5 Benefits of Employee Retention
Team cohesion. Workplace environment. Time. Money. The benefits of employee retention are many and varied. Not only does it have a significant impact on the very culture and atmosphere of a company (it’s hard to love your job when you never know who’s going to be sitting across from you month to month), it has a very real effect on the bottom line. Hiring the best people for the job is critical; keeping them is even more so.
The Cost of Employee Turnover
To understand the benefits of employee retention, let’s look at the opposite: employee turnover. How much does it cost when a team member leaves? The facetious answer… a lot. Think about all of the resources involved with advertising, recruiting, screening, interviewing, hiring, onboarding, and training a replacement.
According to estimates from Deloitte, the cost of losing an employee can range from tens of thousands of dollars to as much as 1.5 – 2 times their annual salary. Let’s say, for example, you have a higher-level manager who makes $100,000 a year. Losing this person may cost you $150,000 – $200,000 when all is said and done.
If your business is smaller, you may be looking at an employee who makes $50,000; still, this could cost you $20,000 or more. Typically, losing hourly employees costs about $2000. The point is, this is capital that you could be using to invest in and grow your company.
This is just the bottom line, hard number impact. There are other concerns to keep in mind when it comes to employee turnover, such as decreased morale and productivity. But let’s start looking at the positive. What happens when you implement strong employee retention initiatives? What does it look like when people choose to stay with you?
5 Benefits of Employee Retention
Building a strong team empowers your business to:
We have already discussed this, but it bears repeating! Employees will come and go; it’s a part of the cost of doing business. However, when you minimize turnover – and focus on retention – you save invaluable resources that can be utilized to solidify operations, invest in advertising and marketing, and build your company. You can even save money by offering incentives for team members. (More on retention bonus best practices in a moment.)
Remember: employee retention saves time, particularly for HR staff (or whoever heads up your recruiting and hiring processes). And time is most certainly money.
Workplace relationships and friendships have a tremendous impact on morale and job satisfaction. Employee happiness is one-quarter more strongly correlated with coworker connections than those with supervisors. When they have these bonds, team members tend to be less stressed, have a better sense of community, are more likely to contribute to company culture, and, of course, are more likely to stay. Nearly 80% of workers who do not feel valued look for other opportunities; when they feel like they belong, though, they feel as if their opportunities are with you.
When you are dealing with high turnover, it costs in terms of productivity. It is difficult for your team to stay cohesive and to continue their job duties given constant interruptions. You will see more delays, mistakes, and costly overtime. Other areas take a hit as well: communication, social connections, and collaboration suffer. It takes time to build effective coworking relationships with new hires.
Depending on the role, it can take a year or two for a new employee to reach the productivity level of the person they replaced. Can you afford this gap?
When people remain committed to your organization, you realize far greater productivity and far fewer disruptions. In fact, they are 21%, on average, more productive than less-engaged (or unengaged) employees.
Attract New Employees
The single best source of new hires is your existing employees. When you focus on retention, you have a team that is more likely to refer their friends and associates to you. They are happy and satisfied with their work, and they feel comfortable recommending their contacts for employment.
Existing employees will also help these new hires transition into the company more quickly and efficiently – saving more time and money!
Continue to Engage Customers
The benefits of employee retention go beyond the walls of your organization. They extend outwards to the customers you are serving. Engaged, productive workers provide better service and care about the reputation of the company. They are your best brand advocates. They are also better positioned to solve more complex problems and answer more in-depth inquiries. This saves time, makes everyone else’s life easier, and keeps customers happy.
The benefits of employee retention are clear. But the question is: how?
Retention Bonus Best Practices
Is money the only way to keep employees? The good news: no. But it does help. Other factors, such as workplace connections, job satisfaction, opportunities for development, and the possibility to advance, play a significant role in retention. That said, people need to be adequately (and well) compensated for their work.
Providing a lump sum in the form of a bonus can work wonders when it comes to retention. It is about more than the amount: it is about feeling appreciated and valued for their contribution to the company. Typically:
- Retention bonuses are about 10-15% of the employee’s base salary
- They are timed to coincide with important events, such as important projects or mergers/acquisitions
- They are accompanied with a “shout out” for a job well done
Employee Retention Builds Businesses
For more guidance and advice on retaining employees – and building your business – contact AMB Performance Group.