Employee Retention: strategies to reduce turnover

Employee retention is encouraging talented and skilled employees to stay until the completion of the project. Employees are the assets of an organization that ensure the long-term success and health of that organization. Unfortunately, studies mainly focus on turnover factors. Most importantly, studies should investigate those factors that encourage the employee to remain in the same organization for a longer time and feel attached to it. In 2001 Stauss defined employee retention with two subsets: emotional-cognitive retention constructs (trust, commitment, and customer liking) and behavioral intentions (readiness to recommend and repurchase intentions). Replacing promising and skilled employees is costly and has adverse impacts on service delivery and productivity. Hence, HR management should converge their policies to generate an encouraging working environment where employees meet their needs. Providing employees’ needs to the extent that makes them feel admired and valuable is the first step toward employee retention.

Factors affecting employee retention

Employee retention is the key to organizational success. Employee retention factors can be categorized into three groups: mental, physical, and social. Working characteristics like the opportunity for growth, training, job security, and work-life balance are those factors that mentally impress employees. For instance, involving employees in the decision-making process, reward them, and make them feel recognized, besides self-perceived leadership skills construct social interactions in the workplace. Physical factors are compensations and work environment. If all these factors exist in an organization, it will not only help to attract new employees, but will also encourage the existing employees to remain in the organization.

Promotion and opportunity for growth 

To motivate talented employees they need to know the competitive advantages and development opportunities. Arguing competitive advantages in the career for employees leads to more commitment.

Training and development 

Organizations should invest in career development and employee training to keep leading edge in their competitive field. As the rate of technological development is so fast, companies need to keep their team knowledge updated to benefit from these facilities. Although the organization should investigate in advance to find out which department is the most profitable one for investing in.

Job Security in employee retention

Studies have proven that the concept of job satisfaction and job security are entangled to another. Dissatisfaction leads to insecurity and it affects performance and commitment adversely.

Work-Life balance

The employee will feel exhausted and stressed if there is no boundary between his/her work and life. If work demands intervene in personal life (like working during holidays), it can progressively disengage employee and affects retention. In 2006 Australian Telework Advisory Committee showed that 70%of those businesses that involve their employees remotely benefit from several advantages. Including productivity, reduced costs, improved employee flexibility, and work-life balance.

Participation in decision-making

In modern business, employee-employer relation is highly important. It encourages employees to involve their team in all business affairs and decision-making. Therefore, the sense of belonging in employees enhances and makes the working environment more pleasant.

Reward and recognition in employee retention

Offering reward in the response of the employee performance has a positive impact on their loyalty. Employers show the employees how valuable they are in the organization by recognizing and appreciating their work.

Leadership Skills in employee retention

Leadership skills and style in an organization directly affect job satisfaction. What’s more, Indirectly affects the level of staff commitment and overall organizational productivity.

Compensation in employee retention

The level of monthly salary and benefits is the first employee retention technique that crosses one’s mind. Studies showed that payment does not stand at the top of the list factors influencing turnover, yet it can critically reduce turnover and increase commitment. This highlights the significance of established payment strategies by organizations.

Work Environment in employee retention

Organizations should notice and provide their employees’ needs to make their working environment comfortable and pleasant. Employees need a private and quiet place to concentrate on their tasks. Such HR policies motivate employees and make them commit to the organization for the long term.

Job Satisfaction 

All employee retention factors have a direct relationship with job satisfaction. To satisfy an employee with his/her position, a set of psychological, physiological, and environmental factors should be provided in the working environment. Job satisfaction is the overall positive or negative emotional state of the job. Employee expectations include autonomy, fair payment, a secure and private working environment, and recognition from colleagues and employers. As far as these expectations are fulfilled the employee is satisfied with his/her job and he/she is productive in his/her role. The effects of intrinsic job satisfaction factors such as job tasks, content, variety, self-growth, and self-fulfillment should not be neglected. There is a negative correlation between job satisfaction and absenteeism and turnover rate. Overall those employees who feel satisfied with their job tend to stay longer with the organization and less be absent.

Employee Turnover costs

Employee satisfaction is one of the most challenging strategies that HR management confront. Analyzing and understanding the human mind and personality is very difficult. Since the employees’ personalities and expectations are very diverse, there is no single strategy or solution for employee retention. In 2001 Harrington examined the various predictors of intention to quit a job and his findings showed that emotional exhaustion, dissatisfaction with salary, and promotional opportunities were the main predictors. Besides, there are too many job opportunities for talented and skilled employees. Society for Human Resource Management reported that 75% of employees are actively looking for a new job.

HR management should consider the imposed expenses due to recruiting new staff to replace the vacant position. The imposed expense is approximately half to double the former employee’s salary. Advertising vacant positions, interviewing candidates, and training the new employee for the open post would take time and cost too much. For instance, in Germany recruiting a new employee would take up to 6 months and could cost up to 40000 euros. Such additional costs can jeopardize an organization’s productivity. Those organizations that understand the turnover predictors and try to change the ambiance could survive from the sudden quits and additional expenses. So it is the HR duty to manage these challenges and satisfy the staff to remain with the company as long as possible.

Das, Bidisha Lahkar, and Mukulesh Baruah. “Employee retention: A review of the literature.” Journal of Business and Management 14.2 (2013): 8-16.

By: Yassaman Djafari, September 2020