It can be exciting to welcome new team members to your company. But if you’re doing it too often, you may have an employee retention issue.
You may be wondering, “Why is employee retention so important?” The answer: It is far more cost-effective – and better for your business – to retain and develop employees. And putting employees first is also one of the qualities of a great workplace.
Retaining employees reduces the resources you have to invest in finding, interviewing, hiring, onboarding, and training new staff. Instead, you can spend time developing your employees and growing your business.
It’s expensive too. Gallup reports that employee turnover costs can range from $600,000 to $2.5 million yearly for small businesses, and the Work Institute estimates the cumulative cost to small businesses at $600 billion.
With higher turnover, productivity drops as your team cover a missing employee or integrate a new one. Lower employee retention also affects morale, productivity, operating costs, and more.
Top Workplaces understand the importance of employee retention, and they excel at minimizing unwanted turnover. This article will discuss the importance of employee retention and outline eight benefits they gain by getting it right.
What is employee retention?
Employee retention aims to keep talented, engaged employees who have extensive organizational knowledge employed with your company.
Employee retention reduces turnover rates by fostering a positive work atmosphere. It comes by providing competitive benefits and pay and offering a healthy work-life balance for employees.
But employee retention is about more than perks and compensation. Employees want to feel heard, valued, and appreciated, and they want to know their contributions matter.
Even if you don’t realize it, your business competes with many others to attract and retain the best and brightest. Employees are looking for a competitive salary and benefits package, growth and advancement opportunities, and engagement, along with job satisfaction.
If employees don’t find these at your company, technology makes it easier than ever to find and apply for new jobs.
8 benefits of employee retention
While a certain amount of employee turnover is expected, there are numerous reasons why employee retention is important. If your business has a high employee retention rate, your business will gain a reputation for being a great place to work. You can also focus on growing your business and improving training and development instead of finding and replacing employees.
In turn, this can help you attract top talent. Let’s discuss eight primary benefits of employee retention, including:
- Improved productivity
- Reduced cost
- Improve morale and team cohesion
- More skilled employees
- Reduced training time and costs
- Reduced recruitment expenses
- Better customer experience
- Improved employee engagement
1. Improved productivity
On average, it can take a new employee a year or two to build relationships and productivity. Often, seasoned employees have to bring new employees up to speed, which takes them away from their usual productivity. And when employees have to cover for employees who quit or frequently train others, it can lead to:
- Lower quality work
- Lower morale
2. Reduced cost
Considering all the costs of advertising for new employees, from interviewing and onboarding to training and development, it can be pretty expensive, especially when you have to do it frequently.
High turnover is associated with:
- Loss of productivity
- Customer service issues
- Impact on company culture
- Lower engagement
All of these can contribute to rising costs on top of finding and training new hires. Retaining employees reduces or eliminates these costs. With increased productivity and quality of work from long-term employees, your business can become more profitable.
3. Improve morale and team cohesion
Higher employee retention boosts employee morale and builds team cohesion. It takes time to build a team and coalesce team synergy into something beneficial. Retaining employees makes this more likely, enabling greater connectedness and generating positive synergy.
4. More skilled employees
Higher retention rates mean your employees can become more skilled. After all, this development and institutional knowledge take time to learn, develop, and perfect.
Skilled employees are crucial to succession planning and solving complex problems. When you have trained team members, they can help mentor other employees to improve your organization’s overall quality of work.
5. Reduced training time and costs
With higher employee retention, you can take your time and resources and use them to help your veteran employees learn new skills and improve their existing ones. Professional development has long-term benefits to growing your business.
6. Reduced recruitment expenses
Advertising, recruitment, and hiring new employees are costly. It also takes away the time your managers and human resource people could be spending on other things.
The Society for Human Resource Management reports that it takes 42 days on average to fill a vacant position. Retaining current employees results in saving these significant expenses so that you can invest those funds elsewhere.
7. Better customer experience
Newly hired employees aren’t as knowledgeable as seasoned employees, and customers are likely to notice.
Experienced employees develop relationships with customers, and they can be part of why customers keep coming back. With more experience and deeper organizational knowledge, veteran employees are often more capable and confident when solving unique or complex customer issues.
8. Improved employee engagement
It takes time for new hires to become fully engaged with the company. Long-term employees are more likely to be more loyal to the company and more engaged. Employee engagement is the outcome of employees who bring their best to work every day, feel committed, and want to refer your company to others.
Employee engagement also leads to a more supportive and positive work environment and a better workplace culture, increasing employee retention.
How to improve your company’s employee retention with Top Workplaces
The benefits of employee retention are immense. Saving costs and time are not the only reasons why employee retention is important. Long-term employees have a better chance of developing customer relationships, refining organizational knowledge, and gaining skills and experience over time.
Now that you have the answer to the question, “Why is employee retention important,” take advantage of employee retention benefits by creating a clear path for employee growth opportunities.
Find out what matters most to your employees and where there are opportunities to improve employee retention. Start by nominating your company for Top Workplaces, the recognition program that’s powered entirely by employee feedback.