Employee retention is one of the main challenges for any company. Whether you call it employee turnover, attrition, or churn, it’s an issue that can put a massive strain on your productivity and affect your bottom line.
To solve the employee retention problem, you first have to understand the challenges involved. This guide covers the main employee retention challenges, why they matter, and actionable solutions.
Let’s get going!
Why is employee retention important?
If you doubt employee retention is a big deal, we’ve got a sobering statistic. According to a Gallup report, employee turnover costs United States companies a staggering $1 trillion (that’s trillion with a “T”) each year. This high cost is due to all the time and effort put into recruiting, onboarding, and training employees only for your investment to walk out the door shortly after.
Replacing an employee can cost anywhere between 50-60% of that employee’s salary while the overall costs can mount from a frightening 90% to an absolutely chilling 200%. Any company that wants to be profitable and successful simply can’t ignore turnover rates. The higher they are, the more you lose in terms of productivity, human capital, bottom line, you name it.
6 main challenges of employee retention
The antidote to churn is retention, but that is often easier said than done. Here are some common challenges to retaining employees.
Let’s take a look at each challenge.
Compensation dissatisfaction
While it is true that money isn’t everything when it comes to employee engagement, the compensation package you offer does play an outsized role. It’s pretty clear why; it’s literally your employees’ livelihoods we’re talking about here.
The salary side of this is crucial, but don’t forget things like health insurance, pension contributions, and paid sick leave. A lack of these can put the employee on the lookout for a company offering those benefits. Furthermore, those in more experienced, senior, or in-demand roles expect additional perks such as on-site childcare, pet insurance, fitness, and learning stipends.
Another thing to consider about employee morale in connection with compensation is bonuses. The best employees and top performers expect you to reward their efforts. Bonuses can be powerful incentives for employees to remain in your company.
Better opportunities elsewhere
It’s no secret that the pandemic and the Great Resignation have changed things significantly in the job market. Employees have many more options now, and they’re not shy about exercising them.
A competitor can swoop in with a better job opportunity—whether it’s more money, more perks, more flexibility, or more career growth opportunities—and pinch your top talent. Nowadays, employees are also much less likely to tolerate any deficiencies in their company that might stand in the way of their career path.
Put simply, you need to be mindful of what your competitors are doing. What are their bonuses like? Do they offer lots of office goodies like catered lunches? What is their company culture like? You also must carefully consider the needs and interests of your employees. What are you not offering that they could likely find somewhere else?
Not enough appreciation and recognition
Everyone likes to be praised and recognized for their hard work and contributions. And yet, according to a Gallup study, fewer than 1 in 3 employees say they’ve been praised for something they did well in the past week. Whether they are new employees who just completed their onboarding or seasoned pros, praise makes the employee experience much better.
It’s all thanks to a little chemical called dopamine, which a sense of accomplishment and praise from others activates in our brains. That’s why employee recognition should be a part of your company culture. ‘Praise publicly, criticize privately,’ is an old management adage for a reason. When team members never get any recognition, even when they go above and beyond, they’ll conclude that the management and the company itself don’t care about their contributions.
And from there, it’s a short walk to disengagement and even the dreaded quiet quitting. Of course, when a better new job opportunity comes along, quiet quitting becomes loud quitting.
Bad hiring practices
Employee retention starts with recruiting. Often, managers and human resource (HR) departments tend to overlook the importance of cultural fit, even though millennials prioritize cultural fit above everything else when it comes to choosing an employer. But no amount of praise and benefits will mean anything if the employee just doesn’t fit in which happens often as each person and each company is different.
However, that doesn’t mean there are no ways to prevent a bad hire. There are frameworks and questionnaires that can help you get to know potential hires better and help determine if they are a cultural fit.
Unfortunately, cultural fit isn’t the only issue with recruiting. Sometimes, people will simply lie. That’s why checking references and thoroughly reviewing an applicant’s work history is a must.
Toxic work environment
A lot has been said in recent years about work-life balance and providing a healthy work culture. But are these just HR buzzwords and baubles, or is there an actual bottom-line effect to caring about employee well-being?
Some interesting stats can show us the truth. Consider these:
- 94% of entrepreneurs and 88% of job hunters say a healthy work culture is paramount for success
- 86% of people looking for a new job avoid companies with a bad reputation
- 15% of job seekers have even rejected job offers because of a perceived lousy company culture
A toxic workplace culture filled with backstabbing office politics, overwork, and unrealistic deadlines is a one-way ticket to Burnout City. To attract and retain top talent, you must offer an office culture that considers work-life balance. And, of course, the less office politics there are, the better.
Unrealistic expectations from the employee
So far, the retention challenges listed have focused on mistakes made by corporate managers and HR professionals. But not all the blame lies there. Sometimes, it’s the employees who simply have unrealistic or unreasonable expectations. For instance, a new hire might expect a much lighter workload than they have. Or they might find your company isn’t as lax about sick leave as they thought.
The best way to prevent this is to be clear about your expectations and the demands of specific roles from the very start. That means from the posted job description to the selection process and into onboarding.
4 employee retention strategies to solve attrition issues
The cure for retention challenges is a retention strategy. And if you don’t already have one, you might want to adopt one of these.
Let’s get into the details of each.
Recruit the best talent
Recruiting talented employees from the get-go goes a long way in reducing attrition issues. You may have to spend a bit more upfront on top talent compensation, but the expense is worth the financial loss of investing in then losing talent that wasn’t right for the job. But you don’t just want to look at their resume and accomplishments. Check some references, and ask how the potential candidate fitted in with their previous teams. That will tell you a lot about the culture fit of the potential employee.
Of course, you’ll want to consider all the challenges of retention. Are you offering enough compensation to attract top talent? What is your company’s reputation like among job seekers? Answering these questions will help you determine how to attract the best people to your company. Exit interviews are a great way to collect such insights.
Focus on retaining the top performers
According to the famous Pareto principle, 80% of outputs are due to 20% of inputs. That’s why this idea is also known as the 80/20 rule. To put this in an HR perspective, 20% of employees drive 80% of your company’s productivity and success.
Logically, you’ll want to focus on retaining them first and foremost. Or, take care of your good employees, and they’ll take care of you. This doesn’t mean you should ignore the remaining employees who still contribute. A good company culture benefits everyone. However, rewarding and recognizing that 20% sets a standard for other employees to strive for.
Get onboarding right
According to a study by Kronos and the Human Capital Institute, 76% of HR leaders say their organization’s onboarding process is underused. Although many say onboarding aims to integrate the new hire into the company culture, only 30% of onboarding programs are devoted to this function.
Whether you’re onboarding remote employees or on-site team members, this process is your chance to familiarize them with your culture and set the right expectations from day one. Onboarding is your opportunity to increase engagement and retention from the start. To make it successful be sure a user-friendly learning management system (LMS) is in place.
Provide professional development opportunities
To keep your employees, there is one factor more potent than money: learning. Polls show that 94% of employees would stay longer in a company if it gave them opportunities to learn.
There are many ways to provide professional development opportunities, such as mentoring programs, upskilling and reskilling, and leadership training.
Boost employee retention rates with the right LMS
Retaining employees is a big challenge. Everyone knows that people leave companies in search of greener pastures. But you don’t have to lie down and let your bottom line take a beating.
One of the best ways to combat attrition is to invest in a learning culture that nurtures employees and allows them to grow as professionals. An LMS like Docebo can power your learning culture and professional development efforts and serve as your company’s knowledge base. To discover how Docebo can help you retain employees through learning, schedule a demo today.