Why retain employees is important

A revolving door environment can dampen employee morale. Aside from lost connections, employees who remain may have to take on heavier workloads or responsibilities.

As a result, their motivation and satisfaction can also nosedive. Just as concerning is the contagious nature of turnover. Employees may decide to leave because they notice others are job hunting, talking about quitting or actually leaving the company.

Organizations with successful employee retention programs can lift employee morale, enable greater connectedness and engagement, and create contagions of positive emotions in the workplace. One crippling cost of high turnover is the loss of institutional knowledge, skills and relationships — within the organization and with customers and partners — that disappear when an employee exits. The organization also loses the potential value the employee could have delivered, also known as the opportunity cost.

When senior employees depart, the loss can impact succession planning as well. These employees — particularly top performers or those with in-demand skills — are often at risk for turnover even in times of high unemployment.

Organizations that focus on retaining more senior or experienced employees see significant returns as these professionals are apt to solve complex issues on their own, which benefits the organization.

Replacing an employee carries significant costs. After an organization finds qualified employees and successfully recruits and onboards them, they have to be trained. Should a new hire leave, all that money goes down the drain. By focusing on employee retention, recruiting costs can be dramatically reduced.

Another consideration is to recruit from within the organization. The cost to train and reskill an employee from within can save an organization tens of thousands of dollars per person. Persistent turnover causes a host of issues for employers. The most immediate impact is loss of productivity. On average, it can take a new hire one to two years to reach the productivity of an existing employee.

In addition, new hires need time to build relationships with co-workers and customers. An understaffed environment also causes problems of its own — among them, employee overtime and burnout, lower work quality and delays.

Effective employee retention can save an organization from productivity losses. High-retention workplaces tend to employ more engaged workers who, in turn, get more done. Engaged employees are more likely to improve customer relationships, and teams that have had time to coalesce also tend to be more productive. Turnover costs can have a significant negative impact on a company's performance; however, not all turnover is harmful.

For example, a new replacement hire may turn out to be more productive or more skilled than his or her predecessor. Devising effective employee retention strategies requires organizations to understand both why employees leave organizations and why they stay.

Employees leave organizations for all sorts of reasons —Some find a different job, some go back to school, some follow a spouse who has been transferred to a different location, some retire, some get angry about a work-related or personal issue and quit on impulse, and some simply decide they no longer need a job these categories of departure are referred to as "voluntary turnover".

Still others get fired or laid off by the organization referred to as "involuntary turnover". Generally, an individual will stay with an organization if the pay, working conditions, developmental opportunities, etc. These judgments are affected by both the individual's desire to leave the organization and the ease with which he or she could depart.

Studies have shown that employees typically follow four primary paths to turnover, each of which has different implications for an organization:. See : Are Your Workers Bored? As important as it is to understand the reasons that drive employees to leave an organization, it is just as important to understand why valuable employees stay.

Studies have suggested that employees become embedded in their jobs and their communities and as they participate in their professional and community life, they develop a web of connections and relationships, both on and off the job.

Leaving a job would require severing or rearranging these social and value networks. Thus, the more embedded employees are in an organization, the more likely they are to stay. Companies can increase employee engagement by providing mentors, designing team-based projects, fostering team cohesiveness, encouraging employee referrals, and providing clear socialization and communication about the company's values and culture, as well as offering financial incentives based on tenure or unique incentives that may not be common elsewhere.

Employers must be responsive to the wants of employees. Prior to the COVID pandemic, research found that nearly a third of workers sought out a new job because their current workplace didn't offer flexible work opportunities.

After , many workplaces have remote work and flexible scheduling options that have been put to the test. Employers can use this new flexibility to their advantage.

Employees want to be recognized for their achievements. Employees who have the opportunity to move around within a company, whether to new jobs in different departments or by promotions, are more likely to stay with that company. Employee benefits also play a role in retention.

Offering a competitive benefits package, in addition to competitive pay, reduces the likelihood an employee will find the grass greener elsewhere. Practices that contribute to retention arise in all areas of HR, and all roles within an organization will need to work together to develop and implement multifaceted retention strategies. Broad-based and targeted strategies, or a combination of both, may be appropriate depending on the circumstances.

Competition within an industry takes place at every level of doing business. When you have quality employees, you will produce better products and services.

You will also be able to sell and market your products and services more effectively than competing companies with a weaker talent pool. If you fail to retain your best employees, there is a decent chance that your competitors will be able to hire them. Just as you vigorously protect your trade secrets and intellectual property from your competitors, you should do the same when it comes to your employees.

Maintain an attractive, supportive, ethical workplace where people want to develop their careers. Lainie Petersen is a full-time freelance writer living in Chicago. She has written on part-time, full-time and freelance employment for a variety of online and offline publications.

She holds a master's degree in library and information science from Dominican University. Small Business Managing Employees Employees. By Lainie Petersen Updated April 02, Relationships are developed that encourage continued sponsorship of the business. It is expensive and leads to a temporary loss in efficiency. When a senior member decides to leave the organization, its effect can be felt throughout the organization, which in some cases, leads to more resignations.