What do your employee turnover numbers look like? Hiring top talent is great but retaining that talent will be far more beneficial to your business performance. If you wait until your employee hands in their resignation to find out how they feel about work, you are missing a valuable opportunity. You will miss the chance to keep a valued member of your team; and you will also miss the opportunity to identify and fix issues within your organization.
Developing an employee retention strategy that appreciates and acknowledges your employees and their needs will allow you to retain top talent within your company. Higher levels of employee retention will also benefit your business bottom-line and ongoing performance.
What is employee retention?
Employee retention is often shown as a statistic to showcase the percentage of employees that have remained in your business for a fixed period of time.
This is calculated by working out the total number of current employees minus the total number of employees that left. This figure is then divided by the total number of employees which is then multiplied by 100 to give you your employee retention rate.
Employee turnover relates to the percentage of employees who leave your business. You may often hear companies talk about their staff turnover rates when discussing employee retention. Across all industries, the average employee turnover rate in 2019 was calculated at 3.7%. Keeping this average turnover rate in mind, a 90% employee retention would be considered a good employee retention rate. However, the average employee retention rate may differ based on different industries.
According to research by Jobvite, 33% of new employees quit their job within the first 90 days of employment. Reasons for leaving include the job not being as expected, misinformation about the company culture, and poor leadership practices. Understanding why an employee leaves can be an important component in learning how to improve your employee retention rate.
Why is employee retention important?
Now, you might be wondering why employee retention matters so much. Investing time, energy, and resources in improving your employee retention rate can have rewarding benefits for your business.
Having a high turnover rate can be costly for your business. Recruiting, replacing, and re-training employees can have a significant financial strain on your company. The Society for Human Resource Management (SHRM) estimates the average cost of replacing a salaried employee as being equivalent to 6 – 9 months’ salary. For an employee earning $60,000 per year, that totals approximately $30,000 to $45,000 in recruiting and training costs. Naturally, your finance department would much prefer you to reduce those overheads by ensuring you have a strong employee retention rate.
Cost isn’t the only important factor involved in employee retention. A high turnover rate can also be damaging to your business performance. Focusing on employee retention could positively impact your business performance by ensuring stability within your team and, in turn, within your processes.
Employees who are happy in their jobs are more likely to stay and will also be more productive and produce a higher quality of work. Of course, in some situations, a new hire could help bring a new perspective and productivity to your business. Therefore, it’s important to frequently check in with your employees to make sure they are satisfied and performing optimally.
How do appreciation and acknowledgment affect employee retention?
Employee appreciation and acknowledgment are two factors that can positively impact employee retention. By making employee appreciation a central part of your business strategy, you can help to improve the employee retention rate of your organization.
Appreciation can be defined as the “recognition and enjoyment of the good qualities of someone or something.” Therefore, by showing your employees that they are appreciated, you are informing them that they are an integral member of your team and the wider company network.
Research by TINYpulse states that 21.5% of employees who don’t feel recognized when they do great work have interviewed for a new job. In contrast, this figure was only 12.4% when employees do feel that their work efforts are recognized. Further to this, a report by Appirio found that 60 percent of surveyed employees highly valued being appreciated by management, and that appreciation played an important role in their decision to remain with an employer or interview for a new role.
From this research, it is evident that appreciation and acknowledgment should form part of your employee retention strategy. In order to effectively implement a successful retention strategy, it is also important to understand the driving forces behind those feelings of appreciation.
The psychology behind appreciation and acknowledgment
In order to increase employee retention, you must first understand the psychology behind appreciation and acknowledgment. By doing this, you will be able to better understand what makes your employees happy.
Appreciation and acknowledgment are, at their core, constructs of intrinsic motivation. In psychology, there are two types of motivation: intrinsic and extrinsic. Intrinsic motivation refers to the act of doing something without any external reward. Someone who is intrinsically motivated will engage with a task because they enjoy it and get personal and internal satisfaction from it. On the flip side, extrinsic motivation refers to the act of doing something in order to gain an external return.
Goals that are intrinsically motivated will be focused on outcomes that satisfy your basic psychological needs for autonomy, competence, and relatedness. In a work environment, this could refer to feeling like you are part of a team or having your hard work be acknowledged. Another example of workplace intrinsic motivation would be taking on more responsibility because you enjoy being challenged and feeling accomplished.
A report into the psychological effects of appreciation and acknowledgment in the workplace found that appreciation and acknowledgment were two important tools in worker motivation and organizational success. By regularly expressing appreciation for employees, employers can also minimize their employee turnover rate. This report also highlighted when employees feel appreciated and esteemed for their commitments at work, it leads to increased employee commitment and lower staff turnover.
Creating a culture of appreciation and acknowledgment
There are several ways that you can harness a culture of appreciation and acknowledgment within your workplace. In order for employee appreciation to have significant effects on your employee satisfaction and retention levels, it needs to be ingrained into your company culture. Simply setting one day a year aside to champion employee appreciation will not be enough.
You can create a culture of appreciation and acknowledgment by allowing employees to provide feedback without judgment or risk of repercussion. If employees feel like their voices are heard, they will be more likely to feel valued at work.
You should also ensure that a culture of appreciation is evident at all levels of your business by encouraging employees and managers to show gratitude for one another. One way to do this could be through employee of the month nominations, or encouraging employees to give positive (and genuine!) feedback to another team member during daily stand-ups.
Other ways to instill a culture of appreciation include offering valuable rewards to employees that work hard, celebrating employee effort rather than outcomes, and analyzing your company values to make sure they are reflective of an appreciative company culture.
Investing in your employees as a way of showing you care
Employee training and development can also be a crucial factor in ensuring a high staff retention rate. According to LinkedIn’s 2018 Workforce Learning Report, 93% of employees stated that they would stay at a company longer if it invested in their careers.
Investing in your employees shows that you care about them. By providing your employees with learning opportunities, you are letting them know that you value their input and that you care about their long-term success. This shows your employees that you are focused on their personal growth and long-term performance, rather than focusing on short term business objectives.
Therefore, if you really want to show your employees that you genuinely value them, you should look to invest in employee learning and development opportunities.