Employee Retention Strategies: Solving Workforce Turnover

Introduction: The Retention Challenge

For many years, a person would go through school, get a job, work at the same company for 40 years, and retire to enjoy the golden years. Today, that is no longer the norm (Lofton, 2006). The gold watch is no longer enough enticement to stay with the same company. Part of this shift may be traced to the nationwide layoffs that occurred across America during the recession of the 1970s. At that time, many people lost their positions, their benefits, and their pensions. The national workforce realized that the loyalty they had been raised to believe in was not extended by their employers when the time came to cut losses. From that point forward, employees began looking out for themselves, and it is now not unusual to receive training in one environment, move on to another company for a little more pay or better perks, and then move again later (Lofton, 2006).

One of the largest problems facing the national workforce today is the retention of good employees. Recently, this company has begun to lose a number of valuable employees to competing companies and industries. The importance of retaining employees who are proficient in their job skill sets cannot be ignored.

Retaining key employees is a top priority. A successful solution will produce more profitable and effective organizations, happier and more productive employees, and more satisfied clients and customers. Losing employees is also expensive. Studies have found that the cost of replacing lost talent ranges from 70 to 200% of each departing employee's annual salary. Costs include advertising and recruiting expenses, orientation and training of new hires, decreased productivity until the new employee is up to speed, and the loss of clients or customers who were loyal to the departing employee. Finding, recruiting, and training the best employees represent major investments. Once an organization has captured talented people, its best return on investment (ROI) requires closing the back door to prevent them from walking out (Jordan-Evans, 2001).

Identifying the Problem

This company currently employs 150 people in various administrative and manufacturing positions. The company has been in operation for 15 years and until recently had enjoyed a stable, long-tenured workforce. Within the past year, however, the company has suffered a 20% loss of employees.

The first step that must be taken is a research study to determine the cause of employee exits. This study will be conducted over a six-month period using several approaches. The first component will be exit interviews: each employee who gives notice of intent to leave will be asked to complete an exit interview with Human Resources on their final day. Until now, the company has never performed exit interviews, which leaves no way of knowing why employees leave. Key questions include: Is the competition offering higher pay rates, better benefits, or other perks? Are the problems internal rather than external? Do employees feel valued as members of the team, or do they feel unimportant? Are managers trained in communication and team management?

These are all elements that must be studied so that we can understand what is driving the sudden increase in employee departures. An exit interview provides employees the opportunity to tell us how we could improve conditions for future employees. They will be encouraged to be open and honest in their assessment of how they were treated and what prompted them to seek and ultimately accept another position.

Key Factors in Employee Retention

The second step in the solution is to address the elements that are creating the desire to leave. A common assumption among managers and human resource professionals is that the number-one reason employees resign is money — either insufficient pay or a higher starting rate at a competing firm. However, research consistently shows that pay is rarely the primary driving force behind job searches and departures.

In 1999, a Hay Group study examined over half a million employees across 300 different companies and found that pay was the least important factor in retention (Jordan-Evans, 2001). The study ranked the reasons employees remain with successful companies in the following order of importance:

With these findings in mind, we need to direct our attention to the top five retention factors and ensure we are targeting those areas for employee satisfaction, while also adding programs that will create a genuine desire to stay.

Conclusion

The problem of employee retention has been growing for several decades. Today, employees do not feel the same sense of loyalty to their employers that previous generations did. Whether this is due to greater workforce mobility, the reduced social stigma of job-hopping, or simply different career expectations across generations, the trend represents a serious and ongoing challenge throughout American industry.

The financial cost of losing trained employees is substantial. When an employee departs, the company must slow production while a replacement comes up to speed, renew various occupational licenses for new hires, and bring in temporary administrative staff whenever an office position becomes vacant. These costs accumulate quickly and erode both productivity and morale.

The time has come for a proactive approach to employee retention. The strategies discussed in this report will begin immediately. The company will reconvene in six months with data to evaluate the effectiveness of these efforts and to assess any necessary adjustments. By addressing the root causes of turnover and investing in the people who drive this company's success, we can build a more stable, engaged, and productive workforce for the long term.

References

DeSena, J. (1991). 25 steps to success: Motivating and retaining valuable employees. Security Management.

Griffiths, K. (2006). How to find 'em and how to hold 'em: Retaining and recruiting employees. Industrial Distribution.

Jordan-Evans, S. (2001). Retaining key employees. Journal of Public Management.

Lofton, L. (2006). Benefits becoming more important in hiring and retaining. Mississippi Business Journal.

(2000). Overlooked plans can benefit key employees on a selective basis. Los Angeles Business Journal.