The Complete Guide to Employee Retention - Herd Digital

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The Complete Guide to Employee Retention

Complete Guide to Employee Retention

With how expensive it can be to replace your most qualified staff, employee retention has never been more important. Lucky for you, we’re here what it is, why it’s so important for your business, and how to improve your own employee retention strategies.

What is the Meaning of Employee Retention”?

Before we explain employee retention, first we need to look at employee turnover. 

Employee turnover is the amount of people who leave a company within a certain time frame. For example if your business had 100 people at the start of the year, and 10 people left within that year, your annual employee turnover is 10%.

Employee retention meanwhile, is a business’s ability to to retain its staff and prevent employee turnover. These include systems and processes in place that help to create a positive and supportive work environment that stops your employees wanting to leave your business. Increasing employee retention has a direct impact on your business for a number of reasons:

Why is Employee Retention Important?

High employee turnover can have huge negative impacts on your businesses finances. A study from Oxford Economics found that the cost of replacing an employee earning £25,000 a year or more was £30,614. Meanwhile, more recent research from The Society for Human Resource Management found that it can cost a company 6 to 9 months of an employee’s salary to replace them.

Giving an exact estimate can be difficult. Because there are many, difficult to track factors; from the actual recruitment costs to the loss of an experienced employee’s knowledge. But reducing the financial costs of employee turnover is just one of the benefits of having a high employee retention. 

We asked Associate Director of Herd Digital, Alexis Wilkie, for why employee retention is so important for digital agencies: 

“It normally takes an agency around 1-3 months to find a new employee. That person they find will then have a 3 month notice period. It will likely take them at least 3 months to get to the point where they’re performing at the previous employees level. This means it’s going to take 7-9 months before the team is back to normal working capacity.”

But keeping experienced employees on your team and saving money aren’t the only reasons why employee retention is important for your business…

What are the Benefits of Employee Retention?

The benefits of employee retention for your business are numerous. We could list them for days: But instead, here are the most important benefits of employee retention that can have the most significant impact on your business:

  1. It saves you money on recruitment. It can cost tens to hundreds of thousands to replace your employees every year. Improving employee retention can save your business both money and time on replacing these employees who leave.
  2. You see better returns on your training investments. When your employees stay longer, the training and development you provide becomes a greater benefit to the business.
  3. It means a better experience for your customers and clients. If your business works with customers or clients over a long period of time, you don’t want to be replacing their point-of-contact again and again. It can reflect badly on you as a business, and will impact their customer experience.
  4. Employees who stay longer are happier: And are more productive. If your employees stay longer it means that they are happier in their work. And there is a proven, direct relationship between employee satisfaction and productivity.
  5. Your employees will be more experienced and better at their jobs. The longer an employee is with your business, the more valuable they become. 

The Causes of High Employee Turnover

The first step to improving employee retention is knowing the causes of high employee turnover. Because once you know why it happens, you know how to prevent it, and recognise any gaps in your own employee retention strategies:

  • Financial reasons: A big reason for employee turnover is financial. Your employees may be being regularly targeted by recruiters, so if your employees salary is stagnating, soon they’ll be receiving tempting offers from competitors.
  • Personal reasons: There are a number of reasons that may cause someone to leave their current role, that are completely out of your control. They could be physically relocating, be making a career change, or have health reasons making them leave.
  • Lack of progression opportunities: If an employee sees there is no chance to be promoted, there is a strong chance they will look elsewhere for these opportunities.
  • Lack of learning/ development opportunities: Similar to the above, is employees leaving so that they can learn new skills and gain new experience. Some businesses offer opportunities for lateral moves into other departments to overcome this.
  • Poor work-life balance: One of the biggest reasons for employee turnover is employees feeling overworked and having no time for a life outside of work. 
  • Poor Management: Great managers can elevate their team and have long-lasting positive impacts on employees. But bad managers can drive away employees by creating hostile work environments.

Recognising the Signs Your Employees Are Looking to Leave

Whatever the reason for employees leaving your business, it doesn’t just happen overnight. Searching and interviewing for a new job takes time. And there are signs you can recognise that someone is looking to leave your business.

  • Last minute days off. Employees having last minute dentist or doctors appointments can be just that. But they can also be signs that your employee is interviewing elsewhere at short notice.
  • Leaving early or not staying late. Employees who are heading out the door won’t be concerned about putting in the extra hours.
  • Decreased motivation or productivity. If someone is planning on leaving, they probably won’t be putting in the same amount of effort as they previously were, as they won’t see any reward from it.
  • Change in attitude to their work. Sometimes an employee looking to leave can be apparent from their attitude to their work or even colleagues. 

Recognising these signs can help you to preemptively prevent their leaving by discussing if they’re unhappy with their work, and what you can do to make them stay. These can be interventions such as promotions, pay increases, or the opportunities for additional training and development.

Employee Retention Strategies and Models

There are various different employee retention strategies and retention models, and what works best for your business may take some insight and trial and error. But here we’ve got eight of the most popular employee retention strategies for you to decide from.

1. Maslow’s Hierarchy of Needs

The short of it: The employee’s most important needs are being met.

Perhaps the most well-known employee retention model. This focuses on the needs of every employee, in order of importance: Physiological needs, job security, belonging, self-esteem and self-actualisation.

What it means for your employee retention: Mapping out how the needs of your employees are met can identify gaps, and make sure that you’re meeting their needs at every level. For more information on Maslow’s Hierarchy of Needs, here’s a handy quick guide.

2. Herzberg’s Two-Factor Motivation-Hygiene Theory

The short of it: Purpose in their work and job security.

Herzberg summarised as two-factors being crucial to employee retention: Hygiene (company environment, job safety, salary, and company policies) and Motivators (the job itself, enjoyment of the work and opportunities for progression). 

What it means for your employee retention: You need to satisfy both categories to ensure long-term employee retention.

3. Human Motivation Theory

The short of it: It satisfies unique and personal needs.

The human motivation theory argues that every person has one of three basic needs: power, achievement, and affiliation. And that their behaviour is heavily impacted by their need.

What it means for your employee retention: To improve employee retention, you need to identify what is most important to each individual employee: And act on it. Here is some more information about how to implement this strategy for your business.

4. Social Exchange Theory

The short of it: Are the rewards worth the relationship (job)?

The social exchange theory argues that relationships are only worth keeping, when they feel an appropriate reward for this effort.

What it means for your employee retention: This means that your employees will only stick around and put in the work, if they feel like they are rewarded for maintaining their relationship and level of work. 

5. The Theory of Organisational Equilibrium (TOE)

The short of it: Is their effort recognised?

Barnard-Simon’s theory suggests that an employee will only stay at a company for as long as they feel their efforts are recognised. Job satisfaction relies on the employee’s compatibility with their role, and their relationships at work.

What it means for your employee retention: Employee retention relies on employee’s being satisfied with their contribution at work, and the compensation they receive from this: Whether financial, career progression, or just recognition.

6. The Equity Theory

The short of it: The better your employers feel treated, the longer they’ll stay.

The brainchild of John S. Adams, The Equity Theory, argues that high morale equals high productivity. Conversely, when employees aren’t happy and aren’t motivated, productivity naturally drops.

What it means for your employee retention: Employees who are happy in their job and feel they are treated with respect and are motivated are more loyal. 

7. The Human Capital Theory

The short of it: The more you invest in employees, the higher employee retention.

This theory argues that companies have a natural incentive to offer training and support to better their employees skills and experience: their ‘human capital’. And that the greater this human capital is, the better your employee retention is.

What it means for your employee retention: The more your employees feel that you’re constantly investing in them with training and development, the better they will perform and the longer they will stay.

8. Resource-Based Employee Retention Theory (RBV)

The short of it: Employees feeling recognised and that their work has a purpose.

The resource based employee retention theory states that employee retention can be heavily impacted by how useful to the business they feel. That their feelings of being valued by the business can heavily impact employee retention.

What it means for your employee retention: When your team feels they have a purpose with work and that their contributions are valued, they will stay for longer. But conversely, not recognising the hard work of your team can have detrimental effects.

8 Tips to Improve Employee Retention

While understanding employee retention models and strategies is well and good, we’ve put together some practical tips that you can implement in your business to improve employee retention.

1. Have a Transparent Progression Plan

Being clear with your employees about what they need to achieve to progress in their careers, helps give them achievable goals to aim for. Meanwhile, if your employees have no idea what it takes to progress, they might think that the only way for them to progress is to leave.

2. Have Regular Salary Reviews

Salary is one of the most, if not the most, important thing to employees. Our best clients have yearly progression reviews or every six-months. These regular conversations with your employees about salary show recognition of your employees continuing value to the business.

3. Recognise Your Employees Hard Work

Recognition of the hard work of your team is a common theme through the employee retention strategies on our list. Because it’s human nature to seek approval and reward for our work. Even if you’re excelling in other areas, if your employees don’t feel appreciated, they won’t put in the effort.

4. Offering Hybrid and Flexible Working

This one is nothing new. But it’s absolutely worth stating that if you can offer hybrid working opportunities to your team, you should be. Because it’s one of the most important things to the Digital Marketers out there (See below).

5. Provide a Real Work-Life Balance

Digital marketing is notorious for the long hours, especially in an agency. So taking steps to ensure that your employees have manageable workloads and the support of their managers, can make any other agency look like a nightmare…

6. Create a Supportive Company Culture

One of your greatest strengths is your company culture. Because the environment your employees work in can have a huge effect on employee retention. In fact, a strong company culture can reduce your employee turnover by up to as much as 35%!

7. Have a Well-Planned Onboarding Process

Having an onboarding program that makes your team feel welcome is crucial to retaining new hires. It also helps your new hire hit the ground running and getting stuck in with their work, without feeling lost or overwhelmed.

8. Proper Exit Interviews

While this may seem the opposite of your goals, exit interviews are still opportunities for improving future employee retention. Having an open and honest conversation with employees who are dead set on leaving, can help you find areas of weakness and prevent anyone from following out the door.

Measuring Your Employee Retention and Employee Turnover

If your business is a larger company that has many employees coming and going, or a business which experiences high employee turnover (or higher than you like), then it can be incredibly productive to track your employee turnover and retention.

This starts with tracking annual turnover and retention rates, but it doesn’t end there. By tracking and analysing a wider set of data including employee satisfaction, employee performance, absences and holidays, you can find areas of weakness within your employee retention strategy. As well as indicators of when people are likely to leave. 

If Your Employee Retention Efforts Aren’t Working

Despite your best efforts, sometimes your employee retention efforts fail. Sometimes there aren’t opportunities for people to progress into. Or there isn’t enough money in the budget to pay them more. And sometimes it’s just completely out of your control. 

When that happens, you need a recruitment partner who can help you find the right people for your business, who are interested in staying for the long-term. And if you’re a business looking or your next digital marketer, that’s where we come in.

If you’re looking to hire your next digital marketing professional, reach out to us here, and see what we can do for your business.

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