Employee turnover is a huge problem.
For one, it’s an expensive problem. Some studies predict that every time a business replaces a salaried employee, it costs 6 to 9 months’ salary on average. For a manager making $100,000 a year, that’s $50,000 to $75,000 in recruiting and training expenses.
Another issue is the administrative hassle involved. Your HR staff need to process applicants, select candidates, and hold several rounds of interviews.
On top of that, you’re dealing with indirect costs like the business you lost because you didn’t have the capacity to handle it all while you were short-staffed.
It’s in every employer’s interest to reduce turnover in order to lower direct and indirect costs. Unfortunately, there’s no one-size-fits-all solution to employee turnover. There’s no silver bullet, especially if your company doesn’t have billions of dollars to offer perks like free food, massage therapists, or an onsite gym.
However, there is hope. Employee turnover can’t be eliminated, but it can be minimized. In this blog post, we’ll take a look at some companies that have been successful in proactively developing a positive work culture—one that fosters retention and high productivity.
Read on to learn some strategies for minimizing business losses by retaining great employees.
1. Make your employees feel appreciated.
We’ll start with Zappos. Zappos is well-known for their company culture of employee appreciation. In turn, this employee engagement strategy increases employees’ emotional commitment to their work, their team’s goals, and their company’s mission.
In particular, Zappos offers four unique peer-to-peer rewards programs. These programs help build a positive team spirit by giving employees the chance to acknowledge others who are excellent employees.
Through the co-worker bonus program, Zappos employees can reward each other with a $50 coworker bonus for doing a great job at work. An employee can reward their coworker for going the extra mile on an assignment, or even for showing a random act of kindness to another coworker.
These bonuses aren’t huge, but they aren’t meant to be. They’re meant to be small tokens of appreciation between co-workers which incentivize employees to be courteous and to go above and beyond. As a result, Zappos employees develop stronger bonds, and Zappos strengthens its culture of appreciation that goes a long way towards employee satisfaction and retention.
This is just one of Zappos’ many innovative employee retention strategies. As proven by Zappos’ employee retention rate, a small investment into a culture of recognition can pay off in dividends toward keeping workers happy and productive.
2. Listen to your employees.
It’s well-understood that communication is the most important component to successful teamwork. But communication isn’t just about speaking up—it’s also about listening well. Active listening is a fundamental interpersonal communication skill. When done in a corporate setting, active listening builds the foundation for strong employer-employee relations.
Cincinnati Children’s Hospital Medical Center (CCHMC) used employee feedback as a powerful preventative for turnover. How? Like many other organizations, they utilized exit interviews.
Now, exit interviews are one of the more standard employee retention techniques, and they aren’t a surefire fix for improved employee retention. However, it was what CCHMC did with exit interview data that made their technique a real stand-out.
Employees leaving the organization revealed big, invisible issues, like feeling unvalued and perceiving no room for advancement. This discontent led to high employee turnover among the nursing staff.
To address these issues, CCHMC updated their nursing employment structure. This new initiative allowed for pay based on experience, and incentivized nurses to obtain advanced degrees. In fact, they even went so far as to develop partnerships with a local university to provide better tuition assistance for their nursing staff.
Their workforce research efforts paid off: CCHMC saw a 34 percent reduction in overall turnover, and an 11 percent reduction for the positions with costliest turnover expenses. In addition, employee ‘reasons for leaving’ changed from being mostly supervisor-driven to non-hospital driven.
The simple act of listening revealed a powerful picture of the correlation of day-to-day dynamics operating in the hospital. Listening is the ultimate employee retention strategy—all you have to do is let your employees tell you what you need to change to better retain your talent. If you address your employees’ areas of concern, you’ll reap the rewards—just like CCHMC did.
The EAAR Listening Method
The EAAR Listening Method (Explore, Acknowledge, Apply, Respond) is a conversational framework that decreases your chances for uncomfortable conversations, while increasing your chances for finding win-win solutions.
Begin the discussion with an exploratory, open-ended question:
“Mrs. Manager, what are the reasons that led you to conclude Mr. Employee’s employment should be terminated?”
“Tell me more.”
“Please share some examples.”
“Help me understand.”
Once you’ve explored the other person’s position and reasons for it, move to acknowledgement.
Get the person to acknowledge that you understand his or her point.
“So, Ms. Manager, if I understand you correctly, you believe Mr. Employee should be terminated because of the following reasons… Is that correct?
Although it’s a critical step, it’s easy to forget to acknowledge others’ statements. Instead of confirming the understanding, the listener jumps to an assumed conclusion, which can be totally wrong (and potentially lead to conflict). The EAAR method eliminates this possibility.
If the person says, “No, that’s not what I meant,” return to the Exploration step:
“I’m sorry. Please explain what I missed.”
In your response, apply portions of what the person said. By mirroring the actual words the person used, you’ll ensure they feel heard and understood.
“Ms. Manager, I agree with you that Mr. Employee’s behavior is unacceptable. What you described [list the employee’s actions] makes a compelling case. However, because of the following reasons, I think termination now would be premature and present undue legal risk. Nevertheless, I’m happy to work with you on an intervention strategy. If Mr. Employee is willing and able to close the gap in your legitimate management expectations, he will do so. If not, we will be in a much stronger position to terminate his employment, and I will support you.”
3. Invest in employees.
Salary increases have the reputation for being a fairly unreliable employee retention strategy. In most organizations, that holds true. Inadequate compensation will certainly push employees to leave, but organizational issues like communication, leadership, workplace environment, and lack of appreciation can’t be fixed with a pay raise. Increasing employee pay isn’t an effective solution to employee turnover.
… Most of the time.
There are a few exceptions to this rule. One outlier is implementing small, frequent frequent raises and/or increased promotions. One example is from Chicago-based app designer, Solstice Mobile.
According to the company, Solstice promotes 5 to 10 percent of their staff every quarter, with an average corresponding pay raise of 14 percent. Additionally, Solstice Mobile has two more rounds of salary evaluation every year. In one of the most recent cycles, the company reports that 70% of employees saw their paychecks increase by an average 7%.
Additionally, Solstice Mobile has two more rounds of salary evaluation every year. In one of the most recent cycles, the company reports that 70 percent of employees saw their paychecks increase by an average 7 percent.
It might seem risky to dole out raises and bonuses several times a year, but Solstice Mobile CEO John Schwan says his company’s company’s innovative salary and promotion system is a contributing factor to their 98% retention rate.
Salary bumps may not be the most traditionally reliable employee retention strategy, but thinking outside of the box and building a compensation system that works for your company and your employees can pay off in retaining great employees.
4. Encourage collaboration.
The retail industry has one of the highest turnover rates—slightly above 60 percent in the U.S., according to the National Retail Federation. However, REI has managed to crack the retail retention puzzle, with about 10 percent turnover.
REI’s company culture encourages collaboration. REI is a cooperative—customers who buy into its membership program actually become part-owners of the company—and it’s the dedication to the spirit of cooperation that helps reduce employee turnover.
REI’s company mission statement is “to inspire, educate, and outfit for a lifetime of outdoor adventure and stewardship.” REI is incredibly committed to company culture, and all employees are encouraged to collaborate wholly and often.
New employees are acculturated to the REI culture during the onboarding process. One way REI carries out their company mission is through Base Camp, their daylong orientation program. During this session, new employees are encouraged to go outside and experience nature with fellow employees. Whether cleaning up a local waterway or biking down a public trail, REI encourages employees to go outside and build relationships with their coworkers while experiencing nature together.
Another collaborative technique is REI’s “buddy shift” system. During their first two weeks on the job, new employees are paired with experienced employees to learn the REI method of customer service. This system ensures new employees have the chance to build organic connections with their new coworkers.
Finally, each REI store organizes community service projects throughout the year. All employees participate in giving back to their local community, thus building camaraderie while supporting REI’s commitment to community-building.
REI is clearly committed to building a great company culture. In turn, employees are committed to REI.
5. Help employees manage their work-life balance.
Employee burnout cases have increased to the point where the World Health Organization has officially recognized it as an occupational phenomenon. This is a major driver of employee turnover. According to Kronos, 46% of HR leaders say employee burnout is responsible for up to half (20% to 50%, specifically) of annual workforce turnover.
With burnout occurring at record levels, it’s in every organization’s best interest to help their employees achieve “work-life balance.” There are many strategies for employees to maintain healthy boundaries between work and personal life, and employers can do their part by supporting working parents.
Now that the days of stay-at-home mothers and breadwinning fathers are long gone, many corporations are looking for ways to better retain working parents. Balancing a career with family life isn’t easy, but outdoor clothing company Patagonia takes work-life balance to new heights.
To start off, Patagonia has a generous parental leave policy.
By one estimate, 43 percent of highly qualified women with children leave their jobs for a period of time. Those who do return to work are likely to find an unsupportive environment. Aside from giant tech companies, it’s rare that employers offer parental support in the form of on-site child care, lactation programs and paid medical leave.
However, Patagonia boasts that 100 percent of moms have returned to work after maternity leave. Patagonia offers on-site child care centers that go beyond the standard daycare facility. Children of employees are watched by qualified teachers trained in childhood development. Children spend time learning outdoors, and take frequent field trips. Because the child care centers are on-site, parents can stop in at their leisure, and many take the opportunity to eat lunch with their kids.
Patagonia extends support for parents with older kids; school-age children have the option of taking a bus back to headquarters, where they can grab a snack and chat with their parents after school.
The commitment to working parents doesn’t stop at child care centers. Patagonia also pays for a caregiver’s travel expenses when an employee must go on work trips and has a child under the age of one.
Surprisingly enough, offering onsite childcare is not prohibitively expensive. In fact, Patagonia recoups 91 percent of the cost ($500,000 through tax breaks, 30 percent through the value of retention, and 11 percent in employee engagement). All in all, the cost to run this childcare facility only comes in at 0.005 percent of all selling, general, and administrative costs. The results are worth it.
6. Gamify career development.
According to a 2018 survey by Korn Ferry, the top reason professionals are looking for a new job is boredom. One-third (33 percent) of respondents selected “I’m bored, need a new challenge” as their motivation for moving on.
It makes sense when you consider that people have a natural desire for growth, change, and personal development. When your employees feel like their skills are stagnating, and there are limited opportunities for learning new skills, it’s rational to move onto the next role.
Anyone who has ever worked in a kitchen can tell you about the monotonous tasks—and high risk for boredom. To address high turnover in their hotel kitchens, Hyatt leadership developed an employee recognition program called “The Good Taste Series.” It might not have the same ring as “No Reservations” or the punchiness of “Cutthroat Kitchen,” but the principles are the same.
Designed to retain talented employees with exceptional cooking skills, the program is an internal culinary competition in which kitchen staff create new dishes within individual hotels, advance to regional contests, and eventually compete in national finals. Winners of the competition receive a week of vacation, plus two plane tickets and free lodging at any Hyatt property in the Americas.
The Good Taste Series has also led to significant bottom-line results: a 10 percent reduction in kitchen turnover across 140 full-service properties in the Americas, and six of the 12 finalists from 2014 alone were promoted.
7. Rethink health care benefits.
Health and wellness benefits are incredibly important for employee retention.
Just look at the numbers: A 2020 poll from NBC News and the Commonwealth Fund shows that three in 10 Americans are worried about being able to afford their health insurance and out-of-pocket costs for prescription drugs over the next year.
Moreover, a survey from America’s Health Insurance Plans revealed that 56 percent of Americans said their health plan is the reason they’ve stayed at their current job. Nearly half of respondents (46 percent) said their health plan was either a deciding factor, or a positive influence, in the decision to take their current job.
That’s why employers should take note of Draper Inc. of Spiceland, Indiana. Unlike many of the corporations mentioned in this article, Draper isn’t exactly a household name—which just goes to show that businesses of all types can develop incredible, successful wellness programs (and not just multinational superstars).
Draper addresses health problems on a company-wide scale. For instance, Draper created their own on-site healthcare clinic in 2006, partnering with a local hospital to provide staff for the clinic. Employees receive complimentary routine check-ups, and for a minimal co-pay, their families can, too.
One of the first goals of the Draper wellness program was to reduce smoking among its employees. Draper achieved its goals by providing smoking cessation education and free nicotine addiction medication for its employees.
Borrowing from the previous employee retention strategy, Draper also holds fun competition for its employees. “Dump Your Plump,” a companywide weight loss challenge, incentivized employees to get active with cash and gift card prizes. Perhaps even more enticing was the “Walk to Hawaii,” in which employees competed to walk the distance from Spiceland, Indiana to Hawaii. The prize? Entry into a drawing for an all-expense paid trip to Hawaii.
Although a wellness program like Draper’s isn’t free, you could argue that Draper’s wellness program pays for itself. Since it began its program, Draper has seen a 12 percent drop in health claims. Not only is the wellness program reducing Draper’s insurance costs, it’s also improving employee quality of life.
Beyond the benefits from a physically healthier workforce, Draper proved their commitment to their employees—with results directly translating to higher employee retention.
We Can Help
As you can see, companies can reduce employee turnover by understanding and adapting to the needs of their workforce. A little empathy and creativity can go a long way toward boosting employee retention rates.
If you’d like to inquire about our 401(k) Fiduciary Support services, please fill out the form below and we’ll get back to you shortly. We look forward to hearing from you.
DISCLAIMER: Advisory Services offered through Prosperity Financial Group, Inc., an Independent Registered Investment Advisor. Securities offered through Fortune Financial Services, Inc. Member FINRA/SIPC. Prosperity Financial Group, Inc. and Fortune Financial Services, Inc. are separate entities.