How to improve employee retention: 5 powerful strategies
Like many startup founders, I started CharlieHR expecting (and hoping) that our small team would stay together until the bitter end.
A lot of small business owners and first-time entrepreneurs think this, especially when they’re first getting started. When you’re so deeply invested in your vision, it’s an easy mistake to make to think that everyone else on your team is as invested in your mission as you are.
Unfortunately, this is rarely if ever the case. People are complicated. Your team members have their own needs, dreams, goals, and career ambitions. At some point, the reality sets in that employee turnover is a fact of reality in every business cycle.
Realising this forced me to reassess how we approach HR and treat our most important asset - our people.
There comes a time when every founder, business leader and entrepreneur realises that employee retention isn’t an “HR problem” but a fundamental driver of your business' success and growth. Improving employee retention isn’t just about hiring the right people, but about knowing how to keep them.
Understanding employee turnover
Let’s start by defining employee turnover as the rate at which employees leave a company, whether voluntarily or involuntarily. Every company is eventually going to lose people, no matter how efficiently it's managed. The best you can hope for is to keep it as low as possible.
Calculating your employee turnover rate is fairly straightforward. First, determine the number of employees at the start (E_beginning) and end of the period (E_end), and the number of employees who left during the period (E_left). You can use the following formula:
Employee Retention Rate = [(E_beginning - E_left) / E_beginning] * 100%
This is useful in measuring how high your employee turnover is, but to get the whole picture, you need to understand what factors improve employee retention, and the reasons why employees might leave.
- Lack of career development opportunities: If employees don’t see a clear future for themselves or if their long-term goals no longer align with your company’s, they’re more likely to leave. Roles that offer little in the way of career advancement or future growth can be more likely to lead to employee dissatisfaction and turnover
- Insufficient compensation and benefits: At the end of the day, no one works for free. If your team members don't feel that they're adequately compensated for their hard work or if their benefits package doesn't fit their needs, they may feel as though their role is no longer worth it and look elsewhere. You can account for this by regularly reviewing your compensation strategies so that they are in line with or competitive with industry standards
- Lack of recognition: Employees want to feel seen, validated, and appreciated for their work just like everyone else. Offering regular constructive feedback and acknowledgement of their accomplishments can help boost their morale and keep discontent to a minimum
- Poor management and leadership: How well the captain is staying the course has an impact on how many people jump ship. Your employees are more likely to leave if they feel like you don’t support them or like you’re breathing down their neck
- Negative workplace culture: Nothing can turn an otherwise good job into a day-to-day grind like a toxic workplace atmosphere. Promoting a positive, inclusive culture where employees feel comfortable and safe goes a long way towards getting them to stand by you
Understanding the causes of employee turnover is the first step towards helping them feel valued, and like they see a future at your company.
The impact of high employee turnover
The impact of a high employee turnover rate is manifold.
For one thing, replacing employees who leave is costly. The UK in particular has one of the highest employee turnover rates in Europe with an average of 16.8% of employees leaving their jobs per year.
When you consider the resources, assets and money involved in recruiting, training, and onboarding new people, it adds up very quickly compared to what you save by investing in your employees’ growth and enabling their success. The cost of replacing an employee in the UK can be between 30% to 200% of their annual salary.
Not only that, but it impacts your organisation’s ability to function and your team’s productivity. New hires usually need at least a few months to get their bearings and learn the lay of the land before they can do their best work and really be part of the team.
A high employee turnover rate has a way of building and spiralling out of control. The more employees start leaving, the more frequently the team members who are left will start thinking about doing the same.
5 strategies for improving employee retention
Finding ways to retain employees is not a one-size-fits-all approach where the same strategy will work for every company. Increasing your employee retention rate involves a holistic and flexible combination of strategies aimed at improving your employee experience and making your company a better place to work.
1. Career development opportunities
Employees are more likely to mentally check out at their jobs and eventually leave when they don’t see a future at your company. Invest in your employees' growth by creating mentorship programs, creating training opportunities, and consistently offering different progression paths.
Check in with your employees to discuss their career ambitions and their potential growth opportunities at your organisation.
2. Competitive compensation and benefits
When all is said and done, we all work because we want to make money, pay our bills, build wealth, and save for the future.
Pay attention to industry standards and make sure what you’re offering your team members meets or excels the going rate in your industry.
You can also explore different benefit options like wellness programs and offering flexible remote working options. Employee perks such as gym memberships and shopping discounts are another common benefit. For example, with CharlieHR’s software, your team members get access to thousands of offers on entertainment, dining out and wellbeing programs, at no added cost for you as their employer.
Benefits like these, although not monetary, can be just as valuable.
3. Give recognition for good work
Showing appreciation for your team members goes a long way towards retaining your best talent. This can be as simple as a shout-out during a team meeting. For example, with CharlieHR, employees can shout-out their teammates using the platform, which triggers a notification on Slack for the whole company to see.
The key is to make recognition authentic, sincere and meaningful.
4. Transparent performance management and communication
An effective performance management process helps you keep a pulse on your employees and how likely they will stick around for the long haul. Schedule regular one-on-one check-ins rather than annual reviews, and create objective, realistic, and fair performance metrics. Make sure your team members clearly understand their goals and expectations, how they’re evaluated, and how they can improve.
You can use a performance review tool to reduce the admin around running performance reviews and to make feedback second nature with your team.
5. Use HR automation tools to measure engagement and boost retention
To make your existing employee retention strategies and processes more effective as your company scales, HR automation platforms like CharlieHR can be a huge boon when creating and setting employee retention rate goals.
CharlieHR’s engagement surveys feature can help you gather accurate data about your employee satisfaction and retention rates, and help facilitate communication between employees and leadership.
After all, if you don't know how your team feels about working at your company, you'll never be able to make any workplace improvement to keep people for the long run.
Ways we retain our employees at CharlieHR
Honing in on your HR processes to optimise employee enablement and and your retention rate is a continual and ongoing process. You’re not going to get everything right, and you’re going to make mistakes on the way.
After a few years of trial and error, here’s what we found works for us at CharlieHR to retain our best and brightest employees:
- Flexible working hours: The 9-to-5 model is very limiting and stifling for some people which is why we don’t have fixed working hours. As long as our team members achieve what’s expected of them, it shouldn’t matter where or what time of day they do it
- Remote working: All of our team members at CharlieHR can work from anywhere in the UK. Our office is available to anyone who wants to use it, but we don’t mandate a set number of days of the week that people need to come. All our employees can also work from anywhere in the world for a maximum of 90 days per year
- 9-day fortnight: This is our own special take on the 4-day work week. We have every other Friday off company-wide with no negative impact on salary or annual leave days. This is a big draw in terms of employee retention because this benefit is rare in the UK
This is what we’ve found works for us, but how you improve employee retention at your company may look different.
Retain your best talent with Charlie's HR software
Calculating and improving your employee retention rates requires a well-rounded, thoughtful approach tailored to your company’s structure and stage of growth.
If you notice that your once loyal employees are looking at the door and you don’t understand why, it’s time for you to take a critical look at your current practices and find out what’s going wrong.
Employee retention tools like CharlieHR can help you identify the sources of employee turnover and fix them. Start a 7-day free trial of CharlieHR today, and make your company an even better place to work.