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A recent BLR® article discussed the findings of a new survey conducted by Saba Software, Inc. The survey was given to 2,000 employees and HR leaders from the United States and the United Kingdom, and found that one-third of the workforce in each country is likely to leave their current employers within 6 months.
BLR research has shown that the total costs of replacing one employee range from 50% to 60% of his or her annual compensation to a staggering 100% or more depending on the situation. Some of the reasons involve:
- The expense of finding, hiring, and training a new employee;
- A drop in productivity;
- An increase in quality problems as either less-trained or overworked employees take over the departing employee’s work;
- Stalled projects that the departing employee was involved with; and
- Decreased morale among remaining employees who now have more work to do.
The single most important way to combat these costs is to retain your employees—but that’s easier said than done. The same survey by Saba said that 49% of HR leaders make retention a priority. But simply wanting to retain your employees and actually retaining them are two different things. Let’s take a look at some of the tried-and-true methods of retention.
Learn how to keep your employees happy and working with the second HR Playbook from BLR®. Check out Employee Retention and Satisfaction: How to Attract, Retain, and Engage the Best Talent at Your Organization.
During the Hiring Process
There has been a lot of talk about steps you can take to ensure that the people you hire in the first place are more likely to stay. These guidelines can help, but in the end, no one can tell the future.
- Try to find employees that are motivated by your company’s culture and believe in your company’s mission statement.
- Hire people at a level that will challenge them, either by offering them a better position than the one they applied to, or by giving them a position that goes just beyond their current capabilities. These employees are will be engaged right from the get-go, and will appreciate the company’s initial assessment of their capabilities.
- Make sure that your hires know the values of your company, and make certain that’s part of why they want the job. This will help keep them emotionally invested in the company.
- Let the hires know that if they work hard, there is room for them to move up in the company. This will help them to feel like they are working towards a goal, not just a paycheck.
Cash is King
Of course, there is more to retaining key skills than cash compensation. However, an uncompetitive compensation package absolutely plays a role in employee attrition. It’s vital that cash compensation be at least a part of any successful retention program. The types of cash compensation available include:
- Base pay
- Variable pay
- Target total cash
- Awards
- Lump sum payments
- Retention payments
Each of these incentives has its merits and flaws, but it’s important to know that retaining an employee doesn’t have to just mean paying him or her more forever. Setting goals that come with awards, for example, only rewards employees who give something extra to the company. Many are willing to work harder if that means they can make more money.
Whatever your cash compensation retention program looks like, ensure that your program is market-competitive. Offering less-than-competitive cash incentives does not address the problem of other companies tempting your talent with more money.
Once you have top talent, be sure to retain them! It’s all in BLR®’s HR Playbook, Employee Retention and Satisfaction: How to Attract, Retain, and Engage the Best Talent at Your Organization. Learn more now.
Take Stock of Your Ownership Interests
Certain companies can retain certain employees with stock options. Obviously, if your company isn’t traded, then this won’t work. While not every employee will be interested, it is believed that employees that see a correlation between their contributions and the performance of the company are interested in stock options. Luckily, these types of employees are often valuable. Additionally, employees who want to own part of the company will be particularly interested. They will essentially be investing in themselves, as well as the company.
A few things to remember about stock options:
- They allow an employee the option of buying or selling an asset at a set price before a given date.
- Investors, not companies, issue options.
- The value of an option is intrinsically linked to the value of the investment.
- If the company’s future is less than great, this option will likely be less attractive.
- If you do go for stock options, remember, they should be only a part of your key skills retention program.
Tomorrow we’ll explore a very important consideration for retention: engagement. Plus, an introduction to BLR’s HR Playbook, Employee Retention and Satisfaction: How to Attract, Retain, and Engage the Best Talent at Your Organization.