Managing employee retention means taking planned steps to keep workers motivated, committed, and productive so they choose to stay with the organization. A strong retention plan helps attract and keep valuable employees while also lowering turnover and its costs. These efforts support better productivity and boost overall business success.
Overview
Keeping skilled employees is a top priority for HR teams and company leaders. It takes more time and money to find, train, and prepare a new employee than it does to hold on to a current one who is already performing well.
Being fair and open with employees makes a big difference. According to research by SHRM, employees listed five main things that influence how happy they are at work:
Being treated with respect at all levels of the company
Fair pay
Trust in senior leaders and managers
Feeling secure in their job
Having chances to use their skills and talents
These areas are key to keeping employees engaged and satisfied, which is essential for any retention effort. While it's easy to see why these things matter, actually making them happen takes effort and sometimes gets put off. Still, investing time and resources into keeping employees leads to better performance, higher morale, better work quality, and fewer problems and resignations.
In the end, when companies focus on employee retention, they keep talented, driven people who are committed to the organization’s goals and success.
Business Case
One of the main challenges for organizations is keeping the employees they value most. Companies need to prepare for upcoming talent shortages and the lack of workers with key skills needed to stay ahead in a competitive market. Businesses that take a consistent approach to managing employee retention, no matter the economic climate, will be better equipped to handle these challenges.
In the SHRM/Globoforce survey "Using Recognition and Other Workplace Efforts to Engage Employees," 47% of HR professionals listed retention and turnover as their top workforce concerns.
Here are some important reasons why focusing on lowering turnover is smart:
Losing employees is expensive.
When valued employees leave, it hurts performance.
With fewer skilled workers available, it may become harder to hold on to top talent.
Although turnover costs can hurt a company’s success, not every departure is bad. Sometimes, a new hire may perform better than the person who left.
Drivers of Employee Retention and Turnover
To create successful retention plans, companies need to understand what motivates employees to stay and what causes them to leave.
Why employees leave
Workers leave their jobs for many reasons. Some take a new job, go back to school, move with a spouse, retire, or leave after a disagreement. Some quit because they no longer want or need to work. These reasons fall under what’s called "voluntary turnover." Others are laid off or fired – this is called "involuntary turnover."
In general, employees stay with a company when what they receive – such as pay, benefits, or work conditions – is equal to or greater than the effort they put in. These decisions are shaped by how strongly the person wants to leave and how easy it would be to do so.
Research shows four main paths people follow when they leave a job, each with different effects on the organization:
Dissatisfaction. Address this with basic retention tools like tracking employee morale and dealing with the causes of turnover.
Better options elsewhere. Keep employees by offering competitive pay, career growth, and a healthy work environment. Be ready to respond when top workers get outside job offers.
Planned exits. Some employees plan to leave for personal reasons, such as a new baby, a spouse’s job move, or school. Boosting rewards based on time with the company or personal needs may help keep these workers. For instance, better parental leave or family support policies can reduce exits related to family changes.
Negative experiences. Some leave suddenly because of a bad event – such as being overlooked for a promotion or having a conflict with a manager. Look into the common issues causing these exits. Offer training to prevent toxic behavior like bullying or unfair treatment, and provide support like flexible hours, help resolving conflicts, or employee assistance services.
Other important signs that someone might leave include:
How committed they feel to the organization and how satisfied they are with their job
The quality of their relationship with their manager
How well they understand their job role
How their job is structured
How well their team works together
Understanding these factors can help organizations take the right steps to improve retention and reduce unwanted turnover.
Why employees stay
Understanding why employees choose to stay is just as important as knowing why they leave. Research shows that people often become deeply connected to their jobs and communities. As they build professional and personal relationships, they develop strong networks that can make leaving more difficult. The more connected employees feel to their jobs and workplace, the more likely they are to remain.
Organizations can improve engagement by offering mentorship, creating team projects, promoting strong team relationships, encouraging referrals, clearly communicating company values, and offering incentives tied to length of service or other unique benefits.
Employees also want to be recognized for their work. In the SHRM/Globoforce survey Using Recognition and Other Workplace Efforts to Engage Employees, most participants agreed that recognition helps build a better workplace culture. About 68% said their company’s recognition efforts help keep employees from leaving.
Benefits also affect retention. A strong benefits package, along with competitive pay, helps reduce the chance that employees will leave for a better offer elsewhere.
Key Retention Strategies and Best Practices
Retention efforts come from all areas of HR, and it takes teamwork across departments to create and apply strong strategies. Depending on the situation, broad strategies, targeted efforts, or a mix of both may be needed.
Effective practices
There are several areas where focused efforts can greatly improve employee retention:
Recruitment. Hiring practices can influence turnover. Research shows that giving applicants a realistic picture of the job during the hiring process improves the chances that new hires will stay.
Socialization. New employees often leave early on. A strong onboarding process helps them feel part of the company, making them more likely to stay. Helpful socialization efforts include shared learning, informal and formal introductions, and assigning experienced employees to guide new ones.
Training and development. Workers are more likely to stay if they have chances to keep learning and growing their skills. Without those opportunities, they may look elsewhere.
Compensation and rewards. While pay alone doesn’t always predict if someone will stay, organizations can use three main approaches:
Offer pay and rewards that lead the market.
Adjust rewards to fit personal needs with person-based pay.
Tie rewards directly to staying, like offering more vacation based on years of service, retention bonuses, stock options, or linking pension payouts to the length of employment.
Supervision. Research suggests that fair treatment by supervisors plays a major role in whether employees stay. Companies should focus on improving supervisor training and communication skills.
Employee engagement. Engaged employees are more satisfied, enjoy their work, feel their job matters, and believe their contributions are valued. One study found that highly engaged workers were five times less likely to leave compared to those who weren’t engaged.
Broad-based strategies
Broad strategies are aimed at the whole organization or large departments and are used to improve overall employee retention. These efforts can include giving company-wide salary increases based on market data, changing hiring practices to focus more on retention, and creating a better work environment.
To decide which broad strategies to use, companies typically rely on three main sources:
Research on retention helps identify the main reasons employees leave. Attending industry events and joining groups like SHRM can offer access to the most recent data and insights.
Looking at what other companies are doing, what has worked and what hasn’t, can be helpful in choosing effective strategies.
Benchmark surveys allow companies to compare their pay, benefits, bonuses, and similar policies with others in the industry.
Targeted strategies
Targeted strategies are built using detailed data from exit interviews, follow-ups after someone has left, stay interviews, employee focus groups, and other studies that explore turnover. These tools help pinpoint where specific problems exist and guide the creation of strategies to fix them. For instance, if a company finds that many female professionals are leaving, it can explore the reasons behind it and design actions tailored to that group.
Implementation
The HR team usually takes the lead in setting up and managing retention efforts. Success depends on having HR professionals who understand employee motivation, retention tactics, benchmarking, and current best practices.
Laying the groundwork
HR usually handles the following steps to collect the right information, define the problem, and shape the retention strategies that follow:
Find out if turnover is an issue. Use turnover rates, benchmarking, and both internal and external needs assessments to analyze the situation.
Create an action plan. Based on the data, build a plan that includes broad, targeted, or combined strategies to improve retention.
Put the plan into action. Carry out the chosen strategies that best fit the problem.
Check the results. After implementing the plan, review the results to see the outcomes and weigh them against the costs.
Benchmarking
Setting the right benchmarks is an important step when starting a retention strategy.
External benchmarking. It’s hard to judge if a 15% annual turnover rate is too high without comparing it to industry norms. By using benchmarking and needs assessments, companies can figure out if their turnover is actually a problem. External benchmarking compares a company’s turnover rates to others in the same industry, region, or sector. These numbers show yearly and monthly quit rates as a share of total employment.
Internal benchmarking. This looks at how a company’s turnover rate changes over time. A rising turnover rate overall or in specific groups may signal a deeper issue.
Dealing with common problems
As with any major business effort, there are typical challenges when setting up a retention program:
Lack of support from senior leadership. If top leaders don’t show that employee retention matters, supervisors are unlikely to focus on people issues. Leadership must clearly support retention and take responsibility for its success, or employees and managers may question how much the company truly values its people.
The perception is that retention work is just extra tasks. Without real buy-in from the organization and a strong sense of how retention links to long-term success, managers might see these efforts as optional or a distraction from their core responsibilities.
Costs and return on investment
Because there are so many different ways to improve retention, it's difficult to put an exact number on the typical cost of setting up a program. Still, companies should budget their plans thoughtfully.
The return on investment can be estimated by tracking several HR metrics, such as turnover rates, internal promotions versus external hires, grievance filings, absenteeism, and discrimination claims.
Auditing and evaluating
Every HR program, especially one focused on keeping top talent, needs regular evaluation to see if it's working and to find ways to improve. One reliable method for measuring the success of a retention strategy is to conduct an independent review that looks at how the program is affecting different groups of employees. For example, are certain employee groups – like entry-level, technical, professional, management, or long-tenured staff – leaving more often than others? If so, those specific groups may need targeted actions. HR should take the lead in tracking the outcomes of all programs that impact employees.
Besides keeping an eye on turnover numbers and results from exit interviews, another useful approach is to hold stay interviews with current employees. These interviews help managers learn why valuable employees stay and what might cause them to leave. It's best when managers conduct these interviews themselves, as long as they’ve received proper training since they have the closest relationships with their teams.
Global perspectives
As the economy becomes more global, keeping talented employees is now a concern around the world.
Workforces are becoming more culturally diverse, which creates new challenges for HR teams. In some regions, retention efforts are harder to carry out due to different expectations around pay, job roles, and benefits. Organizations that operate globally – or that have very diverse teams – must take cultural and national differences into account when developing HR programs, including those aimed at improving retention.
Employees working abroad often deal with challenges that domestic workers don’t face. Keeping international assignees can be tough, especially when companies don’t plan well for their return. One common problem is poor repatriation, which often leads to high turnover among returning employees. Employers should stay connected with expats to prevent them from feeling cut off from their home office. They should also be ready to help employees deal with reverse culture shock, which is common when returning workers need time and support to readjust to life back home. Employer involvement plays a key role in keeping these employees long-term.
Mary Watson
