How long an employee stays with a company is referred to as employee retention. Average or median tenure can also be used as a measure of how long employees remain with a company.
The number of employees that leave a company in a given time, usually a year, is referred to as employee turnover. On the other hand, employee retention refers to how many employees a company manages to keep over a specific period.
Tracking turnover is essential for businesses since it can be expensive to replace personnel. Retaining employees have a greater rate of return than recruiting new ones, like consumer retention.
Additionally, staff retention is a critical metric that can be used as a competitive advantage. When a corporation is shedding workers, it’s usually a sign that something is off.
The opposite is true for an organization whose employees have long-standing histories of building their skills, knowledge, and relationships within the organization.
When an employee leaves a position vacant, seeking, hiring, and training a replacement takes time, money, and effort. Separation expenses, such as severance money, are possible.
A Gallup study found that the cost of replacing an employee can range from one-half to two-thirds of their annual compensation. Over half, a trillion dollars might be saved per year based on Gallup’s findings that 52 percent of voluntary turnover is preventable and the average voluntary turnover in the United States.
Additional costs include lost production while the position is vacant. For a new hire to match the productivity of an employee who left, it can take a year or two.
As a result, the morale and productivity of the remaining staff can be negatively impacted, resulting in lower revenue, less efficiency, and higher turnover.
The information, skills, and connections you lose due to a departing employee are additional costs. If you have to start over with a new employee, consider even the money you invested in training the previous employee.
When you let an employee go, you also miss out on their future value to the firm, especially regarding succession planning. The greater this loss, the more likely this turnover is to be considered unfortunate.
Finally, a company’s turnover might affect the brand more. A company’s current and ex-employees can either be a beneficial source of positive publicity for the company, or they can be a source of negative publicity for the company, putting both the employer brand and the consumer brand in danger.
Retention is critical not only for cutting costs but also for boosting both sales and morale among employees.
Staff engagement, in addition to the financial benefits of employee retention, is a critical component of any company’s success.
Let’s take a look at some often used terms to describe how engaged employees are:
- In the words of Gallup: “those who are actively engaged, enthused, and committed to their work and workplace.”
- In the words of Aon: “the degree of a worker’s psychological engagement in their company.”
- As defined by IBM Kenexa: “the amount to which employees feel a sense of responsibility for achieving organizational goals and are prepared to put in extra effort to do so.”
- “Employee engagement occurs when workers desire to come to work, are competent of doing their tasks, and understand how their labor contributes to the success of the firm,” says the Harvard Business Review.
For an employee to have a stake in the success of their company, they must be able to make a significant contribution over the long run. Increased involvement, excitement, and effort can be fostered from there.
In addition, numerous studies have demonstrated the significance of fostering employee involvement:
- In terms of customer loyalty (10 percent increase), productivity (20 percent increase), and profitability, organizations with highly engaged staff beat their peers, according to Gallup (21 percent)
- For every 0.1 percent improvement in employee engagement at a particular Best Buy location, the company realized an additional $100,000 in revenue.
- Disengagement costs the United States $500 billion yearly in lost productivity, and our Employee Engagement Handbook offers practical suggestions for reducing disengagement.
By 2030, Korn Ferry estimates that there will be a global shortfall of 85.2 million individuals in the workforce. That amounts to $1.75 trillion in annual revenue in the United States alone. Retaining and engagement go hand in hand when it comes to retaining the best employees.
With fewer people looking for work, staff turnover rises, making employee retention more critical. It doesn’t matter what’s going on in the outside world; elite talent has a lot of options.
Furthermore, even in a low-skilled labor market with significant unemployment, it’s prudent to have a plan in case the market changes. In the long term, retaining the individuals you’ve worked hard to cultivate and on whom you depend for critical knowledge, skills, and relationships will pay you.
External and internal pressures significantly impact turnover, which is influenced by a wide range of factors. On the inside, we can have a more significant impact than if we focus on external factors.
Although we’ll begin with external forces, it’s essential to know how much they contribute to oscillations so that you may make sound decisions regarding retention. When you compare your company’s turnover to your competitors, you can get a better idea of how essential it is to your business.
The United States Bureau of Labor Statistics’ monthly Job Openings and Labor Turnover Survey, roughly 16,000 firms are surveyed. According to the data provided, the average turnover rate is approximately 3.5 percent, with a voluntary turnover rate of around 2 percent per month.
In 2009, more than six unemployed people were in every job opening in the United States. In 2019, there will be fewer than one unemployed person per job opening. As a result, workers now have additional selections.
There is a tendency for voluntary turnover to increase and involuntary turnover to decrease when there is more confidence in the economy and fewer people out of work.
Mercer’s annual survey of 150 US firms found voluntary turnover at 16% in 2018 – lower than the federal government’s stated 26.9%, which may reflect the types of organizations who engage in Mercer’s more in-depth study.
Although larger businesses can have lower turnover rates, overall, turnover does not differ substantially based on the organization’s size. On the other hand, smaller organizations tend to be more affected when a member leaves.
The South has the highest quit rates in the United States, while the Northeast has the lowest.
Industry-specific differences are the most pronounced. In the private sector, hospitality and retail have the highest turnover rates, while manufacturing and finance have the lowest.
One in every ten LinkedIn users reported leaving a company in 2017, according to an analysis of LinkedIn’s 500 million users. The government and Mercer indicate a higher turnover rate than is likely due to the type of professionals who utilize the platform and the individual’s need to keep their profile up to date.
LinkedIn, conversely, demonstrated how turnover matches current industry trends. Retail and now software are both high-turnover industries. The development of internet shopping has made it more common for retail professionals to change to a new industry than for tech workers to switch companies.
A study by LinkedIn found that marketing and research, media and communication, human resources, and support functions had the most significant percentages of job turnover (all at 17 percent) (15 percent ). Another indication of the high demand for their expertise is the higher-than-average (13 percent) turnover in sales, engineering, and operations. At the same time, the retention rate for company growth is the greatest (6 percent ).
While patterns in employee turnover are helpful, knowledge of your business and the general economy is more likely to predict when you need to invest more in recruitment and retention. Aside from that, regardless of market volatility, long-term investment in retention is the most beneficial strategy.
Although external benchmarking can be helpful, the most significant benchmark is internal to your firm, depending on job level and location, and other segments throughout time. As a result, let’s take a closer look at ourselves.
Employee turnover (the number of people who leave a company) and employee retention (the number of people who stay) are both influenced by employee experience (why employees remain).
According to the Work Institute, 77% of voluntary turnover can be prevented. There was a strong correlation between career advancement and departure, followed by work-life balance and management behavior. Other prominent reasons included compensation, the job, and the workplace.
There are a few commonalities in industry research, and they’re summarized as follows:
- The sum of all benefits.
- The process of growing and learning
- Increased potential for success and advancement
- Wellness and work-life harmony
If you’re looking for a platform to use for employee appreciation, seek one that:
- Incorporates into existing workflows
- Offers incentives
- Analytical data is made available to the public.
- Easy to work with
These and more can be found on Bravo!
When it comes to keeping employees engaged and loyal, Bravo’s Dashboard feature can be a powerful tool. There’s no better way for employees to feel a sense of pride and belonging than to have a screen set up in a shared space, such as the break room or reception.
Bravo can also be used to increase retention to reduce the likelihood of employee departures. It is possible to see which individuals of a team need greater attention based on their connections in our Organization Graph feature.
To begin, you must pay attention to what is being stated. Decide on a communication technique that will help you gain insight into areas where you can improve employee retention. Check back later to see if any actionable solutions meet your company’s specific needs. Things aren’t going to improve overnight, but you’re making strides in the right direction.
Come chat with us if you need additional assistance! Let us show you around the platform and give you a demo so you can learn more about how to develop a culture of recognition.