Why is Employee Retention Important Anyway?


It Affects More Than Your Bottom Line

Why is employee retention important? Because employee retention techniques provide the glue that keeps your team in place, helps motivate staff members to remain productive, and encourages loyalty. The amount of effort, and the amount of importance, you place on employee retention translates directly to:

  • Bottom-line profits

  • Employee effectiveness

  • Team assimilation

  • Loyalty to management goals

  • Pool of promotable employees

Just in monetary costs alone, you can lose as much as 150% of an employee’s salary when he leaves — up to 200% for managers and executive positions. Then there’s the cost of time spent searching for replacements and getting new hires up to speed. And of course, your team ultimately loses momentum as ongoing project efforts slow down while new people get up to speed.

A Nightmare on Corporate Boulevard

Joan has moved up quickly in the company and now leads your sales team in productivity. She’s been a mentor to new staffers, and you have her on track for a senior management spot within the next year. Then Joan gets the call from your competitor with a better offer. Hopefully, you had her sign a non-compete contract so she can’t take her current clients with her.
Even with a non-compete contract in place, you can still expect to pay for:

  • Extra staffing to perform her duties while you recruit a replacement

  • Advertising and recruiters

  • At least 50% of lost revenues from her channels

  • Onboarding costs of new hire

  • The productivity slump felt in the rest of the team, reeling from the loss of their star

  • Customers who really preferred to work with Joan

If Joan made $100,000 per year, expect your failed employee retention efforts to cost you somewhere in the neighborhood of $150,000 to $200,000 before you can even begin to get back to where you were before she left.

Was It All Just a Bad Dream?

employee bad dream

Employee retention requires a concerted, proactive effort on the part of HR, company executives and front-line managers. It is important to have effective employee retention as part of your company culture. It’s built into the overall company objectives and goals. Keeping trained, talented staff members is important to retain your big clients.

But the reality is that you will wake up one day to find your best employee or manager has jumped ship for more money, bigger opportunities, loftier promises or just for a change of environment. In fact, the average American worker lasts only about 4.6 years in a job.

Why They Leave

Employees leave their jobs for a wide range of reasons. While some are reluctant to move on because of the relationships they’ve built and the gratitude they feel for the opportunities you gave them, others can’t get out the door fast enough if they were unhappy and unfulfilled:

Example #1

John was never happy at the firm. He didn’t like the way he was ignored when he first started, and the commute was much longer than he anticipated. He felt his contributions to the team weren’t welcomed or valued. He left every day at closing time and took all his sick days and vacation time as soon as he earned them. John brought exceptional skills, talents and education to the job, so when he was approached by a recruiter, he didn’t hesitate.

Example #2

Mary loved the company and the people with whom she interacted every day. She felt welcomed and appreciated in her various roles. She was often the last person to leave the office. Her supervisors valued the work she did and frequently communicated their sentiments. Mary was on track for a promotion soon. At the same time, she was struggling to pay for her mother’s round-the-clock care from a recent stroke. When a competitor offered her a substantial increase, she reluctantly took it. The importance of having a clear employee retention plan in place that includes open communication could have prevented these losses. Here are two specific strategies:

  1. Develop a company culture in which employees can discuss their personal difficulties as well as their feelings about their jobs. The Wall Street Journal calls it a “stay interview.” Instead of focusing on exit interviews, pre-empt some departures by finding reasons for employees to stick and stay.

  2. Keep up with the industry standards for pay and perks so that your competitors can’t undermine your employee retention efforts with better salaries, bonuses and stock options. Your regular market research should include information about industry and area pay scales.

Important Tips to Improve Employee Retention

Now you know why employee retention is important. Even if your employees are going to leave sooner or later, you can take steps to increase the amount of time your employees stay and lower the replacement costs you incur every time someone leaves. Create a stable and productive workforce by:

  • Adding employee retention into every manager’s job description.

  • Reviewing your onboarding process so that new hires get acclimated smoothly and appropriately.

  • Improving your hiring guidelines to ensure a good fit both technically and culturally with your organization.

  • Rewarding longevity with perks like extra days off, flextime options, work-at-home opportunities, bonus pay and stock options.

  • Providing benefits that include retirement savings plans and health insurance.

  • Paying for continuing education and attendance at industry conferences and out-of-town meetings.

  • Setting clear career path objectives for those outstanding employees who have the drive and dedication to participate in the company’s success — and giving those employees sufficient time and opportunities to achieve those goals.

Importance of Employee Retention: Efforts Will Pay Off

Review for employee retention important

Hiring the right employee is not an easy proposition. You invest significant time and resources in the process. You continue to invest in your top staff throughout their tenures with the company. The longer employees stay with the company, the more they comprehend your vision and process, the more they have to contribute and the more effective they are at serving as an example for the rest of your staff. It is essential to take measures to increase employee retention rates to build a strong, loyal, dependable team of top performers.

To recap, what makes employee retention important? No matter what industry you’re in, employee retention is important for the success of your business. So, schedule a meeting with the decision makers in your company today and get started on the road to retaining your best employees for a long successful career with you and you alone.

The Author

Straight from the desk of

Kimmel & Associates

Kimmel & Associates

Marketing & Communcations

Kimmel is an executive search firm located in Asheville, North Carolina. Our professional recruiters are committed to exceeding client expectations. They work with the same dedication, honesty, and attitude of service that has been the Kimmel standard for over 34 years.

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