Employee Retention: do you know what these two words mean? Let’s proceed in order: to start and lead your startup to success you need to surround yourself with the right people. Not only that: you also need to know how to retain the talent you have managed to attract, preventing them from leaving your company to go work elsewhere (perhaps at one of your direct competitors). This is where the concept of Employee Retention, now absolutely central to modern business, comes in.
If you want to improve your talent “retention” and reduce staff turnover, you need to know the most effective strategies for retaining and motivating your employees. You are in the right place.
What is Employee Retention
The introduction of this guide has served to give you a rough idea of what Employee Retention is; now, however, it is time to examine this very important concept in more depth.
Meaning and importance
Retention means the ability to keep employees within the company. In some cases, this concept is also made explicit with the formula “Talent Retention” because the goal, of course, is not to lose talented employees, that is, those who are able to really offer added value to the company.
The definition of Employee Retention, or Talent Retention, refers to an organization’s ability to keep and retain its employees within the company. This ability, as you will discover shortly, requires a twofold investment, both in terms of time and money.
Today Employee Retention is a concept that those who manage a startup or, more generally, a company cannot disregard. We are, in fact, in the era of so-called Great Resignation, that is, the global phenomenon of “mass resignation of workers.” The needs of employees have changed profoundly in recent years, and some have taken on great significance, even in a way that was unexpected for business owners around the world, who have more or less suddenly found themselves having to deal with a large number of resignations and (especially in some industries) an enormous difficulty in replacing “runaway” workers.
Impact on corporate business
The new demands of workers have forced (and are still forcing) business owners to reorganize their companies so as to curb turnover.
The impact of the latter on the company’s business is significant for several reasons: first, you have to consider that while it is true that new employees bring new skills and fresh ideas into the company, so is the fact that those who have been working for the company for a long time are already intimately familiar with its structure and processes.
The farewell of an employee, therefore, can be a major blow to the operation of the company itself, in terms of the loss of corporate culture and expertise, not to mention the impact that the farewell may have on the mood of the group (or customers) or the additional risks associated with his or her eventual move to competitors.
There is another aspect that cannot be overlooked: the farewell of an employee and his replacement have a significant economic cost for the company (especially for a startup). We are not referring only to the expense required to cover the salary of the new employee: to this, in fact, we must, for example, add the expense connected with the process of search, evaluation and selection of the new employee and that connected with his or her training.
Thus, turnover has an impact on the company in both strictly operational and economic terms.
Why do employees leave the company?
One of the basic questions you need to ask yourself is this: why do employees leave the company? Answering this question is no easy feat because there can be many reasons. Let’s analyze them together.
Analysis of reasons for turnover
One of the main causes that leads an employee to leave a company is related to economic factors and, specifically, to pay that is considered too low. Often, however, it is a mix of reasons: reflection on pay, in fact, is inevitably linked to other aspects as well, such as the commitment required, both in terms of hours and actual effort. The need for greater flexibility, for example, is another cause that often drives workers to say goodbye to a company.
The list of reasons, however, is long: also influencing an employee’s willingness to leave his or her job may be poor chemistry with colleagues and superiors, lack of rewards and recognition that live up to expectations, poor prospects for growth within the company, or not sharing the corporate culture.
Employee expectations and needs
Earlier we mentioned expectations; we did so because, of course, the choice to say goodbye to the workplace is personal and, therefore, inevitably based on personal expectations and needs.
Having said that, however, in recent years, it is possible to identify some common trends in workers’ choices: partly abetted by the Covid-19 pandemic, which has caused many companies to resort to smart working and, more generally, to more agile and flexible ways of working, the search for a better work-life balance (the balance between time to devote to work and time to devote to private life and family) has gained ground among workers’ expectations and needs, becoming decisive in their evaluations in some cases.
Similarly, in recent years certain cultural and social issues, such as environmental issues, have become even more central to public debate, and workers have also begun to consider them more. The result? Among the reasons for resigning today is, much more than yesterday, dissatisfaction with the way in which the company deals with certain issues.
Strategies to Improve Employee Retention
This is it: in the next few lines you will find in detail what are the most effective strategies for improving Employee Retention. As mentioned, this concept is also expressed by the Talent Retention formula, and the first step, not surprisingly, inevitably involves choosing the best talent to bring into the company.
Choosing the best talent
Choosing the best talent, that is, equipping oneself with resources that are qualified in terms of skills and aligned with the company’s goals and values, is the prerequisite for then retaining the best workers within the company.
In this regard, remember that the onboarding process (the induction of new staff into the company) is crucial: the commitment to cultivate a strong and lasting relationship with the worker should start from the moment of the interview.
Recognition and gratification
Once an employee has been inducted, the work of engagement is certainly not done: recognition and rewards go a long way toward making workers feel appreciated and valued. Do you know what Meg Whitman (eBay and Hewlett-Packard) said about this very thing?
“To retain talent in a startup, you have to show them that they are part of a larger mission and that their contribution is critical to success.”
Compensation and benefits policies
Each employee’s salary should (indeed, must) be commensurate with his or her degree of professional competence and experience. If your startup is unable to increase the pay of its workers, you should provide other forms of compensation (e.g., work-for-equity) and corporate welfare initiatives, so that you can keep your employees’ satisfaction levels high even in the face of a not particularly high salary.
Work-life balance and work flexibility
We have already pointed this out: nowadays, workers’ attention to work-life balance and work flexibility is at an all-time high. Flexibility, here, is to be understood both from the point of view of time (flexible hours) and work space (smart working).
On the subject of the latter, remember that if you cannot provide ample flexibility for your employees, you should at least be concerned about organizing and providing them with a functional, comfortable and pleasant workplace (including, trivially, paying special attention to ventilation and lighting of the space).
Training and professional development
If you want to make your startup more palatable in the eyes of your employees, you must also ensure that they have sufficient room for professional growth. Technological innovation is introducing new and ongoing challenges to workers, and the best way to cope with them is to provide in-house continuing education courses, so as to help employees develop their personal skills in line with the evolution of your business.
Mentorship and tutoring
Introducing mentorship and tutoring for new employees within the company is a win-win solution: associating a new employee with a mentor will, in fact, facilitate and speed up the new employee’s induction into the company and make the employee chosen as a mentor feel more valued, who will also have the opportunity to learn a new perspective on the company’s organization and processes in this way.
Monitoring and evaluation of retention
The last effective strategy for improving Employee Retention we saved for last, but not least: it is absolutely essential to constantly monitor the company’s capacity in this particular area.
Use of KPIs and feedback for evaluation
You are probably now wondering what you need to do to monitor and evaluate your Employee Retention: you should know that there are precise business KPIs to analyze this particular aspect, starting, of course, with the so-called employee turnover rate.
Generally, companies measure turnover rate as a percentage: you have to divide the number of employees who left your startup in a given time period (chosen by you) by the average number of employees during the same period and then multiply that by 100.
More specific than the turnover rate are the voluntary turnover rate and the involuntary turnover rate: as you have probably already guessed, what makes the difference between these two indicators is whether the employee left the company on his or her own initiative or not. The formula is the same as for the turnover rate: what changes is the figure to be divided by the average number of employees. Keep in mind that the turnover rate (generic, voluntary or involuntary) can also be calculated in relation to a specific business area.
Average length of employment, also known as average seniority, is also a very important figure from an Employee Retention perspective.
The “opposite” kpi to the turnover rate is the employee retention rate, which measures the percentage of employees who stay with a company over a given period: it is expressed as the average number of employees in the organization minus the number of those who left it, divided again by the average number of employees.
Next, it is very useful to measure the retention rate of new employees: to calculate it, you need to divide the number of workers who left the company within the first year of operation (or whatever other period seems most appropriate to you) by the total number of employees who left the company during that same period.
Other key KPIs are then recruitment time (calculating the number of days it takes to fill an open position), the effectiveness of training (analyzing the number of employees who completed required training programs and how much they learned at the end of these courses), productivity (considering the number of hours worked by an employee and the amount of work produced) and the employee satisfaction rate (assessing how much people value their jobs and how motivated they are to deliver good performance).
Knowing how many employees have left the company is important, but knowing why is even more so. Previously, we have pointed out that there are many reasons why it is possible to leave a job.
You should know, however, that there is a way to find out the real reason why an employee has decided to leave your startup: ask them. More and more companies are resorting to so-called Exit Interviews: these are questionnaires that you can have resigning employees fill out, to explicitly ask them about the reasons for their voluntary departure and thus gain valuable insights that can be used to improve Employee Retention strategies. This is a tool that can prove very valuable, since workers about to leave a company often have no particular qualms about explaining in writing and as directly as possible the reasons for their decision.
Continuous improvement strategies
Frequently and consistently measuring and analyzing your Employee Retention capability and investigating the real reasons why employees leave is critical because it gives you the ability to intervene early when needed and to do so by solving the very problems reported by workers. For example, you may find that you need to improve the aforementioned onboarding process or you may realize that your base salary is not living up to workers’ expectations and solve the problem with other forms of compensation and initiatives. The goal, never forget, is to continuously improve yourself.
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