Are you tired of losing the best people you have, and the revolving door in your HR department?

Employee retention, or holding on to highly skilled and productive people on our teams, takes strategy. Sure, you see a lot of room for improvement in your workforce but turnover (replacing people) is not the best answer.

Part of the answer is in keeping people, and part is hiring the right people to start with, but neither is the whole story. Whether you're in charge of a large business, medium business, or small business, how effective you are at retaining quality employees will directly impact the success of your company.

When you have a solid foundation on which to develop your retention strategies, you can take your company to places you never thought you could reach.

So, retain those employees! But how? Bribe them with cookies and donuts?


Well, maybe. But, there is so much more to it than that.

All About Employee Retention

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We're going to start out with some basics of employee retention. Understanding first what information you need to know, then how to get that information, will lay a solid foundation to build your retention strategies.

To put us in the right frame of mind, let's start with this: Just about everyone has had employees simply up and quit, leaving you to find a new employee to fill the open slot.

In the meantime: Your other employees must pick up the slack.

That means longer hours, more responsibility, less time to perfect their work, and basically a headache every day. It means more burnout and less satisfaction in their jobs.

What if you could ensure more of your employees stick around? That's what we're talking about when we say employee retention.

What does employee retention mean?

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Employee retention is exactly that: Keeping your employees around. It means decreasing turnover.

It takes a lot of work, though. First, you have to be involved with your workforce. And you have to make some sacrifices yourself. Then, most of all, you have to learn to see your workforce from their point of view.

It will mean you have to ask yourself some hard questions and actually listen to some harsh words from employees. The fact is, though, that some simple math can show you how far away from being effective your current strategies are.

Pro Tip: Your employees will be happier if you make Day 60, Day 120, Day 365, as important for them as you made Day One.

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The first thing you must know is your turnover rate, then what that rate means to your company's bottom line.

Simply understanding one number can help you set goals

Here's the truth:

Hiring people costs money. Training them costs money, too.

And the more people you have who quit or get fired, the lower the morale of your workforce.

And that's not the worst part:

If you have a revolving door (as many places today do), you end up in a black hole of spending to constantly hire and train new staff. You’re unhappy, they’re unhappy, everyone’s unhappy, and the health of your company follows your dollars down into that black hole.

You need to know your turnover rate. Here's how you calculate that:

  • Find out what your average monthly headcount is. This count includes every employee: Your full-timers, your part-timers, your direct-hire temporary workers, and everyone who's out on vacation or temporary leave. Don't count your independent contractors or your agency temps, though. You should be running headcounts several times per month.
  • Add those headcounts together, and then divide by the number of headcounts you ran to find your average.
  • Find out how many people leave the company each month. This number includes people who quit and people you fired or permanently laid off.
  • Divide the number of people who left by your average headcount for that month.
  • Move the decimal point two spots to discover your turnover rate.
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You had 1,000 employees in your first January headcount, 1,005 in your second headcount, and 1,010 in your third.

1,000 + 1,005 + 1,010 = 3,015

3,015 ÷ 3 (the number of times you ran a headcount) = 1,005

Your average employee headcount for January is 1,005.

Now, 10 people quit, and 5 were fired, for a total of 15 employees who left in January.

15 ÷ 1,005 = .0149

.0149 = 1.49 percent turnover for January

Ready to find out what that means to your bottom line?

Knowing your turnover rate is only half of what you need. You also need to know how much turnover costs you.

For that, you need to know several things:

Information to gather

  • The productivity you lose before the employee leaves (pre-departure costs)
  • The cost of each vacancy (vacancy costs, including overtime and extra shifts for employees covering the vacancy)
  • How much it costs you to onboard and train a new employee (orientation and training costs, including the productivity you'll lose getting the new employee up to speed)
  • Time and money spent on advertising and hiring (administrative and hiring tasks and additional administrative tasks)

Once you have all this, you'll need to do some more math.

Never fear, though:

You can do this math with a calculator. Not to mention, we've created the paperwork for you!

Calculating your turnover cost per employee

Pre-Departure costs

Time with Company (Weeks), Hours (Per week), Hourly Pay ($)

Departing employee: _________ x ___________ x _________ = __________

Coworkers: _________ x ___________ x _________ = __________

Managers: _________ x ___________ x _________ = __________

Total: __________

Vacancy costs

Time with Company (Weeks), Hours (Per week), Hourly Pay ($)

Coworkers: _________ x ___________ x _________ = __________

Managers: _________ x ___________ x _________ = __________

Total: __________

Orientation and training costs

Time with Company (Weeks), Hours (Per week), Hourly Pay ($)

New employee: _________ x ___________ x _________ = __________

Coworkers: _________ x ___________ x _________ = __________

Managers: _________ x ___________ x _________ = __________

Total: __________

Administrative and hiring tasks

Hours per Employee Hourly Pay ($)

Separation Processing: ___________ x _________ = __________

Scheduling Changes: ___________ x _________ = __________

Job Announcements: ___________ x _________ = __________

Resume Screening: ___________ x _________ = __________

Reference Checking: ___________ x _________ = __________

Interviewing Candidates: ___________ x _________ = __________

New employee: ___________ x _________ = __________

Onboarding ___________ x _________ = __________

Total: __________

Additional hiring costs

Cost ($)

Other job advertisements: ___________

Recruiter or Temp Agency: ___________

Background checks, drug tests, etc.: ___________

Orientation and training services: ___________

​​​​Total: __________

Total turnover cost per employee

Pre-departure costs: __________

Vacancy costs: __________

Orientation and training costs: __________

Administrative and hiring tasks: __________

Additional hiring costs: __________

Total: __________

How to know whether you've got a good or bad turnover rate

Yay! You have a 1.49 percent turnover rate, according to the example above!

However, as that rate plus the costs sink in, you might find yourself wrinkling your nose slightly and tilting your head to one side, wondering if that's good or bad.

Here's where it gets dicey:

There is no magic bullet number to aim for. Whether your particular turnover rate is good or bad depends heavily on your industry, the size of your business, and how much your turnover costs are.

But there's good news: You can figure out a ballpark number of a "good" turnover rate on which to base your goals. That number is based on how much of your workforce regularly underperforms.

If your underperformers make up the bottom 15 percent of your workforce, then you should aim for a turnover rate of 15 percent or less. Depending on what your other employee retention strategies are, you can reduce your number of underperformers over time.

That will help improve your turnover rate.

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Reasons why people quit their jobs

Roughly 30 percent of employees leave their jobs within the first 6 months.

Here's why:

  • Bad supervisors and managers
  • Poor work-life balance prospects
  • Feeling overworked and underappreciated
  • The job is, or feels like, a dead end
  • The company’s overall culture just sucks
  • Sheer boredom
  • And, of course, if the paycheck sucks, they'll jump ship as soon as they can

The things people want at work

What to do, what to do? Do you know what your employees want?

They probably want these:

  • Fair and decent compensation (good pay plus a good benefits package)
  • Respect and dignity
  • Appreciation
  • Feedback beyond performance reviews
  • Trust
  • Recognition
  • Ongoing professional development
  • Opportunities for advancement

What a good employee retention program looks like

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A good program is comprehensive. You will need to work on pretty much everything you can think of to offer your workforce. These things don't only help employee satisfaction, they also improve engagement, which we'll discuss in more detail later. 

  • Salaries and benefits packages: Do some research and see if what you're offering is genuinely competitive with the rest of your market. Including paid time off (not a single PTO policy, but separate systems for vacation, sick time, and parental leave) is a great way to set yourself apart from the competition.
  • On-the-job training, mentorship, and professional development: Your employees want to keep learning and growing, especially when it comes to career advancement. It's your job to ensure they get that.
  • Feedback and communication: Provide both positive and negative feedback both during and outside of performance reviews. Let them know where they've gone right in addition to where they've gone wrong, and give them advice on improvement.
  • Recognition: Recognize employees who go above and beyond, whose work is exemplary, and those who stand out in other ways. Keep your door open for employees who might be struggling and want some help.
  • Work schedules: The younger generations are the future of your company, and they're looking for good work-life balances. Flexible schedules can help increase your employees' overall engagement and satisfaction.

Pro-tip: People who work from home tend to be happier and more productive, leading to less turnover. You'll also save money on leasing office spaces if you let employees work remotely.

All the Stats You Could Possibly Want on Employee Retention

If you’re truly interested in employee retention, you really ought to be aware of some of the numbers involved.

Because the truth is:

No matter how you look at this, it’s important for you to understand.

Invest in Your Workforce as You Would Any Other Asset

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Your employees are assets, not costs to minimize.

Here's what you need to know:

Unhappy workers don’t just mean higher turnover for you. They also mean lower productivity and lower customer satisfaction.

On the upside:

Employees who are happy provide better customer service, produce better products, and overall, make your company run as well as possible.

Stronger training and development, better pay and benefits, and actively measuring your workforce's engagement and satisfaction will cost you more in the short run.

Think long-term!

Like any good investment, the smarter you are with investing in your workforce, the better your return on that investment. That means more money for you and your company, which means you can implement even more employee retention strategies.

You create an upward spiral instead of a downward one.

The best employee retention strategies are "bottom-up" strategies. You'll have far more luck when all your strategies focus on your employees instead of your managers and supervisors.

Factoid: As Boomers continue to retire and Generation X ages, your biggest source of employees is Millenials. However, Millennial turnover currently costs the U.S. economy over $30 billion per year.

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How solid training plays into employee satisfaction

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It may not sound like it, but there is a strong link between good training and development programs and employee retention.

Remember this:

Your employees want to do well. If they feel a sense of loyalty to you, they feel a stronger desire to do well.

On the flipside:

When they don't see a clear path for advancement, and they don't feel like you care about whether they learn and grow, morale falls. And we all know what happens when your workforce suffers from low morale.


when you keep your workforce ahead on training, your company as a whole becomes better at what it does.

Develop serious onboarding, training, and professional development programs like:

  • Growing and building your in-house experience and expertise
  • Grooming the leaders that will take your company into the future
  • Keeping your employees better engaged with the ongoing challenges

Each of these items is crucial to the long-term health of your company. Absolutely crucial. That's why training and development must make it into your employee retention strategies.

Making your employees feel valued

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When your employees feel valued, they're more productive. They feel more invested in taking care of you because you're taking care of them.

As a result:

You'll find that they want to come to work rather than just punch the clock and bide their time all day. They're motivated.

That's really why ensuring your employees know you value them is so important.

Besides that, taking care of your workers helps your reputation.

That's word-of-mouth advertising, people. And that's the most powerful advertising you have.

Not only that but...

it's free. So, when your employees feel highly valued, you get it back in buckets.

You reap what you sow.

You become a company to which talented people want to come. Your clients, customers, and partners can trust you to look beyond the almighty dollar and towards what they want, too.

That, in turn, helps you bring in new business and grow.

Tips for gauging employee satisfaction

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So you're taking a good look at your workforce and noticing that they seem satisfied. Are they, though? How do you know?

The bad news is:

There's no one way to gauge employee satisfaction properly.

But you can try these three things:

  1. Employee satisfaction surveys on a weekly or monthly basis
  2. Suggestion boxes for specific initiatives that employees want to see
  3. Give-and-take discussions during performance reviews
  4. Periodic roundtable discussions about what your employees like and where they see room for improvement

Pro Tip: Remember to act on these things! Otherwise, your employees will only see someone who's trying to put on a show.

Tips for improving employee satisfaction

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  • When you figure out where employees are least satisfied, start looking at ways to improve things
  • If it's within your power, change compensation and benefits packages, so they're more in line with what your employees want. If not, find ways to reward your employees for work well done
  • Improve or implement ongoing training and professional development programs
  • Talk to supervisors and managers who get low ratings and figure out what they're doing, or not doing, that could drive morale down among their teams
  • Let your supervisors and managers see the surveys for their teams and help them set up group meetings to discuss results and bat ideas for improvement around
  • Above all, make sure every member of your workforce knows that nobody will retaliate against them for being honest, and then hold everyone to that

The Difference Between Employee Satisfaction and Employee Engagement

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Satisfaction and engagement are not the same things. Good employee engagement is necessary for sound employee retention strategies.

Here's the difference.

What engagement is and why it matters

Engagement is an essential part of employee satisfaction. As we've discussed before, ensuring satisfaction is a critical part of any employee retention strategies you put together.

Here's the truth:

Engaged employees invest themselves mentally and emotionally in your company and its success.

Disengaged employees don't really care. They're there because they have to be, not because they want to be.

Because of that:

They don't give their best, and they don't go above and beyond. They're there to collect their paychecks.

When they care, though...

they'll do the little things that matter in addition to their primary job. Even better, they'll do those things when you're not watching.

And guess what?

Those little things add up to a lot, and your company runs smoother, more efficiently, and you have happier customers, clients, and partners.

On the other hand:

Satisfied but somewhat disengaged employees will keep coming to work to do their job. Sure, they'll do more than the bare minimum to keep getting their paycheck.

But here's the kicker:

They're less likely to want to go above and beyond their duties. You can have satisfied employees without having strong engagement. However, it's harder, and it doesn't pay off as well.

Creating a culture of engagement

Okay, so now what? How do you create an engaged workforce?

Measuring engagement

The only real way you can measure your employees' engagement at work is through surveys.

Lucky for you:

Those surveys can take many forms, and what you ask depends on many factors.

Here's what you should consider:

Remember to give your front-line supervisors survey results from their teams. The best employee retention strategies work from the bottom up.

Because of that:

Your front-line supervisors are the facilitators of culture change and improvement. In fact, this is a great excuse for you to help your supervisors set up roundtable discussions with their teams.

Pro Tip: When your people feel they've discussed everything, pop the magic question: "What needs to happen for you to answer this question with the highest rating?" That's where the magic lies.

What large business can learn from small business about employee retention

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You might think that large businesses have better employee retention strategies than small businesses simply because they have more resources.

Honestly, though, this isn't true.

Small businesses tend to do better with employee retention. One way they do it is offering potential employees more. Their pay structures are flexible so they can negotiate with each potential employee.

The bad news for the big guys is:

They don't have that flexibility.

Despite that, they can look for other ways to give their employees more.

Fringe benefits, such as

  • On-site childcare
  • Gym memberships
  • Discounts on retail and travel
  • And more...

can make your compensation packages more attractive while you continue to work within your existing salary and primary benefit structures.

On the other hand:

Large businesses have formal HR departments, whereas small businesses don't. Often, the owner and upper-level managers handle HR tasks.

This can be bad news for the little guy:

Managers don't have time to focus on other employee retention strategies.

While small businesses don't need entire HR departments, they can see if they can afford a dedicated HR person. If one person's entire job is handling HR tasks, the owner and their managers may find themselves free to work on other areas of retention strategies.

Go Forth and Make Your Workforce the Best Possible

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We know:

You're wondering where to start.

Remember, good employee retention strategies involve the following:

  • Knowing your turnover rate
  • Knowing your turnover costs
  • Investing in your workforce (improving satisfaction and engagement, and working from the bottom up)
  • Measuring your efforts
  • Implementing ideas for improvements
  • Measuring your efforts again

Start at the top, and work on one item at a time.

Creating and implementing effective employee retention strategies will take some trial and error, so it'll take time.

Don't expect things to improve overnight.

And, most importantly...

Don't give up!

Just because something isn't working as quickly as you'd like doesn't mean it won't ever work. The more time you put into it, the more you will eventually get out of it.

Finally, have fun! Enjoy your work and help your employees to enjoy theirs.

Do you have employee retention strategies to share? Let us know all about it in the comments!