Did you know that U.S businesses collectively spend $1 trillion on recruitment every year? That’s close to one-twentieth of the country’s annual GDP! Why do US businesses spend so much on recruitment? It’s because recruitment is very expensive, so you want your business to retain as many of its best employees as possible. Retention should always be a key goal when recruiting diverse talent.
What is Retention and Its Importance
Retention is an organization’s ability to keep its employees. Some industries, like the restaurant industry, naturally have high turnovers, while others, like the education industry, have lower turnovers. Regardless of your industry’s turnover rate, retention is relevant for your business.
Retention is about creating long-term strategies to keep your talented employees and build a loyal workforce. The benefit of higher retention rates is reduced recruitment costs and minimal workplace disruptions.
Why Employee Retention Matters
Hiring new employees costs money, takes time, and causes stress. Depending on the position’s complexity, replacing employees who’ve left could also badly disrupt your organization. So, it’s always better to retain talent than have to replace it.
It’s impossible to completely stop employees from leaving your organization, but you can significantly reduce turnover rates. Ideally, you want your organization to lose as little talent as possible to avoid these problems:
1. Turnover Expenses
Replacing employees costs anywhere between 16% to 213% of an employee’s salary. Turnover costs can be this high because organizations often spend months advertising to candidates, interviewing them, and training new employees.
2. The Hiring Process
The Society for Human Resource Management reported that it takes 42 days to fill the average position. The hiring process takes this long because of all the steps you have to take:
- Updating the job description
- Checking candidates’ resumes
- Interviewing candidates
- Completing legal work
- Training your new employee
3. Lost Knowledge
Experienced employees take their experience and knowledge with them when they leave your organization. It naturally takes time for new employees to learn all the things old ones did. The result is lower productivity in the meantime.
4. The Hiring Process
The longer a position is unfilled, the more work gets piled up. Worse, other employees might have to pick up slack for the empty positions until you get a new hire–resulting in burnout. Your entire team’s productivity could be compromised by one or two key positions being unfilled for too long.
5. Declining teamwork
Employees have a harder time bonding with each other when team members keep leaving.
9 Top Benefits of Retention
Retention has innumerable benefits for an organization, ranging from building community to reduced costs and diversity retention.
1. Reduced Costs
Hiring new employees is expensive as we’ve established. It’s also costly in time and effort, all of which your organization has to pay for. Having a good retention strategy effectively eliminates many of these unnecessary costs and saves your organization a good deal of money, time, and energy.
2. Improved Morale
Everyone in a team loses morale when experienced employees leave the organization. When experienced employees leave, it means that existing employees might have to pick up the slack. Experienced employees leaving also potentially signals that the organization doesn’t value their talent, further reducing morale.
Higher morale leads to better productivity so your organization benefits from not preventing its best employees from leaving.
3. Increased Productivity
More experienced employees are more productive because of their experience. Experienced employees also have more refined skills and better engagement. Working longer in a company means experienced employees are better at working.
So long-term, you want your workforce to be as experienced as possible, which you can achieve through better retention. Ideally, you want as many experienced employees as possible in your organization’s most important positions.
4. Increased Customer Experience
Higher employee retention correlates with higher employee happiness, which then correlates with better customer happiness. Employee retention improves employee happiness because it gives employees more security about their future.
Employee happiness improves customer happiness because happier employees will treat customers better. Improved customer happiness then naturally results in improved customer satisfaction and better sales.
5. Less Disruption Caused By Recruitment
Even if recruitment doesn’t cost your organization a lot of money or time, it’s still a big disruption for your company. All the time, money, and energy spent on recruitment–no matter how little-could be better used on other things.
Maximizing retention ensures your organization optimizes its strategic resources and prevents unnecessary disruptions from recruitment.
6. Improved Company Culture
Higher retention rates result in better workplace culture and improved employee morale and commitment. In fact, 88% of job seekers in a survey claimed that workplace culture was important in determining whether they wanted to work for a company.
So higher retention rates result in a better workplace culture that makes it easier for you to retain more valuable employees long-term.
7. Higher Employee Engagement
High retention is also associated with higher employee engagement. In fact, high engagement and high retention mutually improve each other. Better engaged employees are 1.8 times likelier to prefer working in their current organization a year from now.
Higher employee engagement is also tied to better employee performance and productivity. More engaged employees also perform better long-term, so high employee engagement is very desirable.
8. Improved ROI On Talent
Improved retention naturally leads to a higher ROI on your talent strategy. Ideally, you want to achieve the highest possible ROI on every employee you hire. Improved retention is excellent for improving ROI because employees produce more returns the longer they work for you.
9. More Employee Expertise
Employees naturally develop more expertise over time, and employees with more expertise also work better. Good retention policies ensure talented and expert employees stay longer with your organization.
Ultimately, retention should be a key goal during recruitment. Higher retention potentially saves your organization thousands of dollars and prevents you from losing important talent.