http://hrsmarteurope.blogspot.co.uk/
Author: Heba Asaad HRsmart employee
Employee retention refers to the ability of an organisation to retain its employees; therefore, it is the effort by which employers attempt to retain employees in their workforce, whereas it becomes the strategies rather than the outcome.
“I don’t think my work is being appreciated by my company. I might as well look for another opportunity where I know I get the appreciation I deserve”. This is a common phrase that we hear frequently now and as a result of this Employee Retention is highly being discussed and targeted in the market nowadays. We see many companies talk and plan on improving their employee retention rate due to high turnover percentages.
One of the facts that companies need to focus on is that employee retention starts from the very first stage of an employee hiring, so finding the right people for the right jobs is the very first step where employee retention starts.Companies need to clearly identify their job requirements to make sure they can hire the right qualified talents. Having said so, when the right people are hired they would be able to excel better in that position and if dealt with in the right manner by the company would remain motivated and perform better. Better and high employee performance result in higher company revenues as well as helping companies better forecast their future leaders.
A recent study done by “The Center for American Progress” (http://www.americanprogress.org/wp-content/uploads/2012/11/CostofTurnover.pdf) show that the cost of replacing an employee is clustered between 10 percent and 30 percent of an employee’s annual salary.
Consider the real "total cost" of losing an employee:
- Cost of hiring a new person (advertising, interviewing, screening, hiring)
- Cost of onboarding a new person (training, management time)
- Lost productivity (a new person may take 1-2 years to reach the productivity of an existing person)
- Lost engagement (other employees who see high turnover disengage and lose productivity)
- Customer service and errors (new employees take longer and are often less adept at solving problems). In healthcare this may result in much higher error rates, illness, and other very expensive costs (which are not seen by HR)
- Training cost (over 2-3 years you likely invest 10-20% of an employee's salary or more in training, that is gone)
- Cultural impact (whenever someone leaves others take time to ask "why?").
And most importantly of all, we have to remember that people are what we call an "appreciating asset." The longer we stay with an organization the more productive we get – we learn the systems, we learn the products, and we learn how to work together.
Consider the following simple chart. It simply shows that initially most employees are a "cost" to the organization, and that over time, with the right talent practices, they become more and more valuable.
Retention drivers vary depending on the age, demographic and role of an employee. The company needs to understand its own retention drivers by role.
Some items to consider as retention drivers:
- Compensation: Compensation plays an important role in employee retention. It is a hygiene factor though because it can play a key role in motivating employees to give their best, but over compensating people won't make up for a poor work environment.
- Job Fit: Are you attracting the right people for each job? Putting the right employee in the right job helps employees excel better. On the contrary, having employees in the wrong job causes them to not be as productive as desired and therefore results in an unhappy employee who would be looking to leaving your company. It is very important that the company compares what are the qualifications needed by a job verses what an employee has.
- Career Opportunities: Planning career paths for your employees and giving them the visibility on this helps motivating the employee in performing the best he/she could to get to that ultimate position.
- Work environment matters: Having the employee feel that they are safe, appreciated and guided to become the best they can be, greatly motivates the employee and favors sharing positive word of mouth about the company they work for in the market which in return helps on attracting new top talents to work for the company and help in achieving company goals.
Employee retention is a serious issue to be addressed by companies especially that in today’s heating economy and rapid shift in demographics, you'll be competing for talent regardless of your industry. In the end the purpose is to hire the right people, to the right positions and at the right time with the least cost lose.
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