Employee training and development have always been a cornerstone of staff retention strategies, and that’s unlikely ever to change. What has changed for post-pandemic talent leaders is the need to rethink conventional incentives for retaining employees. HR experts are recommending more holistic, human-centric approaches encompassing wellness and flexibility, as well as upskilling and job satisfaction. By prioritizing retention over recruitment, the longer-term investment in happy, healthy, and satisfied employees pays off on multiple cost-saving and performance-boosting counts.
Is this too tall an order for employers hit hard by the Great Resignation? In the fallout of workforce hemorrhaging, as global skills shortages persist, is it reasonable to focus less on hiring replacement staff and more on preventing staff turnover? What would this change in mindset entail?
Let’s consider what leading HR management consultants have to say about:
- Why employee retention is crucial to avoid the high cost and disruptive impact of talent turnover
- How the pandemic redefined employees as people
- Paving the way ahead with job satisfaction incentives
What is the cost-benefit analysis of talent retention?
Employee retention management requires strategic, conscious efforts to motivate and engage key staff members in jobs they find satisfying. Their contributions have a direct bearing on the employer’s overall productivity and performance.
High employee morale and work quality are added benefits. Successful employee retention outcomes also have a positive impact on talent recruitment, while minimizing staff turnover costs and disruptions.
Nearly half of the HR professionals surveyed by the Society for Human Resource Management (SHRM) and Globoforce considered employee retention/turnover prevention to be the top workforce management challenge.
Talent loss is expensive
An organization’s investment in employee retention is overwhelmingly more affordable than the cost of losing staff. Regarding the trillion dollars that U.S. businesses collectively lose each year to staff turnover, Gallup calculated this breakdown per employer:
- The U.S. Bureau of Labor Statistics (BLS) reported that the annual overall turnover rate in 2017 was 26.3%.
- The cost of replacing an individual employee can range from one-half to double the employee's annual salary (conservative estimates).
- Therefore, a 100-employee organization paying an average salary of $50,000 could incur staff replacement costs of $660,000 to $2.6 million per year.
The costs of replacing a departed employee in the U.S. have been studied extensively, revealing these insights:
Hard costs account for about one-third of total turnover costs.
- The average new-hire recruiting cost is nearly $4,700.
- Onboarding costs average about $4,100 per new hire.
- Training and development costs averaged $1,252 per employee in 2015.
Soft costs represent the other two-thirds of overall turnover costs.
Why do employees leave or stay?
A job optimism survey by Robert Half Talent Solutions found that 41% of respondents were looking — or planning to look — for a new position in the second half of 2022.
According to exit interviews, which Robert Half considers an invaluable retention planning tool, employees who quit commonly give these reasons:
- Inadequate salary
- Perks and benefits package isn’t competitive
- Feeling overworked and/or unsupported
- Limited career advancement
- Need for better work-life balance
- Lack of recognition
- Unhappiness with management
- Concerns about the company’s direction or financial health
- Dissatisfaction with the company culture
- Desire to make a change
- More compelling job opportunities elsewhere
A largely preventable problem
A Gallup survey revealed that 52% of voluntary job departures could be thwarted. Those in that circumstance indicated that their employer could have stopped them from leaving by acting on their concerns. Almost the same number of exiting employees — 51% — had no conversations with a manager about their job satisfaction or future with the employer during the three months before they quit.
Other research indicates that employees generally stay with an organization if the pay, working conditions, and learning and development opportunities measure up to — or outweigh — their required contributions of time and effort.
SHRM researchers identified these top five contributors to job satisfaction:
- Respectful treatment of all employees at all levels
- Trust between employees and senior management
- Job security
- Opportunities to use their skills and abilities at work
Other incentives to keep employees from quitting include:
- Personalized benefits
- Professional development and career advancement opportunities
- A positive and supportive work culture
- Receptiveness to actionable staff feedback
- Employee concerns are addressed quickly
The post-pandemic meaning of “human” in HR management
Gartner, a leading provider of IT business research and consulting services, was quick to propose ways that the “employee value proposition” (EVP) must evolve in the pandemic’s wake.
Explaining the rationale for a more human-centric approach to employee engagement, Gartner VP Carolina Valencia said, “The reality is that three shifts in the work environment have eroded the impact of the traditional EVP: Employees are people, not just workers; work is a subset of life, not separate from it; and value comes through feelings, not just features.”
A Gartner study of 5,000 employees and 85 HR leaders drew these conclusions about traditional EVPs:
- Employee engagement, as a driver of performance and retention outcomes, has remained relatively flat since 2016.
- Talent shortages were reported by 29% of functional leaders, notably in IT and data science areas.
- Just 31% of HR leaders believed their employees were satisfied with the existing EVP.
- Only 23% expected most employees to remain with their current employer after the pandemic.
- About 65% of job candidates withdrew their applications because the EVP was unattractive.
In its guide entitled Reinvent Your EVP for a Postpandemic Workforce Gartner proposes a new “human deal” for progressive employers. It hinges on the emotional value that employees can derive from feeling more:
- Understood — through deeper connections with family and community, not just coworkers
- Autonomous — through radical flexibility in all work aspects, not just when and where work takes place
- Invested — through personal growth that the employer supports, not just professional development
- Cared for — through holistic well-being offerings that employees use
- Valued — through a shared purpose with the employer
The BLS reported good news and bad news for 2022. The 77.2 million hires represented an increase of 1.2 million from 2021. But employee losses increased by 3.2 million to 72.3 million in 2022. Voluntary quits accounted for 70% of that total, adding up to 50.6 million — the highest annual level on record.
In a Human Resource Executive forecast of 2023 priorities, as talent leaders address “near crisis-level” recruitment and retention challenges, these themes emerged from the expert observations cited:
- Upskilling is critical for employers and employees alike.
- The intersection of employee and organizational health will be a top priority.
- As employees focus on their own well-being, they expect more from their employers, including greater flexibility, career opportunities, and ways to take care of their mental health.
- Business leaders must strive for a new level of authenticity and transparency in their communications with staff at all levels.
- Evolving employee needs require “people strategies” to support business strategies.
- Keeping laser-focused on helping employees learn and develop their skills starts with manager enablement.
Job satisfaction can deter the decision to quit
Robert Half pinpointed 14 areas where conscious efforts to make jobs more satisfying for valued employees can have a positive impact on retention:
- Onboarding and orientation — setting the stage for success
- Mentorship — for newcomers and existing staff
- Compensation (including benefits) — assess and adjust regularly to stay competitive
- Wellness offerings — personal goals for mental, physical, and financial fitness
- Communication — proactively seek feedback on workload and job satisfaction
- Continuous performance feedback — in relation to professional goals
- Training and development — keep on top of staff upskilling needs
- Recognition and rewards — express gratitude directly or through formal recognition programs
- Work-life balance — set a good example and respect your employees’ after-hours life
- Flexible work arrangements — lack of options could be a reason to quit
- Effective change management — provide guidance, insights, and reassurance
- Emphasis on teamwork — encourage ideas from everyone, not just team stars
- Acknowledgment of milestones, big and small — celebrate together
- Talent leaders are encouraged to prioritize employee retention over recruitment in addressing the critical skills shortages resulting from the pandemic and Great Resignation.
- The workforce disruptions and displacements that occurred during that three-year period influenced the shift in emphasis toward holistic, human-centric retention strategies.
- Efforts to accommodate the wellness and flexibility needs of employees, alongside upskilling requirements, are integral to the job satisfaction incentives that help retain quality staff.
- The overall benefits to organizations investing in talent retention outweigh the costs of staff turnover by an immense margin.