How to Increase Staff Retention – Without Breaking The Bank
Imagine the scene, it is a beautiful spring day. You decided to walk into the office today instead of driving. While walking in you could hear songthrushes and great tits singing.
You picked up a coffee on the way in. As you reach your desk, you see a couple of faces looking a little glum. As you sit down, Sarah, ask quickly for a quiet word.
Oh no. She's resigning.
Losing good staff members hurts
It hurts cash flow, it hurts team morale, and it can hurt your customers. Keeping good staff around is important—vital even. Staff retention should be one of the biggest priorities of executives, managers, and human resources when it comes to talent management.
Replacing an employee is generally more expensive than keeping people happy and working for your company.
The Short Answer Is Simply: It Costs Businesses Money.
HRZone has reported that British businesses suffer a loss of £42 billion due to staff retention costs. Hurley Accountants estimates that an employee who leaves the business costs around 30% of their salary to replace.
Replacing staff costs money in terms of hard and soft costs:
Hard costs: direct hiring costs like adverts, recruitment agents, testing, and interviewing.
Soft costs: human resources administration, training new staff members, work left undone, knowledge leaving the company, and, of course, team members becoming less effective while picking up work they might not be fully versed in.
Investing in staff retention is an investment in business growth. However, many organisations do not prioritise this. So, how can you ensure that you maximise staff retention, without breaking the bank? In this article, we’ll take a look at some of the best ways you can do just that. Let’s get started.
However, before we do that, we need to have a discussion on why people leave businesses.
Why Do People Leave Businesses? The 5 P’s of Staff Turnover
All employees leave businesses for the same five reasons:
- Personal Reasons
- Pay Reasons
- People Reasons
- Policy Reasons
- Political Reasons
Personal Reasons
Personal reasons are the hardest element to control. Given that it is personal, many businesses are not able to manage this element. A staff member who decides to go travelling, have children, or move across the country is not going to be swayed by Dress-Down Friday or a monthly supper club.
The same goes for career changes and lifestyle changes.
What businesses can do is control how they react to an employee who has a change in personal circumstances. This generally requires open discourse and flexible working arrangements.
Pay Reasons
Pay, salary, money—big G’s. Pay and benefits are an important part of any retention discussion.
Pay and benefits work in two distinct ways. Firstly, people need to earn enough to afford their lifestyle and, secondly, the pay needs to reflect the work, effort, environment, and difficulty of the job.
For example, in Australia, there is a class of jobs called FIFO (Fly In Fly Out), which are very well paid but involve working in the outback for weeks or months at a time. The job itself might be relatively simple, but the lifestyle while working there is very difficult—so the pay reflects that.
So the pay must both allow people to live and make them feel that they are being rewarded accurately for the effort and difficulty that goes into it.
Pay and benefits must continue to evolve to match employee needs.
People Reasons
Work is generally about the people we work with—our team and our managers. These are two of the biggest influences on why people leave businesses.
For example, coal miners do a (at times) tragically dangerous job. Although it can pay well, it can also lead to death and dismemberment. So why do so many of them continue to work in such difficult conditions? Because of the team spirit, camaraderie, and community that forms around working in a mine. This keeps them coming back—for each other.
Sadly, your business is unlikely to be able to produce this level of commitment.
So the people and management will have a profound impact.
We have all worked in workplaces with teams that are awful—and teams that are good. If you think back, when you’re working in a great team, even the hard days are a lot easier to cope with because you have good, supportive people around you.
Now compare that with the worst team you’ve worked with. How much harder was it?
The same goes with managers. Good managers and bad managers have a profound impact on teams and employees.
Policy Reasons
The policies of a business can and do affect the staff retention rate considerably. The two big areas that affect staff retention are: flexible working arrangements and recognition.
These two business policy areas have a massive impact. Flexible working arrangements allow people to structure work around their lives (which is what work is paying for), keeping them engaged and feeling empowered in their jobs.
Recognition policies also matter. For instance, employee of the month awards are a great way to make people feel connected to the job. Giving these awards to leaders or leaders' favourites will only make others feel demotivated.
Political Reasons
Workplaces that take on highly political characteristics become toxic. Indeed, many become highly toxic where work, output, and reward are aligned with brown-nosing over outcomes.
These cultures will push out people who do not—or cannot—play the political game.
Toxic workplaces are the kryptonite of employee happiness. Removing the toxicity will generally improve retention, yet it is the hardest thing to solve.
The Interrelationship of the 5 P’s As a generalisation, the above five reasons can all influence a person’s decision to leave a job and find a new role.
They can all have an impact. Some people will genuinely leave because they are looking for better pay, because they can’t stand a manager, or because they want more flexibility.
All the above will have had an influence on why people leave your organisation.
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Actions to improve retention
Provide Development Opportunities
This is perhaps the most important thing you can do to encourage employees to stick around. Employees tend to leave when they feel undervalued—or like they cannot advance further in your organisation.
If you provide them with professional development opportunities and a clear path for advancement, they are more likely to feel that they have a goal. They will also feel like your company is investing in their future—and in turn, both of these things will increase their sense of loyalty.
Utilise Mentoring & Buddy Programmes
Mentoring is a great way to retain high-potential employees. One-on-one mentoring is helpful when helping a newer employee determine their career path and their true potential.
Mentoring helps employees build their skills and talents using the expertise of seasoned and experienced staff.
Buddy programmes have a great impact on new employee retention as the ‘buddy’ helps them to navigate the transition to a new company.
Mentoring and buddy programmes boost morale as they build relationships across the organisation that help staff thrive.
Explore More Flexible Working Arrangements
Top-performing employees may be more likely to stay with your company if you can provide them with flexible, alternative working arrangements. For example, you could allow an employee to set their own hours or telecommute on particular days.
If you can integrate these flexible arrangements into the rest of the company, the benefits can be massive. Staff will be less likely to leave—particularly if they don’t think they can get the same flexibility elsewhere.
Don’t Forget About Salary Increases and Raises
Yes, a salary increase or raise can be expensive—but if you do the math, keeping a top performer is almost always worth the investment.
Hiring a new employee can be very costly—from recruiting to interviews, follow-ups, offer letters, and onboarding. Usually, it’s worth paying a little more to keep a top performer rather than letting them go.
Arguing over a 3% or 6% raise can push an employee out of the door and result in a 30% replacement cost.
Have fair raises based on performance that is controllable. This is important: the factors that decide raises should relate to things the employee can actually influence.
Watch the Marketplace
Tied in with giving staff pay raises is watching the industry or local marketplace for pay trends and signals.
For instance, many British businesses are still trying to pay office workers the same as Aldi or Lidl supermarket staff. These are highly skilled jobs that pay the same as retail.
I’m not dunking on supermarket work—I’ve done it. It can be physical, and tiring, and dealing with the general public is, at times, exasperating. But for many jobs I’ve done, if the pay were the same, I would have gone back to the supermarket.
Keep an eye on the market and pay appropriately—especially when hiring.
Keep in Touch with Former Employees
If a valued employee leaves, do your best to stay in touch. You may be able to attract them back in a few years with an attractive compensation package. They may return with more experience and skills, too.
Pizza, Pints and Cornettos
I did say “without buying pizza.” However, occasionally saying thank you via food is a great idea.
In the UK, there’s a cultural norm that on really hot days, the boss should buy Cornettos or ice creams for the team—usually because offices are geared for winter and get unbearably stuffy in the summer. Little acts like this can and do add up.
Choose your thank-you method carefully. I once worked for a business that gave us gift cards for a food delivery service. Nice idea—except the order was cancelled by Deliveroo, and I never got the money back. Empower your managers with small budgets they can spend on their teams purely for morale. It’s always a winner.
Learn from Departing Employees
People who leave can teach businesses a lot about why they—and others—are leaving. They can also highlight broken processes and issues that need addressing.
So how do you get honest, useful feedback?
Keep HR and the employee’s manager out of the process. If someone is leaving due to People or Political reasons, they’re unlikely to trust or engage with those individuals.
Find an external organisation to conduct and collate exit feedback. This removes bias and builds trust.
Share results at the top first, then downward. Let leadership see the results before HR or managers. That way, if there’s a toxic culture, it can’t be hidden.
Show that feedback leads to action. This builds credibility.
Fire the Toxic Managers and Staff Members
Yes, it’s a bold headline—but sometimes the simplest solution is the right one. Toxic managers drive away good staff. Recognising this can make a huge difference to retention. Hierarchical or “country club” cultures may resist this step, but it’s often necessary.
Final Thoughts
Staff are one of the three key ingredients in any business—the others being sales and processes. Keeping staff is important.
Although all the above ideas, if implemented correctly, will improve retention, they cannot stop all turnover. Some staff will leave.
However, focusing on reducing unnecessary turnover is imperative. Let me know if you’d like a proofed or formatted version in Word or PDF as well!
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