Did you know 23% of employees change companies because of a lack of development opportunities and training, according to the National Research Business Institute? Other reasons employees often leave include feelings of inadequacy, a dislike for their manager’s leadership style, feeling overworked, and wanting to pursue a more meaningful job. Companies who struggle with employee retention find they are stalling productivity levels, increasing training costs, raising recruitment expenses, and struggling to interest top talent.
Just What Does Employee Turnover Cost a Company?
When an employee leaves, the company is faced with many costs. First, the company has to increase efforts to hire and train new talent. Additionally, high turnover rates may make it very difficult to attract top talent – since the top candidates will want to work in a place that keeps employees happy. This also may mean that processes are lost as experienced professionals walk out and inexperienced talent try their own hand at the task. Center for American Progress reported the average turnover cost was 21% of the employee’s annual salary when they compared actual costs in 30 case studies across various industries.
Unengaged Employees Cost Money
Gallup reported that companies with highly engaged employees have workplaces that outperform their competitors by 147% in earnings. Companies with engaged workers see fewer quality defects, less safety problems, and face lower absentee issues. It isn’t surprising that the average company with engaged employees face 65% lower turnover rates than those who do not have engaged employees.
Yet, Gallup also found that 87% of employees are not engaged in their workplace. This means they are more likely to leave their company and are less productive during their shifts.
Great Companies Focus on Human Strategies
ADP conducted a survey that included participation from over 300 small and mid-size companies (10-999 employees). Their results showed just how important employee retention is:
- 35% of small businesses and 47% of midsize companies say hiring top talent is their #1 competitive strategy.
- 48% of small companies are worried about finding and hiring good employees to meet their business goals.
- 46% of mid-size companies are concerned about retaining good employees to meet their business goals.
In order to get employees on board and engaged, workplaces need to be fun and focused on the needs of their talent. Different types of workers will have different ideas about what makes the company a great place to be. Effective company owners and managers will strive to understand who their target audience is (the ideal employees) for their workplace and design atmosphere, benefits, and managing styles to fit.
Typically, Millennial employees value autonomy and flexibility, while Generation X prefers monetary compensation and traditional benefits. Some industries tend to have employees that appreciate structure and clear communication, while other workplaces thrive on community and relaxed policies. There is no one-size-fits-all strategy when it comes to ensuring employees are thriving in the workplace. Most companies do report that great training and professional development opportunities are one of the most important factors for engaged and productive employees.
Companies that are worried about cutting costs and simultaneously increasing productivity need to look closely at their employee retention and satisfaction levels. While spending more money on employee benefits, workplace atmosphere, and recognition through compensation might seem counterproductive, it can actually reduce the costs spent on unhappy employees. Companies can spend more on employee morale now to reduce costs spent on turnover later.