The cost of employee turnover is outrageously high. When a company loses a salaried employee, it can cost anywhere from six to nine months’ worth of the departed employee’s salary to hire a replacement. This means that if an employee is being paid $40,000 a year, the cost of everything from recruiting to training expenses will be around $20,000 to $30,000. In addition to costing your company a fortune, it can discourage talented employees from joining your organization. High turnover is one of the major red flags job seekers look for when considering a new employment opportunity.
Here are four ways companies can step up their game and hold on to the talented employees they worked hard to acquire:
1. Get rid of top-down management
Everything in the business world is evolving and the concept of management is not immune. Many of the old rules and practices no longer apply, and the lack of a modern workplace philosophy is forcing skilled workers to leave their current company and take their talent elsewhere. The top-down approach to leadership and ruling with an iron fist is no longer a popular way to run a business.
In today’s workplace, the term “collaborative leadership” is commonly cited as a strong approach to employee management. This concept emphasizes leading by example and focusing on both corporate and individual benefit. For instance, Jacob Morgan, author of The Future Of Work, explained in a Forbes article how AMP Bank in Sydney, Australia makes it a point to sit down with each employee to explain how new technologies and strategies can benefit both parties.
It’s important to realize the vital role management plays in the development of a company. Gallup estimates that managers account for 70 percent of the variance in employee engagement scores across business units. Great leadership is a crucial factor in retaining employees; it goes back to the famous saying that “people don’t leave jobs, they leave managers.”
2. Learn what millennials want
By 2020, it’s estimated that nearly half of the workforce in the United States will be comprised of millennials. Therefore, it is crucial to determine what these younger employees want out of a company. Ask yourself the following questions:
Millennials are looking for more than just a job with a steady paycheck, they want careers in which they are engaged with their company’s goals, and can develop their professional skills. A 2014 survey conducted by the Harvard Business Review and The Energy Project found that employees are most engaged when these four core needs are being met:
- Value – Being cared for by their supervisor
- Purpose – Finding significance in their work
- Focus – Prioritizing
- Renewal – Ability to take needed breaks
Regardless of the age of the employee, there is nothing worse than being stuck at a job that isn’t motivating. Fostering employee engagement can be difficult. However, emphasizing honesty and transparency for both company and employee alike can be integral in obtaining uninhibited employee feedback to gauge the direction of your workforce and what motivates them.
3. Promote a culture of innovation
Everyone wants to be involved in a cutting-edge organization. Companies that want to remain ahead of their competitors must do their best to promote this mindset both internally and externally. For starters, when you’re advertising a job opening, take a step back and examine what your company is doing differently than similar organizations. Once you have a firm answer, drive this idea home and showcase what your business is collectively bringing to the big picture compared to your competitors.
Based on your business, this can be a daunting task. But, regardless of what product or service you provide, there is always room for innovation. Take Michelin for example. Tires might not seem like an innovative product but the science behind how rubber interacts with the road is complex. To promote a company-wide innovative mindset, Michelin sponsors cross-functional hackathons and internal incubators where employees are free to take risks and come up with new ideas for the good of the company.
Making sure that innovation is a strong aspect of your culture can play an enormous role in keeping employees engaged and motivated.
4. Recognize and reward employees
While this one might seem obvious, it is still accurate: everyone likes to know their hard work is being noticed. Great employees are hard to find, and even harder to keep. So when you notice colleagues going above and beyond the call of duty, it’s important to provide plenty of recognition and rewards to encourage repetition. Recognition is essential to employee engagement and The Corporate Leadership Council shared in a recent report that highly engaged employees are 87 percent less likely to leave the organization.
Events like company-sponsored happy hours or weekend getaways celebrating a strong quarter can go a long way in demonstrating to employees how much their work means to an organization. Going beyond these types of “job well done” gestures, making sure top performing employees are appropriately compensated is the most important factor in employee retention.
To address this, you can try setting up recognition and rewards programs that encourages daily praises and constant appreciation. Or consider implementing programs within the workplace that are transparent when it comes to pay raising goals, such as merit-based pay structures. Just be sure to set goals at a level in which employees will need to put their best foot forward, while remaining reasonably attainable.
Talented workers tend to know their worth. If you are not paying them appropriately, they will have no problem finding an organization that will.
Over to you
Retaining high performing employees in the current business climate is very challenging, and with the many detrimental costs of employee turnover, your company’s bottom line could be adversely affected. If your turnover rate is higher than you would like, it might be time to take a close look at day-to-day operations and find the root cause as to why people are so willing to leave your organization. Sometimes, it is a simple fix. Other times, a complete organizational reinvention is needed to ensure the external perception of your organization matches the internal. At the end of the day, a company that focuses on engaging their employees, whether through strong leadership, culture, recognition, or rewards is on the right track to reducing turnover.
To learn more about employee turnover, check out the blog post How to Spot Who’s Going to Quit Next.