1. Employee Retention
2. Importance of an Effective Employee Retention Strategy
3. How to Develop an Employee Retention Strategy
4. Compensation and Benefits
5. Recognition and Appreciation
6. Challenge and Advancement
7. Culture
8. Step by Step Guidance for Businesses Focused on Improving Retention

Employee Retention

Employee retention is a term used to describe an employer’s ability to keep employees from leaving. It’s important because the cost of replacing an employee who quits can be very high considering lost productivity, effects on morale and the costs of recruiting and training a replacement. A good employee retention strategy addresses compensation, benefits, advancement opportunities, company culture and other important factors with the goal of creating a workplace where employees want to stay.

Importance of an Effective Employee Retention Strategy

In a recent study by Future Workplace and Kronos, a whopping 87 percent of employers said that improving retention is a critical priority for their organization. There are good reasons for this. With the U.S. economy adding more jobs, and salaries on the rise, employees are becoming choosier about their positions and actively looking for opportunities to better their situation. More people are testing out their value in the current job market by interviewing with prospective new employers, asking for higher salaries and promotions, and researching pay grades in their industry.  A recent study by Glassdoor found that over half of employees feel that, if they lost their job today, they could find a new job and be in an equal or better position (in terms of salary and organizational level) within six months. That’s a dramatic change from just a few years ago. It reflects employee confidence in their job market advantage, and it means more employees will be changing jobs this year—unless their current employers work very hard to keep them.

When one of your star employees resigns out of the blue to take a “dream job” somewhere else, you’ve got challenges to face. You need to replace a talented team member, and critical tasks may fall by the wayside until that occurs. You also need to manage the morale of your remaining workforce. When someone walks out the door, people notice. They wonder why, and whether they should follow.

The common wisdom is that it costs twice the average employee’s salary to recruit and train their replacement if they quit. If that one resignation letter becomes a stack of them, those costs can become crippling. Couple that with the low morale, high turnover brings, and a decreased knowledge base in your workforce, and the picture is grim.

With quit rates low in a challenging economy, there have been long stretches in our recent past where companies could get away with sub-par retention strategies. That’s changing now, and any employer who currently has low retention rates should be looking hard at increasing them.

How to Develop an Employee Retention Strategy

Your employee retention strategy needs to start on the date of hire and continue through the entire tenure of a valued, high performing employee. At all times, they should be receiving a message, through the way they are compensated, communicated with and treated, that you are glad they are there and want them to stay.

Your new hire program should be about more than just getting the hire “up and running” to meet your productivity needs. It should include on-boarding and mentoring components specifically intended to set the tone, from day one, that your culture values top performers who stay. Take time to present the corporate culture by discussing employee compensation, communication around the company pay system, employee recognition, employee rewards systems, work-life balance, training and development, and your efforts to maintain a creative work environment. New employees should walk away from their new hire orientation feeling it was a really good choice to join your company—and you should survey them at the end of orientation to be sure they do.

Surveys are also important after the hiring and orientation process. Your retention strategy should include regularly surveying your workforce about how they feel about the company. If employees are leaving, why?  If they are staying, why?  What benefits and cultural factors are important to them?

Using the data from your surveys, you will be able to evaluate your company against what matters to your staff and begin developing your plan to make adjustments that will improve retention.

Embrace the Employee Perspective:  Succeeding in employee retention requires that an employer think about things from their employees’ point of view. This sounds simplistic, but it’s critical. Too often, business owners and executive leadership are so focused on organizational metrics or what shareholders or the board think, and they can lose sight of how things may be feeling for employees in the entry and middle levels of the company. A good retention strategy gets to the heart of what the workforce cares about and strives to deliver it to them. It needs to take into consideration:

  • Compensation and Benefits
  • Recognition and Appreciation
  • Job Challenge, Training and Advancement Opportunities
  • Culture, Including Work/Life Balance

Compensation and Benefits

It is possible for an organization to focus too much, or too little, on compensation and benefits—and either imbalance is a problem. On the one hand, employees who feel underpaid will quit—and no amount of fun or trendy perks are likely to change that. On the other, compensation is not the only motivating factor, and many employees have walked away from a highly paid job in a terrible culture.

A new 60 minutes/Vanity Fair poll found that compensation is still the most important motivating factor for most employees in staying at a workplace. It is important to evaluate your compensation against other employers you compete with in the hiring pool on a regular basis to see if your rates are competitive. Industry salary surveys and online tools like Glassdoor can also be helpful for this purpose—and give you a window into what your employees think their peers at other companies are making.

It is also important to keep a close eye on internal pay equity. No matter how strenuously they are encouraged not to, some employees will compare notes about salary. You don’t want a top performer leaving because they compared notes with a peer and found out that person negotiated a better salary.  Consider a bonus structure that can allow you to maintain a level playing field with base salary and award employees who meet or exceed specific goals.

In addition to financial compensation regularly survey your employees on their view of your other benefits, including health care, 401(k) and any other options you offer, to ensure your package is matching both the needs and the priorities of your high performers.

Recognition and Appreciation

Employee recognition and appreciation is one of the most frequently overlooked factors in employee retention. Employees who work hard and perform at a high level but don’t feel those efforts are being noticed or appreciated by the company are a high flight risk, that would have been easy to avoid.

Make sure your culture encourages managers to recognize and appreciate exceptional work visibly and often. Establish contests and companywide recognition programs to give top performers visible appreciation. You may also want to consider peer to peer recognition programs, which can do double duty in recognition and culture-building.

Challenge and Advancement

Not everyone can rise to CEO, but everyone should feel like they have a fair shot at it. In a recent study by Cisco and Future Workplace, opportunities for advancement (or “career mobility”) was found to have a strong direct tie to retention, engagement, productivity, and teamwork.

Employees are more likely to stay with your company if they know what is expected of them and what opportunities they must advance. This is especially critical with newer generations of workers. Survey after survey shows that when millennial and Generation Z workers are frustrated in their efforts to advance at work, they immediately start looking for other opportunities.

Make sure your managers are coaching their employees regularly, assessing their skills, looking for new ways to challenge them and actively helping their top performers to advance within the company.

Promote from within whenever possible and give employees a clear path of advancement.

Training and Development is Critical: 

Training and development can be the magic ingredient in creating advancement opportunities that will help your retention rates. Employees who have access to training opportunities not only feel more valued, they feel empowered to address any knowledge or skill gaps that might otherwise hold them back from advancing. A recent study by Udemy found that 46 percent of employees cite limited opportunities to learn new skills as the top reason why they are bored in their current roles and looking for a change.


Organizational culture is a critical factor in retaining top talent. What makes a “good culture” will vary based on your industry and the demographics of your workforce, but the following factors are universally key:

  • Buy-In:  Make sure you are communicating your company’s mission, how everyone fits in, and how you are doing as a group against goals. Feeling connected to organizational mission and goals keeps employees motivated and emotionally connected to your company.
  • Transparency:  Nothing turns a culture toxic faster than a rumor mill in high gear. Promote open communication, encourage feedback, and deal with gossip and rumors promptly and effectively. Hold regular town hall meetings where employees can offer ideas and ask questions.
  • Flexibility:  While not every company wants a flexible schedule or a remote workforce, every worker knows about these options, so it is important to consider what if anything you can offer in terms of flexibility. A recent global study by Ernst and Young found that 74 percent of workers want the ability to work flexibly.

Step by Step Guidance for Businesses Focused on Improving Retention

Hire a human-resources professionalIf your company does not have a dedicated HR specialist, and if it is nearing the 100-employee mark, consider whether it is time to add an HR Director to the organizational chart. Putting one person in charge of managing employee benefits, perks, reviews and related tasks takes a huge load off you and makes sure employees are treated fairly. HR managers also can set up various programs and perks you may not have known existed.

Make Sure Your Hiring Practices Are on Point:  Before you can begin improving retention rates, you must be certain you have an employee base you want to retain. This means ensuring your hiring practices are yielding workers you want to keep. Audit your hiring practices to ensure they are focused on the right issues. Too often the hiring process overemphasizes personality fit with the hiring manager. Make sure your process is focused on job skills and cultural fit first and foremost.

Coach Your Managers: It is often said that employees don’t quit jobs, they quit managers, and there is a lot of truth to that. From your first level supervisors to the executive team, retention friendly management practices should be taught and expected. Measure and improve retention by knowing which line managers are doing well with it and which are not. Make strong retention rates for top performers a critical managerial goal.

Track Your Metrics:  The adage is true—if you don’t know how you stack up to others in your industry, you probably don’t want to know. Compare your retention rates to those of other companies in your industry. Find out who is doing the best at keeping the best workers and then look hard at what you can learn from them.

If you need help with employee retention issues, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures and Airbnb.