Employee retention is vital, but why should you invest in it? The short answer is: because you can’t afford not to. The longer answer requires a look at attrition—the alternative that faces your business.
What’s the True Cost of Attrition?
Attrition has hard costs like hiring expenses, which can grow quickly, but there are also other impacts that are harder to measure. So how does attrition truly affect your business?
Attrition Impacts Employee Motivation
Work friendships are real and they matter, not just to your employees, but to your business’ productivity. If two employees are close and one leaves, it can leave the other feeling less motivated. It could even lead them to start looking for new opportunities, further increasing your attrition rate.
Attrition Impacts Morale
When employee churn is high at your organization, it sends the wrong message to current and new employees. For new hires, it hints that they’re in a company where their career won’t grow. Why would they want to stick around there?
For veteran employees and managers, attrition can lead to a frustration and an increasing workload when they have to pick up extra work and recruit a new employee.
Attrition is the Enemy of Productivity
When an employee leaves, their responsibilities don’t leave with them. Someone has to pick up that slack, and that can lead to poorer performance for the business.
Additionally, attrition means your business is losing institutional knowledge that’s been developed over years. You may be able to replace an employee in three months, but you’re not guaranteed to regain that knowledge with a new hire. Effective teams create productivity by blending different skills and abilities into a single mechanism. In short, effective teams create exponential impact, not additive impact. The risk here is that the removal of even one key component stifles the output of the entire team in a similarly exponential fashion.
So what do you need to do to limit attrition and improve employee retention?
Building a Smart and Healthy Culture Can Improve Employee Retention
Leaders and managers have a serious need to solve the problems that attrition poses. Easier said than done. There’s also no single solution. Each business faces unique challenges and needs custom solutions.
However, those solutions begin at the top with managers and leaders. The decisions, actions, and attitudes of the people in these positions will percolate through the organization, for better or for worse. To reap the benefits of employee retention, get focused on these key areas:
1. Develop Your Leaders
If there was a singular answer to the question “why does attrition happen?” it would be ‘managers.’ According to a study from Gallup, managers are largely responsible for disengaged teams. These are the same teams that are prone to attrition and low productivity.
However, saying “managers are failing” doesn’t fix things, and it’s also not totally accurate. The truth is that most managers don’t have the skills and tools they need to cultivate successful teams. Just like new hires need training and opportunities for ongoing development, so do managers.
To improve retention in your business, you need to address the reason so many employees leave. That reason is often managers. Invest in coaching and professional development for managers and teams. When that happens, things downstream of your managers, like employee retention, can turn around.
2. Build Effective Teams
The success of every business depends on the performance of its teams – leadership teams, departmental teams, shop floor teams and project teams, among many. Patrick Lencioni, the author of many management books, including The Five Dysfunctions of a Team, says, "If you get all the people in an organization rowing in the same direction, you could dominate any industry, in any market, against any competition, at any time."
Because of the unique make-up of individuals, no teams are identical. It is crucial that team members understand one another and how to work effectively with one another. It is also crucial to understand what team expectations are and what it means to be a great team member. Team members are interdependent and investing in the health of your teams is an investment that pays big dividends. No business can reach its potential without effective teams.
3. Communicate Effectively and Build Trust
Effective communication is foundational for the success of any team. You’ve heard it a million times. But what does this actually look like?
These efforts build trust. When trust is established, teams are better off for many reasons. For example:
4. Follow Through
Ongoing development opportunities and open communication are vital for improving employee retention, but they’re not one-time quick fixes. They require maintenance, time, and dedication. When leaders and teams have good communication, things run smoothly, conflict is resolved efficiently, and productivity soars. But you have to keep at it—even when employees inevitably do leave.
The Benefits of Employee Retention are Within Reach
Businesses are like cars. Hit the gas all you want, but without someone steering, you’re going to crash. Smart and healthy business cultures understand the need to prioritize both in order to reach their business goals.
By coaching and developing managers, building effective teams, communicating effectively and building trust, and being consistent at this, your business can make significant strides toward retaining employees and building a smart and healthy organization. Your bottom line—and your employees—will thank you.
The benefits of employee retention are yours for the taking, but it’s not always easy to find the areas that need attention. If your organization is struggling with employee retention or wants to turn your employee engagement into a strategic strength, get in touch with the team at Lauber Business Partners. Our team can perform an engagement assessment to help your organization make strides toward becoming smart and healthy.