In October of 2014, over two and a half million employees quit their jobs, the highest number since 2010. When one side of the job market is filled with eager applicants and college graduates, what motivates the other side to quit in droves?
A company may have the best ideas and most up-to-date technology, but without the human capital to run it, it’s worthless. Revolving door syndrome, where employees come and go, is very much real and costs companies thousands of dollars annually.
Employee retention is no longer something companies can ignore. High turnover rate often masks deeper problems within an organization, and it is up to employers to find out what those problems are.
Here are some reasons why employee retention is important:
- It is Cost Effective
High turnover affects a company’s bottom line. The Society for Human Resources Management estimates that replacing an employee can cost anywhere from 50 to 60% of his/her annual salary. Other employee retention statistics cite figures even more drastic, anywhere from 90 to 200%.
- It Saves Time
The cost is not just in terms of money, but also time. To hire someone new, an interview has to be set up and the applicant has to cycle through the hiring process. For large companies, this can take several months. Once the hiring is done, there’s time cost involved in training the new employee to get up to speed.
This cost in time and money is better directed towards retaining existing employees. With high turnover, there’s also a hidden cost; decrease in productivity and morale among employees who stay.
- It Boosts Morale
Even at the most menial jobs, no one likes to feel expendable. How the management treats them affects their performance and productivity. You may say to yourself, “Well, they’re getting paid, aren’t they? Shouldn’t that be motivating enough?” But you would be wrong. Salary and benefits package are only a slice of retaining best employees.
Employee Retention Strategies
In Daniel Pink’s New York Times bestseller, Drive: The Surprising Truth About What Motivates Us, he states businesses built around external carrot-and-stick motivators often fail to thrive. The new approach consists of three elements: autonomy, mastery, and purpose.
Autonomy is the desire to direct your own life. It doesn’t mean companies should let their employees run amok, making decisions for themselves. But companies can give employees control over various aspects of their work.
Mastery is the desire to get better at things. Companies should match appropriate skills to each employee. Give them something too hard and they’ll feel discouraged; give them something too easy and they’ll feel bored. Boredom is one of the most common reasons employees leave.
Purpose is the desire to connect to something larger than you. When employees can’t feel their job supports the mission or vision of the company they work for, they’re more likely to quit. The best workplaces give employees a sense of purpose.
The sweet spot in employee retention is the cross section between compensation (salary and benefits) and understanding what drives employees’ motivation, through autonomy, mastery, and purpose.
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