If your company continues to struggle with performance and productivity, it is time for you to understand why employee retention is important. It is one of the parts of an organization process that is inevitable so it’s crucial to know more about it.
Imagine a high stake project under implementation, and suddenly the project manager quits. What do you think will happen? Even if a new project manager joins within a week, the process of handing/taking over will be tedious, and there will be inevitable lags in the cost and schedule.
In this article let’s find out more about retention rate and why employee retention is important in every organization.
The consequences of a high turnover rate
The answer to why employee retention is important; lies in the fact that employee turnover has exceptionally high costs.
Some of the consequences attached to high employee turnover are:
- Additional cost of recruitment process from job evaluation to making the final offer.
- On-boarding costs for the newly hired include such as paperwork, training, and setting up new gadgets for use etc.
- Productivity loss as the newly hired person will take time to understand the work, internal and external process and the team dynamics.
- Loss of synergy as the other employees within the team or the organization who had better synergy with the employee who left; may show reluctance.
For example, let’s take a look into Amazon’s case. Amazon may be the biggest e-commerce platform in the world, but with their astronomically high rate of turnover i.e. 150% annually, they might be out of workers by 2024.
According to Oberlo, Amazon has nearly 2 million registered small and medium businesses. With a number that big, what do you think would be the impact of this turnover?
Added value of low turnover rate
To understand more on why employee retention is important, it is crucial to learn about the benefits your company has if the retention rate is low.
There are a few benefits to the organization for keeping a low rate of turnover:
- The organization especially the HR does not have to worry about filling up positions i.e. recruitment all the time. Instead they can focus on talent acquisition.
- High profitability as extra costs are not incurred on the recruitment process.
- Higher productivity as projects continue without lags.
- A better reputation of the organization and its culture in the market.
- Employees with more experience and better understanding of work.
- Many hours saved which are otherwise spent in evaluating employee benefits and organization’s liabilities when an employee leaves.
How to prevent a high turnover rate
There are of course ways to prevent a high turnover rate. Here are some examples.
Invest in employee learning and development. A 2018 report by Linkedin learning revealed that 945 of employees were willing to stick with the current employer if the employer invested in their learning and development for the long run.
Consider both transnational and rational factors when devising strategies for employee retention. Better compensation is good, however also focus on creating a sense of belongingness. Focus on holistic employee health. The pandemic has particularly made health a priority for people all around the globe. Focus on creating employee experience.
If your employee retention rate is already above average, it’s about time you reevaluate your employee retention strategy. A high retention rate also implies the underperforming staff are there and it’s costing you productivity and efficiency.
Instead of focusing on maintaining the industry averages, understand what works best for your organization and its people.
Now that you know why employee retention is important, check out our employee retention software to find out what the situation is like in your company.
Learn more in our other article What is good employee retention rate.