Regardless of a slack or a tight job market, it would be a mistake for leaders to lessen organizational focus on employee retention. The most obvious reason is the high cost of hiring and training a replacement employee, estimated to be about 20 percent of the departing employee’s annual salary, according to CBS News “Money Watch.” The less obvious reason is that retention is often a reflection of employee engagement, a key driver of growth, productivity, profitability, customer satisfaction and—in publicly held companies—earnings per share.
While we tend to think that most responsibility for employee retention resides at the manager level, top leadership exerts a strong influence on whether employees stay or go. For this reason, it’s especially important that senior leadership be acutely aware of the critical role they play in employee retention. As head of a mid-sized business, and from decades of observing other organizations—large and small—here are my own observations on ways leadership can exert a positive influence on employee retention:
Organizations that treat employees well with meaningful benefits packages that include generous vacations and work-from-home opportunities, for example, are shown to have lower turnover and significantly higher financial performance. And who determines these kinds of perks? Although HR has significant input, it’s the C-suite that ultimately gives the “go-no go” on benefits packages.
Senior management recognition of a job-well-done by someone at a different layer in the organization goes a long way toward making an employee feel appreciated and valued, both strong factors influencing employees to stay. Do it in person and do it often. The few minutes spent to express a genuine “thank you” one-on-one will be remembered for a long time.
Good leaders “show up.” They are visible and they communicate, with openness and transparency. This is especially important during difficult times when visible leadership and honest communication can help allay uncertainty—and uncertainty can be an ingredient for turnover. Honest communication from leadership also conveys respect for employees, another factor that positively affects retention.
Nearly all organizations talk about their values. And most try to live them. But it’s especially important for senior leadership to consciously live those values, in the workplace and during off-hours as well. It all comes down to trust: if leadership says one thing but does another, what happens to trust? This kind of disconnect is toxic to retention.
This isn’t a job just for HR or your management team. Real engagement is an attitude, and it’s an attitude that is ignited from the top and permeates the entire organization. Think of how you can show that you really care about the organization. Demonstrate your commitment to improving all aspects of your organization, not just the bottom line. And always treat colleagues with respect, especially in the most difficult or heated situations. These are just a few of the ways that you model engagement and generate a culture of engagement.
A word of caution: There is a big difference between retention and “hanging on.” Reflecting on today’s tight labor market, it is possible that healthy retention numbers also include those individuals who are simply “hanging on” until the job market improves. This is where management’s commitment to actions that drive retention is so critical. Take nothing for granted. Do the right things for the right reasons and good things happen – for everyone.
Resources and Sources:
“Gaps and Opportunities in Employee Engagement Measures,” a Marketing Innovators white paper.
USA Today, “Do Happy Workers Mean Higher Profits?”
CBS News Money Watch: “How Much Does it Cost Companies to Lose Employees?”