What is Employee Retention? Considerations for Keeping an Engaged Workforce
You may understand the value of retaining an engaged workforce. However, can you clearly define what your business’s employee retention strategy is, and ways to improve it?
In today’s competitive labor market, many small business owners are struggling, especially in the area of employee retention. While HR professionals and business owners want to keep good employees longer, many employees are changing jobs more often.
Employees leave for many reasons – lack of growth opportunities, salary expectations, a general feeling of mistrust or disrespect, or other factors. To identify the source, it's important to open the lines of communication with your employees.
The following considerations can help you identify what employee retention means for your business, and how you can take steps to improve it within your organization.
Measuring employee retention
Many business owners and HR professionals use employee retention metrics to evaluate the quality of their hiring programs and the overall health of their workforce. To calculate this statistic at a basic level, subtract the number of employees who left in a given period (i.e. quarterly) from the entire workforce, then divide that figure by the total number of employees.
For example, if you regularly employed 20 workers and three resigned or were terminated during the first quarter, your employee retention rate would be (20-3) / 20 = 0.85 or 85 percent. This percentage can vary greatly across different industries and in different parts of the country, so this benchmark is most valuable as an internal metric evaluated over time.
What actions can you take?
If your business struggles to retain quality workers, there are many resources for improving employee retention. However, it's also important to identify why this is happening and develop plans to help improve retention. Perhaps an unexpected increase in business caused you to hire quickly. While this action might be a fast fix, this could lead to more serious, long-term issues. For instance, an employee may have been hired quickly, but they were not properly on-boarded, or didn’t understand the expectations of the job – or both - which may cause an employee to be disgruntled. Instead of compromising your hiring integrity in such a way, you may consider using contingent or contract workers in the future to help the business through unexpected business upswings. You may also want to reemphasize to hiring teams the importance of hiring the most qualified individual for any position, and prioritizing a long-term fit during this process.
If the issue seems to be related to something more internal, try to identify the root of the problem. For example, employees are more likely to stay at a job when they understand their individual career development path. From a recruiting standpoint, help candidates understand where each position can lead. For your existing workforce, take the time to find out what their goals are and discuss different strategies for achieving them, from allowing them to take on more responsibility on a project to helping defray the cost of their education.
These actions may go a long way to help you build long-term relationships between you and your staff.
Maintaining an engaged workforce
If your workers are generally engaged and your retention metrics are strong, that's just the beginning. Effective retention efforts are continuous, so keep an eye on metrics in this area. A centralized HR management system can help you look for trends and insights over time. By evaluating any changes in your retention numbers, you can identify potential issues within your organization and work to resolve them.