The Need for Employee Retention

The loss of quality employees is costly to any organization.

Employee retention is the rate that workers are retained by a given organization. Low retention equates to high turnover. Organizations typically deploy retention strategies in an effort to maintain high-quality employees. The need for employee retention may be evident in several performance indicators, including productivity and profit. Employee retention is one of the greatest issues faced by businesses today.

Turnover Is Expensive

Effective employee retention strategies are essential for reducing turnover costs. Employee turnover incurs a variety of costs for the organization, including separation costs, vacancy costs and replacement costs. When an employee leaves an organization, the separation costs include administrative costs, separation pay and unemployment compensation. While the employee's position is vacant, the organization may have to pay for additional overtime for those employees who must take over the work of the lost employee. Recruiting, interviewing and training new employees are all costs that might be avoided to some extent. Successful employee retention mitigates these costs and saves a great deal of money for the organization.

Avoiding Brain Drain

Employee retention also is needed to avoid what is commonly referred to as "brain drain." Employees maintain a great deal of essential information in a place where it is not easily accessible by their co-workers and managers: their brain. Brain drain occurs when workers leave an organization and take that information with them. The loss of high-quality workers who know the inner workings of the organization, including all of the undocumented tips and tricks for dealing with suppliers, are essential to organizational success. Successful employee retention strategies are a necessary component of retaining this valuable information.

Corporate Culture

The retention of high-quality employees who are committed to the mission of the organization is vital to the creation and maintenance of a productive corporate culture. According to the Society for Human Resource Management website, organizations with high employee retention rates, "typically have strong, sustainable corporate cultures that can act as key differentiators in the marketplace."

Considerations

There are a variety of factors to consider when assessing the need for more effective employee retention strategies within your own organization. You must first analyze your organization's current retention rates in relation to those of others within your industry, as well as the cost of replacing employees. Organizations also should conduct exit interviews to determine why employees leave in order to identify areas of improvement.

References

• Management Study Guide: Need & Importance of Employee Retention
• University of Wisconsin Extension; How Much Does Your Employee Turnover Cost?; William H. Pinkovitz, et al
• Monster; Avoid Brain Drain; Cheryl Stein
• Society for Human Resource Management: Employee Retention