Peter Drucker, the father of management thinking was right when he wrote: “What gets measured gets managed.” So before we begin to explore how to drive employee retention, let’s talk about how you measure employee retention and the steps involved to get there.
How Do I Calculate Retention?
Choose the period of time you wish to measure, monthly, quarterly or bi-annually. Divide the number of employees who left during the period by the total number of employees at the end of the period to get the percentage.
Now I’m no math wiz, so let’s use an example to help explain:
- Let’s choose January to December of the year before as our example period.
- The total number of employees was 1,043 at the beginning of the period.
- You terminated or lost 177 employees by the end of that period.
- You ended the year with 866 employees.
Here’s How to Do the Calculation:
Ok, now let’s crunch some numbers.
- Employees at the beginning of year subtracted by number lost: 1043 – 177 = 866
- Employees at year end divided by those at the beginning: 866 / 1043 = 0.83
- Multiply your answer by 100 to get the percentage: 0.83 x 100 = 83%
In the sample calculation above, this company had a retention rate of 83% and a turnover rate of 17% (100 – 83 = 17). You can use this calculation to figure out what percentage was voluntary turnover, terminated for cause or total turnover.
All companies are going to have some employee turnover. HR professionals want to keep that number as low as possible because it costs time and money to replace an employee who leaves. PeopleKeep sites standard retention rates of 70% – 85%. Note that these percentages vary by industry. HR professionals aim to keep the average employee turnover rate of 10%. Even then, those employees leaving your organization should be your poor performers. Replace them with highly engaged, high performing workers.
What Drives Employees?
So let’s say your retention rate is sky high – there’s always room for improvement right? And now that we know how to calculate our retention rate, let’s dive into how we get the most out of our workforce by keeping them engaged and incentivized.
Here are ten tips to get you started:
1. Onboarding and Orientation
Right from the beginning, new hires should feel welcome and valued. You have spent a lot of time recruiting them to join your team and now they are coming in with all the excitement of a new job and meeting new colleagues. How you treat them during this process sets the stage for their success and engagement with your company. Make the most of this important opportunity and be prepared with an onboarding plan.
Make sure your new hire knows what time to arrive and who to ask for. Have the receptionist greet them warmly. Introduce them to their new colleagues and arrange for their supervisor to take them to lunch. These activities leave a lasting positive impression with your new hire that they will remember throughout their career with your company.
2. Compensations and Benefits
Having an excellent compensation package is the number one driver in attracting top talent according to Willis Towers Watson. It’s also the top retention driver. Your company should offer the best benefits package possible. While salary and bonuses may be at the heart of this package, paid time off (PTO), health insurance, vision and dental, maternity leave, 401k and company match, long and short-term disability, sick and vacation time are also very important to employees.
3. Recognition and Reward Program
Who doesn’t like a pat on the back?
The best companies have a recognition and reward program to keep their workforce engaged and “catch them doing something right.” Even if your company has to create such a program, you can start by having supervisors send thank you cards for good work or an email with a nice comment. Some managers give an employee a gift card for doing something special. For superior work, a manager may even approve a day off.
Some companies have formal incentive programs and others are less structured. Even if your company has a small budget, you can create a big impact with a recognition and rewards program.
4. Work-Life Balance
In today’s harried world, employees are stressed and work long hours. No one can keep that up forever before they burn out. Companies who recognize employees who work late to finish a big project by providing an extra paid day off reap the reward of a refreshed and productive worker.
Having a company culture that encourages employees to take all of their vacation time without calling in or checking email will find that people come back recharged and ready to work at a high level again. Managers should model that behavior so employees believe it’s okay to use all their vacation days. Companies who discourage vacation time will see their turnover rate rise.
Here’s a quick rundown of countries and the number of vacation days the top countries provide vs the United States:
- Austria – 35 days
- Portugal – 35 days
- Germany – 34 days
- Spain – 34 days
- France – 31 days
- Belgium – 30 days
- Italy – 30 days
- New Zealand . – 30 days
- United Kingdom – 28 days
- Canada – 26 days
- United States – 13 days
5. Professional Development
Employees want the ability to learn and grow in their jobs so they can progress in their careers. By providing training and development to assist them, you increase the chances that they will stay with your firm. You can have an internal program of training during the course of their career path. With today’s technology, you can accomplish this with a good Learning Management System. Many systems now have the capability to allow employees to take training programs on their cell phones.
A mentoring program pairing new people with veteran workers is also effective for both groups. Mentors should not be the employee’s supervisor. The newer people will learn the skills to be successful from those who already are excellent in their work. Conversely, the veterans will learn how to coach and mentor, preparing them for a manager or leadership position in the future.
Lastly, including tuition reimbursement in your benefits package encourages employees to pursue advanced degrees and most won’t leave the company while they’re in school. Be prepared to utilize their advanced skills by making senior leaders aware of those earning degrees so they can begin planning where in your organization those employees can be placed upon graduation – or before.
6. Communication and Feedback
Let’s talk about it.
Communication is a critical skill in today’s workplace. Direct reports should feel at ease in going to their supervisors with ideas, questions, suggestions, and concerns. They should feel that they will get a straightforward and honest answer. A culture of open communication is invaluable in bringing innovation to the surface, as well as addressing issues before they become major problems.
Managers should connect with employees regularly to check in on what’s going on in their projects and teamwork. Asking insightful questions and having a regular conversation with their direct reports is important in generating ideas and solving problems.
Today’s worker likes feedback on their work much more often than their predecessors did. Millennials especially seek constant feedback and this allows them the opportunity to learn what they did well and what they can do to improve and contribute more to the company.
7. Stability and Change
When a company is undergoing change, the single most important thing leadership can do is communicate often. A company may be involved in a merger or acquisition, contemplating layoffs, planning a re-organization, moving to new corporate headquarters, or another major change, and guidance and information from company leaders will reduce stress and gossip.
No matter how much information leadership has, even if the change is stalled for any myriad of reasons, management should communicate to the employee base. People worry about whether they might be losing their job or whether the company moving to a location they can’t commute to as easily, if at all. The more information you can tell employees, the more people can accept and adapt to their changing environment.
8. Culture and Environment
Foster a culture of teamwork and collaboration. Employees spend a disproportionate amount of time at work and it’s important that their contributions are valued by their peers and managers. Managers should make sure that their direct reports are treated fairly. As part of that, managers must communicate their objectives and goals clearly.
Direct reports should know what is expected of them and their teammates when collaborating on a project. They should also know how they are going to be evaluated on their work. Above all, make sure that company and department policies are fairly applied to everyone.
9. Celebrate Wins
Celebrate wins and milestones the team hits. Whether it’s a team project or a new baby, celebrate together. Having events such as a summer picnic, a Halloween and holiday party make people feel engaged, respected and more loyal to the company.
Companies may schedule events together which serve as team-building activities to bring people together. This is especially important after a merger or acquisition when acknowledging the old helps to build the new.
10. Assess Your Employee Retention Strategies
Once a year, assess the effectiveness of your retention strategies. Begin by calculating your retention and turnover rates. Find out what is important to your employees by doing an employee survey to determine what is most important to the people who work in your organization. Make changes to your strategy based on the responses of your workforce.
However you decide to reward your employees, remember every company, every team, and every individual is different. What works for one will not work for all and the skill is finding the right balancing and making adjustments as you go for consistent optimization. In the long run, your company and your employees will thank you.