While hiring is top of mind for many area employers, employee retention isn’t.
“Employers see employees as an item on the left side of the balance sheet,” says Edward C. Hopson, CBA, managing principal and founder of Hopson Communications and Coaching. “They think of employees in terms of recruiting, training and salary — the costs — but no one’s really talking about them in terms of ROI.”
Most employers are reactionary — they wait until they’re losing employees to figure out why that’s the case. But, especially in today’s market, a strong retention plan can be even more valuable than a strong talent acquisition program.
Smart Business spoke with Hopson about why employers should emphasize retention and offers tips on how that can be accomplished.
Why are employees seen more as an expense than an ROI generator?
In today’s marketplace, employees have lots of choices of who to work for and may have a job waiting for them before they leave. And because wages are being increased to stay competitive, it’s going to cost employers more to replace the person who left. Losing an employee is oftentimes a big loss for an employer because it’s an investment walking out the door before the full ROI could be realized. However, employers don’t typically measure and quantify the cost of recruiting and training compared to the revenue an employee ultimately generates. When an employee leaves, especially when that happens within the first few years, there isn’t a metric to show how much production was just lost. Companies need a better analysis that calculates the ROI of each employee instead of seeing their salary as a line item.
Why do employees leave a company?
It’s not necessarily money that drives employees from a company. There are studies that show people will stay for a little less pay if the culture is a good fit — in some cases as high as 20 percent less pay to stay somewhere they like.
Retention is also a product of the relationships employees have with those they work with, especially their direct report. Bad bosses often don’t get exposed for a number of reason, one of them being because companies tend to skip exit interviews. They’re not asking employees who leave why they’re going so they can begin to identify common issues and find a resolution. Similarly, employers should take the time on occasion to ask current employees why they continue to work for the business.
What data can employers use to improve retention?
Companies tend to miss opportunities to learn how to improve retention by not asking enough questions. For instance, new hires bring an outside perspective into the company. By talking with them about their previous experiences, employers can learn new information, getting fresh ideas and insight that can improve retention.
Managers are in a great position to talk with and listen to employees — both new hires and those who have been with the company for a long time. That enables them to take in a lot of information and different perspectives to learn how to keep people on board and keep them happy.
Another way to gain a broad perspective is to talk with headhunters about what they’re seeing in the market — the current pay and benefit structures, etc. That can help companies ensure their pay is competitive and lessen the chance that they lose a good employee to a competitor just because they offer higher pay. The marketplace is competing for talent at all levels, so employers need to get information from the marketplace to see where their pay and benefits rank.
Today, nearly all who are currently employed might have 10 employers that will offer them the same position they have now but with better benefits, culture or pay. That means they can pick the best situation. Employers that change their mindset and see their workforce as an investment that generates a return can position themselves as an employer of choice. Those that can’t will find themselves at a competitive disadvantage. ●
INSIGHTS Leadership is brought to you by Hopson Communications & Coaching, LLC