWhat is talent retention strategy?
Effective talent retention strategies
What is talent retention?
Consider all of the stages of the employee lifecycle: prospective candidates learn about your company and apply for a role, go through your hiring and onboarding processes, become fully contributing employees and at some point, they decide to leave.
Talent retention involves taking intentional steps to extend the period of time between when an employee joins your company and when they make the decision to leave – especially if they’re a high-performing employee in a critical or hard-to-fill role.
According to Gallup, employee retention is one of the biggest challenges organizations face, with only 18% of workers reporting being extremely satisfied with their job and 51% watching for or actively seeking a new job.
Turnover can be costly and disruptive, so retaining skilled and experienced employees helps companies stay productive and efficient in their operations. Talent retention also creates a positive company culture that motivates and engages employees, keeps customers happy and attracts prospective employees to apply.
While the terms “employee retention” and “talent retention” are often used interchangeably, there is a subtle difference: employee retention often refers to the overall goal of keeping all employees at the company, while talent retention specifically targets high-potential and high-performing individuals. Talent retention strategies identify, develop and retain top talent within an organization, ensuring they remain engaged and motivated.
Why talent retention matters
Employee turnover – employees voluntarily making the choice to leave their company – is expensive and disruptive. By some estimates, it costs as much as one-half to two times an employee’s annual salary to replace them. It can also lead to dips in morale and productivity as the rest of the team has to pick up their responsibilities and participate in the interview process to hire someone to replace them.
And it’s not just about short-term financial losses, either. As HR consultant Steve Goldberg wrote on the Greenhouse blog, “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.”
While turnover is a natural part of the employee lifecycle, Gallup finds that 42% of employee turnover is preventable. Similarly, Culture Amp finds that employees clearly indicate when they are dissatisfied and planning to leave their current company. This is a clear sign that many employers could take a much more active role in trying to reduce turnover.
We’ve looked at a few of the risks of high turnover, but it’s worth noting that there’s also a significant 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 an additional year is a factor that contributes to a $1.3 million return on investment!
Key elements of a talent retention strategy
By now you (hopefully) recognize the importance of having a talent retention strategy. But how should you go about putting this strategy in place? Here are a few of the key elements to include.
Identify and assess critical talent
Your talent retention strategy starts with hiring the right people. And structured interviewing is the best way to achieve this goal. At the very beginning of the hiring process – before you write a job description or conduct a single interview – make sure you’ve defined what will make someone successful in the role. This way you can set up your interview scorecards and assessments to help you identify the people who will help you achieve your desired business results.
Create a positive work environment
If you’re serious about keeping talent at your company for longer, 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. Read more about some of the ways we create an award-winning positive work environment at Greenhouse here.
Offer competitive compensation and benefits
While candidates consider a number of factors when evaluating job offers, 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.
And keep in mind that it’s not just about salary alone – employees are also looking at the complete compensation package, which can include benefits like health care coverage, paid time off, flexible schedules and work-from-home stipends.
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.
Effective talent retention strategies
Looking for some strategies to guide your approach to talent retention? Here are a few to consider.
Provide opportunities for career growth and development
One of the qualities that makes talented people stand out is their appetite for growth and professional development. This means that if you want to keep your high performers engaged, you need to give them opportunities to take on stretch tasks, develop new skills and continue to progress in their careers.
The good news is that offering growth and development opportunities doesn’t just keep your high-performing employees motivated and engaged – it also helps your company adapt to future needs and challenges. Plus, when you focus on internal mobility, you can place employees in their new roles with 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?”
Implement work-life balance initiatives
Even top performers need to take a break from time to time. And one of the ways you can prevent burnout is by implementing work-life balance initiatives that give your employees control over their schedules, the ability to work from home and the chance 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.”
Recognize and reward top performers
People want to be recognized for the hard work they do – and unfortunately, this isn’t always the case. According to Pew Research Center, 51% of workers said they weren’t satisfied with the amount of feedback they received from their manager. And it’s not just about feedback, either – only 44% of employees are satisfied with their opportunities to learn new skills and that number drops to 33% of employees who are satisfied with their opportunities for promotion.
You can make recognizing and rewarding top performers part of your talent retention strategy by creating clear career ladders and regular promotion cycles. You can also be intentional about creating regular, public opportunities for recognition, like a Slack channel or a segment during your company all-hands meeting where people share positive feedback.
Measuring talent retention success
Once you’ve begun to put some of these practices in place, you might be wondering how you will know if your talent retention strategies are working. Here are a few steps you can take.
Calculate your talent retention rate
Calculating your talent retention rate provides insights into how well your organization is retaining employees. To calculate this rate, start by choosing a specific period, such as the past quarter or year. Divide the number of employees who have stayed with your company during that period by the total number of employees at the beginning of that period. Multiply the result by 100 to get the retention rate as a percentage.
It’s a good idea to calculate this metric on a regular basis (such as every quarter or every six months) so you can monitor your progress and set benchmarks for improvement. Looking for a benchmark? While retention varies by industry and the nature of work being performed, Lattice reports that 90% or higher is the ideal talent retention rate.
Analyze turnover trends and patterns
After you’ve begun measuring your talent retention rate on a regular basis, you can start to look into turnover trends and patterns. Look for common themes in exit interviews (more on those in a moment), analyze data related to tenure and job levels and compare turnover rates across departments or offices. Based on what you learn, you can begin to take proactive measures to address these issues.
Gather employee feedback and conduct surveys
In addition to the data you get from regularly measuring your retention rate, you can learn more from exit interviews and employee engagement surveys. Exit interviews can be folded into your official offboarding process. Schedule 20 minutes between the employee who’s leaving and a member of your People team to discuss the highlights, lowlights and any other information they’d like to share about their experience. You can then opt to take feedback to the entire leadership team if you have a month with multiple exits or simply present it to the team manager if there’s only one exit that month. Employee engagement surveys can go out to everyone in your company and give you a broader sense of pain points and bright spots within your organization.
How Greenhouse can help with talent retention
At Greenhouse, we believe that a solid talent retention strategy starts with structured hiring. If you take the time to clearly define the qualities that will make someone successful in a role (and make hiring decisions that are aligned with that vision), you’re much more likely to hire people who are motivated, engaged and excited to stay with you for a long time. And Greenhouse supports this with features like interview scorecards that help interviewers ask the same questions and assess all candidates consistently.
Greenhouse customers like Tamara Menéndez, Head of Talent Attraction at Blacklane, can draw a clear connection between structured hiring with Greenhouse and the quality of hires they make. Tamara said, “Greenhouse significantly increases the chance of successful hiring, resulting in the highest caliber of candidate.” Since implementing Greenhouse, Blacklane saw their quality of hire – measured by how many new hires complete probation, meet specific performance outcomes and achieve promotions – go up by over 20%. Read more about Blacklane’s approach to structured hiring here.
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