The high cost of employee turnover
Employees are the driving force of your company and without them, you’d have a difficult time serving your customers. Nevertheless, hiring processes tend to be tedious, long, costly, and a top expense for any employer – so it makes business sense to keep your top employees as long as possible.
In reality, however, many companies have a high employee turnover. In a 2016 study by Gunther Wolf, the average minimum cost of employee turnover in a German company was 43,069 EUR. In the US, the cost of losing an employee can be up to 1.5-2 times their salary. Furthermore, if you keep your employees longer, you not only save on costs but you can limit the disruption of job handover, the long process of onboarding, and new employee team integration.
Why are your employees leaving?
If you have a high employee turnover, it’s time to ask yourself this question. Your top talent might be leaving because of these reasons:
- Poor company culture
- Lack of appreciation from (or for) their team
- Lack of engagement, career growth opportunities, or learning opportunities
- No access to flexible work opportunities (e.g. remote work)
- Negative relationship with a direct manager
- Employee burnout
- Decrease in employee mental health
- Lack of diversity and inclusion policies
All of these are common reasons for companies losing good employees. In numbers released before the pandemic hit, burnout was already a major factor for an employee exit, contributing to up to half of the annual workforce turnover. Now, after two years of lockdowns and remote work, companies are facing an even greater challenge when it comes to keeping their workforce, known as the Great Resignation. So what can you do to minimize employee turnover and maximize employee retention?
To help HR professionals succeed, Sharpist is putting together a series of industry-specific short guides. Explore the one on how to tackle HR challenges in financial services.
Ensuring employee retention through culture
Companies have tried several approaches to reduce employee turnover — competitive salaries, fruit baskets, and additional time off, to name just a few. These approaches have their alluring benefits but, at the end of the day, employees are more likely to leave not because there weren't enough bananas, but rather due to poor company culture.
Culture is an organization’s social identity. It can shape individual behaviour and cultural norms dictate what is respected, encouraged, and rejected within a group. When leaders align company culture with strong values, there's a shared purpose and sense belonging, resulting in productive, thriving teams. Once the company culture is defined, attracting the top-talent that best fits with that culture is the next step.
A study on the subject from the University of Iowa concluded that employees who seem to fit well in their company’s culture, and get along with the other employees (and their manager), had a higher job satisfaction and were more likely to remain at their company, delivering top performance results.
To retain employees and save costs, company culture is clearly a defining factor in the equation. A company that supports performance and productivity, while also encouraging employee development and mental well-being will help employees choose to stay. A positive feedback culture, for example, is a key step in this direction.
Practical tips to help retain your employees
Company culture is the foundation, but a company must build upon those foundations to succeed. In other words, if you can incrementally work on tasks that are aligned with the company culture, you can be more confident in keeping your top talent. Here’s a few tips to drive employee retention.
1. Encourage peer-to-peer relationships
Your team might be passionate about the company product, but it’s their relationships with fellow coworkers that encourage them to stay. Good and strong relationships at work support your team’s long-term happiness. Positive relationships are known to foster better communication, higher engagement, and less stress.
During the pandemic, maintaining healthy relationships has become an even greater challenge. Leaders must be aware that these relationships are an important component of company culture, employee satisfaction and diminished stressed levels, therefore actively working to foster them is a key part of their leadership role.
2. Build employee development programs
As mentioned, a common reason for employees to quit is lack of engagement, career growth, and/or learning opportunities. Your company culture should encourage an environment of performance and learning – the foundation of an employee development program - and then create activities to support this initiative. Activities might be tuition reimbursement programs, formal educational learning in the employee’s discipline, or mentorship programs. A Deloitte study found that mentorship specifically contributes to employee retention, where those with a mentor are 68 per cent more likely to stay with the organization for longer than five years.
3. Implement a personalized digital coaching program
Companies with a strong coaching culture have up to a 62 percent more engaged workforce than those that don’t have a program in place. Digital coaching can close employee skill gaps, strengthen work productivity, or deconstruct negative mental barriers. An established digital coaching program helps employees improve their strengths and work through their weaknesses, but it also sends a clear message to job candidates that your company is dedicated to their employees. Moreover, digital coaching supports employee mental well-being and strengthens behaviours that guard against burnout, making it a great driver for employee retention.
It’s time to stop your top talent from walking out the door. Losing good employees is costly, and it’s strenuous to find new high-performing talent. To improve your employee turnover rate, consider the reasons why your employees leave and how a strong company culture will help them stay. All are important points in supporting long-term employee retention.