The Importance of Employee Retention, Explained 8 Ways

5 min read
Dec 1, 2016

Importance of employee retention

Many organizations treat their employees like theyre a dime a dozen. These companies think that even their best workers can easily be replaced, particularly in today’s tricky economy where there’s no shortage of folks looking for work.  

They're wrong.

Great businesses understand the importance of keeping their employees for a long time. In doing so, they don’t have to regularly spend the time and money necessary to replace employees — which could devastate their bottom lines.

Need some more convincing as to the importance of employee retention?


You Can’t Build a Business Without Consistency

How can you expect to build a successful company if your employees are coming and going at a rapid pace? When your work environment is essentially a revolving door, it’s virtually impossible for your organization to maintain any momentum. Instead of focusing on the larger goals, managers are forced to retrain new employees constantly, as well as keep their other workers engaged.

The longer employees stay at the job, on the other hand, the more skills they acquire. In theory, this means that the best workers are the most tenured workers (though this is obviously not always the case).

Simply put: retention is great for ROI. You can’t really expect much from a workforce that’s constantly full of rookies. Strengthening your business starts with keeping your employees on board.


Turnover Crushes the Bottom Line

According to the Center for American Progress, it costs roughly 20% of an employee’s salary to replace that individual. So when your employees are constantly leaving for greener pastures, you’re forced to spend the equivalent of over two months worth of salary just to find someone to replace them.

That’s a lot of cash, particularly if replacing employees is a regular occurrence at your organization. Businesses that have to consistently replace employees will find out sooner or later how severely high turnover crushes their bottom lines.

When you focus on employee retention, not only do you wind up with a team that knows how to do the job well, but you also get to enjoy a considerably heavier corporate purse.

employee turnover 

You Lose Talent and Ideas

When your best employees are pushed to the brink and decide to seek employment elsewhere, in addition to simply having to replace them with new blood, you’re also losing those individuals’ talents and their institutional knowledge.

Although there are strategies companies can put into place for retaining institutional knowledge — documentation, internal Wikis, etc. — these will never replace the person who has hands-on knowledge of specific process.


It’s Difficult to Establish Camaraderie With a Transient Workforce

Our research has shown that peers are the number one thing people love about their job. So how are your employees supposed to develop strong bonds with one another if team members are constantly leaving the organization? It doesn’t exactly paint the most glowing picture of your business or the work culture.

The more camaraderie exists among your employees, the quicker they’ll help each other out and provide the support needed. By focusing on improving employee retention, you’re much more likely to build a tight-knit team that sticks around for the duration.

It’s OK to lose employees to other opportunities from time to time. But if you want your team to get along and work well together, you can never let it become the rule rather than the exception.


Customers Notice When Names Change

Your clients have been interacting with employees for some time. When the people they’re used to dealing with leave, it can put a bad taste in their mouth, leaving your future working relationship with that organization in doubt.

Everybody understands that employees bounce around from company to company as they advance down their career path. But such behavior shouldn’t be an everyday occurrence.

The last thing you want is to move an account from one outgoing employee to another only to have to shift it again because the second employee is leaving too. It doesn’t exactly spell confidence in your company.


Job Seekers Notice Too

Thanks to sites like Glassdoor, it’s easier than ever to get a glimpse into what it’s like to work at an organization — even if you just found out that organization exists in the first place. Almost 50% of candidates use Glassdoor during their job search, according to Software Advice. 

If your employees are constantly leaving your organization, there’s a good chance that your branding is taking a hit on Glassdoor. When job seekers begin their search for a new gig, they may very well stumble upon terrible review after terrible review of what it’s like to work for your company.

Would you apply for a job that tons of people took the time to tell the world they hated?


Constantly Training New Employees Is a Waste of Resources

Those managers you hired? You almost certainly didn’t hire them to spend their time training new hires over and over and over again. You hired them to help employees develop and to grow your business.

When your employee retention rates are low, your managers have to spend an awful amount of time training and retraining employees. Who will have the time to focus on the bigger picture?


Your Competitors Could Benefit Directly

When you lose a talented employee, maybe that person decided to go back to school, move across the country, or switch industries altogether.

Or maybe that individual sought employment at one of your competitors — the one that seems to be most respected and offers its employees the best perks. Worse yet, maybe that organization went on the offensive and approached your employee first.

In any case, when you lose staff members, you run the very real risk of those folks ending up working for your competition. Could you imagine seeing one of your former employees grow tremendously at a competing organization? Think about all the wasted potential.

The easiest way to ensure your competitors don’t benefit from the talents of your current employees is to improve retention. Offer more perks, more money, and more benefits. Let your employees work where they want, when they want. Host some company happy hours. Take a day off once a quarter to give back to the community and undertake team-building exercises.

Do everything you can think of to make the life of your employees better. They’ll stick around.


Editor’s Note: This post was originally published in January 2015 and has been updated for freshness, accuracy, and comprehensiveness.  



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