It’s no longer enough for businesses to simply put together an amazing team. The key to success and longevity in today’s competitive business environment begins and ends with employee retention. The financial implications of a high turnover rate, where the cost of training and recruitment is lost, are high. A recent CAP study found that on average, employee replacement costs a company one-fifth of that worker’s salary. Since those numbers rise according to position and salary (100 percent or more for middle management, and 200 percent or more for upper management) retaining key employees is a critical financial, as well as strategic, consideration for your business.
The Real Cost of Losing An Employee
Before learning how to retain your key employees, it’s important to understand the full impact of a loss. Aside from the cost of advertising, interviewing, vetting and hiring, consider the following:
- The cost of training and management.
- Changes in company morale, where other employees may question why they left.
- A lag in productivity, as it will take time for your new hire to reach their potential.
- A loss of productivity among other employees, particularly in an environment with a high rate of turnover.
- Potential for costly errors as the new employee learns the ins and outs of your organization.
- A disruption in workflow, as the remaining members of your team close the temporary gap left in the wake of an employee loss.
Best Practices For Retaining Key Employees
The time to begin thinking about how to retain your key employees is before you even hire them. Present the job offer with a realistic view of your current company environment, employee expectations, and opportunities for advancement. Employees are more likely to stay with an organization that fulfills the promises made during the hiring phase. Other key employee retention practices include:
1. Identify your key players. Focus on retaining key employees whose departure would have the biggest impact on your company. While high potential employees may seem to be the obvious choice, delve deeper, to include those with exceptional relationships, knowledge or expertise in critical areas of your business. Identify the skill sets of those you hire; you may find that certain employees could be contributing far more than their current position allows. Tapping into, and utilizing individual skill sets can elevate morale, and a motivated employee given the opportunity for growth, is a satisfied employee.
2. Open the lines of communication. Nurture an environment in which employees are comfortable providing honest feedback or offering ideas or suggestions, knowing their voices will be heard. In addition to an annual employee review, make time to meet with staff individually to find out what’s working and what’s not, to ensure your key employees are challenged and motivated and that their needs are being met.
3. Overcompensate. Be clear about the structure of pay, bonuses, and raises, and when they can expect to receive compensation, as well as what they can do to achieve their compensatory goals. Have this type of conversation on a consistent basis to avoid any misunderstandings or employee frustrations. Additionally, one of the best pieces of advice for retaining key employees is to pay them a salary equivalent to or above the market value. A well compensated employee will be much less likely to start looking around for greener financial pastures.
4. Give them room to grow. Your best employees are the ones that aren’t satisfied with their job, but want to grow and develop, taking their careers to the next level. Provide them the opportunity to learn, advance and contribute in new ways, nurturing those talents discovered along the way.
5. Offer employee benefits. In addition to paying your employees competitive wages, a comprehensive benefits package can go a long way towards retaining key employees. Health and dental insurance, a 401(k) plan, vacation time, and flexible spending accounts are just a few of the most desirable benefits in today’s economy.
6. Provide a healthy environment. Financial compensation provides employees with a sense of value, but continue to nurture that value by showing appreciation through formal employee recognition. Positive feedback and acknowledgement can go a long way towards instilling a sense of pride and accomplishment, and provides incentive for employees to remain a vital part of your organization.
PEO services can help your business to thrive, providing solutions for retaining key employees that will stand the test of time. To learn more about how UniqueHR can help your business with employee retention, contact us today.