Retaining Staff &Reducing Employee Turnover Introduction Employee turnover and the retention of valued employees are major problems facing business in the U.S. The average turnover rate is hovering at 15%. The costs associated with that turnover can be high – generally 25 percent of the individual’s annual salary. Unemployment in the United States is at a 24-year low. Employee loyalty is down.
Never before has it been so critical to focus on strategies for keeping good employees. However finding a solution to high turnover is not easy. One major incentive for retaining employees is the cost of turnover. Keeping good employees increases profits. Employee turnover is a direct drain on the bottom line. Another incentive for employee retention is the high cost of recruiting and replacing valued employees. In a low-unemployment market, employees are increasingly difficult to find.
Many employers are trying to reduce employee turnover with quick fixes, gimmicks, games, and prizes that just don’t work. Organizations are finding that the solutions are more about how you treat employees than tangible items that are given to them. Also, the concept of employee loyalty diminished as employees realized that doing a good job and being loyal to an employer no longer mattered. True solutions require a change in management’s attitudes and behaviors toward employees. The ultimate strategy to reduce the costs of turnover and high recruitment is to manage for retention.
A wait and see approach will not work. Developing a proactive strategy to keeping key employees is essential. Whether it means identifying employees that contribute the most to the bottom line and developing programs that will satisfy them, providing, compensation programs that provide the types of rewards that are important to each employee or taking a closer look at the overall organizations culture, some immediate actions must be taken. Why are Top Talent Jumping Ship? The job market is competitive and the labor pool is shrinking. Employers are more and more frequently vying for the same candidates.
The tight labor market is likely to play increasingly important factors in why some companies are losing their top talent. The current economic situation has created an increase in the amount of employment opportunities and companies are trying everything to woo employees away from their competitors. It is predicted that the job market this year will be the best this decade. Governmental efforts to reduce the budget deficit have led to a reduction in interest rates, which allows business to grow. The U.S. has also grown more competitive in the international business community, which also contributes to an increase in job opportunities. The renewal of the economy has increased some firms sense of national confidence and when businesses feel more confident of the economic future, they are more likely to expand and hire more employees.
Although a good economy has some effects on a companys ability to retain staff there are other factors. Some employees are jumping ship because their needs are not being met. The lack of challenging and stimulating work, fair pay, the tools and resources needed to do their jobs, recognition for work well done and involvement in the decisions that impact their day to day lives at work, factor into their decision to leave an employer. However some employers have found that meeting the basic need of employees is not enough. When it comes to motivating and retaining employees, organizations are finding that they must become increasingly innovative, by offering a number of creative incentives, benefits and services that are designed to make employees’ lives easier and more stress free – at work and at home.
Some employees leave their employers because the skills they possess are in demand, they may be lured away by higher pay, better benefits, or better job growth potential. In this case, a company must take a close look at their organization and determine if they are still competitive. Another reason employees leave is because there was a bad match between the employee’s skills and the job. Employees who are placed in jobs that are too difficult for them or whose skills are underutilized may become discouraged and quit. However, every employee who leaves your company is not dissatisfied.
Some will retire, relocate, quit because of family circumstances, change professions, or even start a business of their own. For these reasons, there is not much an organization can do retain employees. That’s why it’s important to know and recognize the difference between employees who leave because they are unhappy and those who leave for other reasons. Employee Retention Strategies Many corporations use the slogan, People are our most important asset. Similarly, many companies contend that their values support teamwork, integrity, respect, and dignity. While this may sound good, it takes hard, consistent work in policies, statements and actions for employees to believe it.
For example in the banking industry, it is common for banking institutions to treat their teller employees indifferently, paying them the lowest salary and limiting advancement opportunities and then anguish about high turnover rates amongst these entry level employees. Management forgets that tellers are the ambassadors for the company. They are the first to interact with customers and have a huge impact on a customers impression of the institution. If a business wants to ensure that employees remain with the business, it has to identify and emphasize the positive aspects of the business that make employees want to stay. Some internal factors that may influence your employees’ desire to stay are benefits and compensation, pleasant working conditions, opportunity for growth/advancement, and job security. Give employees perks that are perceived by them as benefits that make or break a job.
Job perks like flexible hours or better-than-average benefits might keep employees in a job that they would otherwise leave. Compensation The classic pay philosophy is to provide wages that will attract and retain qualified employees. Being aware of the wage rates in an organizations external market place is critical to its success. If an organizations wage scale becomes too low, the company may lose employees to companies that pay a higher rate. Many companies emphasize total compensation, stating that the total compensation paid by their company is equal to or better than other companies in the market although their salaries may not be.
Variable pay is employee compensation that varies with the organization’s business performance. With variable pay systems the interests of the organization are closely linked to the interests of the individual employee. Variable compensation plans are rapidly growing in popularity. It is more costly to the organization that is performing well; yet the organization that is performing well is better able to afford the expense. A variable pay system works well when the organization’s business performance is equal to or better than the industry average.
However, if an organization is performing poorly while the industry is doing well overall, then your employees’ total compensation (variable plus fixed pay) will be less than other companies in the industry, which could lead to poor morale and/or increased turnover. Profit sharing plans, like variable pay plans in general, are growing in popularity. Profit sharing plans are funded by the organization’s profits based on a specified formula. The profit sharing pool is then allocated to employees, usually as a percentage of their base salary. Currently approximately 40% of compa …