The Ultimate Guide to Retaining Top Talent in Your Organization
In this document, I hope to share some actionable ideas your organization can implement to create a more inclusive environment with a focus on retaining the best employees!
It is important to identify your current retention programs and numbers as it will help you identify if the outcomes you are making are working. The average cost of losing an employee is calculated at approximately 6 to 9 months’ salary on average. So, for example, an employee making $60,000/year will cost the company $30 to $45,000 in recruiting and training expenses. Poor retention affects more than just the company’s wages, it also crushes overall employee morale, performance, and productivity.
What is an employee retention rate?
An employee retention rate is defined as the percentage of employees who stayed on staff from the beginning of a designated period to the end of the same period.
How do you calculate the employee retention rate?
The most common way to measure employee retention rates is by percentage. The calculation is simple: divide the total number of employees at the end of a period by the total number of employees at the beginning of the same period, then multiply the result by 100.
Does knowing the calculation help?
Keeping track of your organization’s employee retention metrics gives the organization quantitative values to track performance. It helps identify trends that otherwise may be missed.
Calculation Breakdown & Example
Employee Retention Rate Calculation
Total Employees (end of period) / Total Employees (beginning of period) x 100
You have 250 employees at the beginning of January 2023 and by the end of December 2023, you have 235 employees.
235 / 250 = .94
.94 x 100 = 94%
In this example, your retention rate is 94%
Your Artificial Intelligence / Material Learning department had 25 employees at the beginning of Quarter 2, April, and at the end of Q2, June, you have 32 employees in the department.
32 / 25 = 1.28
1.28 x 100 = 128%
In this example, your retention rate for Q2 in the AI/ML department is 128%
As you can see this simple mathematical equation can be used in several different scenarios. The organization as a whole, specific departments, as well as breaking down by time frames, such as fiscal year, calendar year, quarterly, or even a specific program’s time frame. No matter how you break it down, that ending rate has a story to tell.
Now that you know how to calculate it. Let’s look into what the calculation means.
Calculation Results Meaning
Let’s keep it simple. An average retention rate of 90% and higher is good. That would mean your turnover rate is 10%. Turnover is the act of replacing an employee with a new employee or the rate at which employees move in and out of the company.
In 2021 the Bureau of Labor Statistics report stated the overall turnover rate was 57.3%. 29% was involuntary turnover and 25% was voluntary. Many industries should expect to have a turnover rate close to 19% and the average cost-per-hire for a new employee is $4,129.
If the average cost per hire at your company was $4,129 and we used the information from Example #1 above, that would equal a cost of around $61,935 annually even with a good retention rate of 94% and a turnover rate of 6%.
Now you know what employee retention and turnover rates are. Plus you can forecast how much it would cost based on the rates! Now let's find out what to do with our newfound information.
Sorry for the long-winded explanation. Now let's get to the good part. How to increase retention and decrease turnover of your best employees.
Retaining Your Best Employees
I am emphasizing the best employees because a big part of turnover comes from burnout. Many times great employees are lost because of the subpar employee interactions. A big part of that is the organization’s operational structure. All employees must be held to the same standard.
Let’s use a scenario, in which you have a star employee, who is your go-to person, but their salary is the same as everyone else. Instead of promoting them, you bombard them with extra tasks that presumably aren’t being undertaken by underperforming employees. This trend is allowed to continue until eventually the underperforming members are hardly working and your select overperforming members are taking on the brunt of the work. Your overperformers leave from burnout of being overly used and now you are left with only your worst underperformers and many tasks that need to be finished.
Now that we have a picture of what a poor work environment looks like, let's look at ways to negate it.
Utilize a team member evaluation program along with the yearly performance review. Meet at regularly scheduled times to set or review goals and track the progress of these goals. Setting goals and meeting with your team regularly keeps everyone engaged on specific metrics to measure success.
Keep your staff focused and follow a schedule, ensuring to commit to deadlines.
Ensure there is open communication, top-down and down-up. Kinks in communication going either way will result in employees not thinking they are heard and critical operational information being missed.
Don’t be afraid to let the ones who don’t meet your standards go. This can be pretty difficult, but keeping track of documentation of unmet goals and action plans created to try and get the lower performers to increase productivity are necessary documents to ensure there are no legal issues post-termination.
You now have the formula on how to push productivity up and motivate your high performers to continue growing while giving the lower performers goals to meet. An issue with focusing 100% on performance-based operations and metrics is burnout. Burnout can be caused by a lack of social support, taking on too many tasks they are unable to handle, and poor self-care. A huge cause of burnout is overwork, specifically unmanaged workloads.
Burnout results in around 20% to 50% of annual workforce turnover. It also has physical repercussions for the individuals experiencing it including headaches, stomach issues, fatigue, frequent illness, and changes in sleep or appetite.
How to resolve your employee’s burnout?
Ensure the team member has an open pathway to communicate with their manager or supervisor. Resetting expectations although may seem detrimental to the company is a great way to keep your team members happy and with the company for the long term.
Having optional work groups, led by the team members that meet after working hours and creating a supporting culture are great ways to help individuals become a more cohesive team.
Having partnerships for discounted rates at gyms, yoga studios, meditation centers and more is also a great way to get your employees to keep a healthy lifestyle and assist the community. Physical exercise and relaxing activities are great ways to improve mindfulness and protect your employee’s health.
You can learn so much from your team members by having a way they can openly communicate with you. This can help with social activities, operations, human resources, and more. Find out what the issues are directly from your team!
Open meetings are great ways to speak to a large audience. This can be done quarterly, annually, or any other time frame to pass along information to a department, team, or even the entire company. It is an effective way to keep your members updated on the organization and also allows them to have a voice, asking questions or providing opinions.
Emails are a classic method to send memorandums and other correspondence to everyone. Emails are an effective tool in keeping everyone honest. Words don’t lie. Asking questions through an entire email chain will effectively pass on your words to everyone and the feedback will be dramatic. It is common for people to be more comfortable writing concerns and opinions behind a screen as seen in social media and other outlets. Use that fact to support your business and retention rate.
One-on-ones are great to have at a team level, and although it may be more difficult the larger your organization scales it is a way to keep your member's voices heard.
Suggestion boxes are an old-school, confidential way for leaders to receive information without risking the team member’s feelings of embarrassment or fear. Many times, people have great ideas but just aren’t confident enough to speak out loud. They should still be heard and suggestion boxes are the way to go.
A more updated version of the suggestion box is having a confidential email that is only accessible to specific key members. The fewer members that have access to the email inbox the more people will feel secure about it. It’s as easy as sending everyone an email with the new confidential email, explaining the function, and seeing the inbox fill up with amazing, unique, and innovative ideas.
No matter the communication route, in the end, nothing will improve if the information stops before it reaches the people who can make the changes. If you can make the changes and choose not to, then your retention and operational capacity may suffer.
Above-Average Salaries and Benefits
A company’s revenue is essential. If you aren’t making money, then you can’t stay open. Although this method may seem obvious it is still a great way to lock in employees. You get what you pay for and in this scenario, it is the team members you are paying for, especially in the current job market this statement has never been more true.
To see where your organization falls on the spectrum against other companies in your field, region, and nation you should conduct a compensation analysis.
What is a compensation analysis?
It is a study that looks at salary and wages, health benefits, paid time off, and employee perks like on-premise wellness facilities and employee discounts.
How do you conduct a compensation analysis?
Select your analysis team. This may seem simple, but due to the amount of information needed to be collected and analyzed it is vital to have the right people for the job.
Define your organization’s structure (C-Suite, Director, Assistant Director, Associate Director, etc.). Each organization has unique factors that need to be taken into account.
Collect internal data that expresses the current compensation practices. This section will be the most time-consuming as you will need to analyze the pay per position level, experience, education, and other factors that led to their compensation being where it is. You will also need information on age, race, and gender to ensure there are no unintentional disparities.
Analyze the internal results After collecting the internal results, you will take the time to discern if there were any disparities among your members. An example is if you have someone working for your organization for 7 years and someone was recently hired on with similar experience and education but is receiving a significantly higher rate of pay. That could affect company morale and enthusiasm.
Collect external data that expresses the current compensation practices of your competitors. This study should be done nationwide averages as well as your local area as those are your direct competition. Websites like Glassdoor and Salary.com are great tools for acquiring external data.
Analyze the external results vs. internal results. This will be the step where all of the information is finally compiled and it is time to analyze the results. You will see how your organization stacks up against the national average and your competition as well as identifying any internal compensation issues.
Create an action plan with the information you have analyzed. This is the part where you develop a plan and execute it to resolve any issues identified.
Employee benefits are non-wage compensation methods provided to employees in addition to their standard wages or salaries. There are several benefits that companies do not take into account or believe are too expensive to utilize. Here are some common and unique benefits that you can implement to stand out and revitalize your workplace.
Paid Time Off
Health Insurance, Mental Health Services
Training & Development Opportunities
Gym Memberships & Local Community Discounts
Team Lunches, Coffee, Snacks
Team Member Appreciation Programs
Child Care Assistance
Show Appreciation and Respect
Showing your employees appreciation by publicly recognizing their birthdays, achievements, bonuses, and positive reinforcement are great ways to make them feel cared about. Employee appreciation is an important employee retention strategy because it shows you care about them and makes them feel part of a team. Showing your appreciation doesn’t have to cost anything other than time as small gestures and public announcements are simple cost-free tools to show your team they are doing great!
Here are some ideas but this section can be open to anything you can imagine.
Buying your team lunch
Publicly praising members in a newsletter or other method
Posting members on your social media page (make sure you have prior approval to post for each member involved)
Celebrating anniversaries like birthdays or 1, 5, and 10-year anniversaries with the company, and other milestones
Offering a holiday or new years bonus
Implement a game system to provide rewards for tasks completed
Have a team member award, weekly, monthly, quarterly, or annually
Host company events
Provide gift cards
Offer additional training and certifications
Host a happy hour event or wellness day
Sponsor volunteer opportunities to support the local community
Have an annual retreat
There is no limit to what can be done for your team. The limitations are whatever limitations your imagination has. Another great way to find out what your team is interested in is by asking them.
They will know best what type of appreciation they’d prefer to receive.
Invest in Your Team / Leadership
Leaders can bring a team to the next level as well as having the ability to destroy a team. Ensuring your managers and supervisors are getting consistent leadership training is a great way to make sure they are doing everything they need to lead your team the best way. Many people are hired in entry-level roles and then promoted. Internal promotions are great! There is an issue though that if you have not received leadership training and are put in a leadership role, there are a lot of things that could be missed.
Leaders should be decisive, authentic, trustworthy, clearly communicate, adapt, and be empathetic. No one wakes up one day and acquires all of these leadership traits. It must be taught. Investing in your leaders is a great way to show them your appreciation as well as increase operational abilities. In a large organization, many team members may never meet the CEO or C-Suite but they will work every day with their supervisor and managers. Are your supervisors and managers presenting the traits you expect in your company? Have you taught them how to mentor, train, supervise, manage, and coach?
Some ways to develop your leaders are:
Recognizing the individuals with potential leadership skills and investing in them. This is a great way to RETAIN YOUR BEST EMPLOYEES.
Ensure your higher-level team members are following up and mentoring. Implementing a mentorship program is a great way to select individuals with leadership skills and have continuous growth for new employees and experienced ones.
Invest in leadership training and events including in-house training or paid training through outside organizations.
Giving employees the tools they need to succeed on their own by setting goals and expectations that will require them to reach high will develop their confidence and empower them as leaders.
Having a culture of internal promotions is a great way to show that you appreciate leaders and can identify them. If individuals know that internal promotions are available the ones that want it will be easily identified as they will break the status quo.
Not discussing COVID restrictions, individuals have always been interested in working from home or having different schedules. Depending on the type of positions you can play with these two concepts to see what works. Having a good work/home life balance is very important to have a motivated and energized team!
Remote Work. With the rise of COVID, remote work took off and it showed that a lot of the work that was being done in brick-and-mortar offices was able to be done at home instead. Now that COVID is managed more and the craze has calmed down, a lot of companies want to bring their staff back into the office. It is important to listen to your team members and listen to their desires, if that means having a hybrid or remote workforce, that may be the best case. If it isn’t possible to have remote work or due to other constraints it isn’t feasible there are other options as well.
Flexible Schedule. Changing the standard 9 am - 5 pm, Monday to Friday schedule may seem strange but it is an effective tool to get your members motivated. Depending on the position requirements there are a few options you can play around with.
Open Schedule - Individuals are required to work 8 hours a day but are free to come in and leave at times that best fit them. Their workday can start at 4 am to 10 am and end at 1 pm to 6 pm. Certain people have specific times in the day when they are more efficient and this can be a unique way to increase productivity.
Short Work Week - can the amount of work be done in 4 days instead of 5? Offer 10-hour shifts throughout 4 days instead of 8-hour shifts throughout 5 days.
Work To Finish - If the members have specific tasks, benchmarks, or metrics they need to meet in a day, have them work until they finish instead of having a specific time frame they are required to work.
Here are three unique ways to keep your schedule flexible while keeping productivity high. They are all able to be played with and although they may require changes to your standard operating procedures they are all viable ways to keep engagement with your team at its maximum. The three ideas posted here are flexible in which you can change them to fit your organization’s specific needs. Find out what your team prefers and you’d be surprised, many people prefer working 8 hours, Monday to Friday but others are more effective with ulterior schedules.
In this document, there were a plethora of new, unique, and old-school methods of retaining employees. Not just retaining any employee though, but specifically the best of the best. The employer is responsible for who is on the team, who gets hired, what they are taught, and what they do while working. Developing a new culture is extremely difficult, but is necessary to develop the type of team you want. These guidelines can be used to ensure your team, is the best team.