Four Key Employee Retention Challenges: When a Raise Isn’t Enough

3 min read
Dec 18, 2019

Employee retention is one of the most talked-about HR challenges, and it’s not difficult to see why. 

Combine record-low unemployment with the rising costs of replacing employees (the average employee exit costs 33% of their annual salary), and you’ve got a recipe for a top business priority. 


But if retention is so important, why don’t organizations just pump more money into their retention program budgets?

Because retention (and its evil siblings attrition, turnover, and churn) are multifaceted, complex issues. In many cases, classic retention strategies simply don’t cut it anymore, and new solutions, when implemented incorrectly, can make problems worse.

Let’s take a look at some of the biggest challenges in employee retention plaguing HR leaders (and what can be done to overcome them). 


1. Money can’t buy happiness.

Here’s a thought experiment:

What if you could replace your retention program with a machine that gives all high-retention-risk employees a 10% raise when they consider leaving; would that solve your retention troubles?

Not even close. The truth is that for many organizations, increasing compensation or matching competing offers isn’t enough to keep good employees long-term.

That’s because not all employees are primarily money-motivated. Our own research shows that fewer than half of employees would leave their current job for a 10% raise somewhere else. In addition, certain demographics are much less likely to be money-motivated than others; in a survey from LinkedIn, 86% of millennials said they would consider taking a pay cut to work at a company whose mission and values they agree with. Let that sink in. 

With limited resources with which to improve retention, HR leaders should consider whether compensation increases are really the best place to invest. That money might be put to better use improving benefits, development programs, or company culture. 


2. Culture can’t be forced. 

Employees who rate their company’s culture poorly are 24% more likely to leave their organizations within a year than those who give their company culture high marks. 

Okay, so culture is important, and there are proven strategies for improving culture, like peer recognition, promoting feedback, and adding fun activities to the workplace. So what’s the problem?

Well, a major component of company culture is authenticity. Implementing a peer recognition program or celebrating employee birthdays might help a little, but unless there’s buy-in from both leadership and employees, it will feel forced — and you can’t force a positive culture. 

Great employee retention relies on great company culture, and that starts at the top. As former Starbucks President Howard Behar put it, culture is “a direct reflection of how well leadership lives up to what they say.” If leaders can’t adhere to a company’s core values, then all the ice cream socials in the world won’t help. 


3. Retention starts with great leadership. 

On that topic, the effect of leadership on retention is difficult to overstate. Nearly half of employees say they’ve quit a job because of a bad manager, and bad supervisor performance makes employees four times more likely to quit. 

For HR professionals, this can be a tough nut to crack. HR doesn’t always have direct control over managerial performance. What they can help with, however, is employee feedback.

Two-way feedback is a great tool for improving employee retention. We’ve found that employees that don’t feel comfortable giving upward feedback are 16% less likely to stay at their jobs. Tools that offer anonymous feedback can help solve this problem. 


4. There isn’t always room at the top. 

One of the biggest contributors to employee churn is a lack of upward advancement opportunities. According to our research, employees who feel they’re progressing in their careers are 20% more likely to stay at their jobs. 

In addition, 70% of high-retention-risk employees say they'll be forced to leave their company in order to advance their career.

This represents a major employee retention challenge. You can’t promote everyone, and there aren’t always positions available for employees that are ready to move up. 

One strategy to overcome this gap is offsetting a lack of job openings with great education and career development opportunities. 

For many advancement-motivated employees, climbing to the next rung in the ladder falls into the same category as getting an advanced degree or certificate. These same employees might value structured mentorship opportunities, or the possibility of heading up their own projects through intrapreneurship.

When positions do become available, employees will be even more ready to succeed in them. 



Additional budget can’t solve every challenge in employee retention. The key to an effective, sustainable employee retention program is taking a holistic view and investing in the things that employees care about most — plus a healthy dose of trial and error.


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