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What is Employee Retention?

Employee RetentionEmployee retention is the rate at which employees leave a company in a defined period, usually a year. A low rate of retention indicates that there is either a failure in management’s ability to find the right people for the job, or the company has policies that drive good employees away. With the rising cost of finding and hiring new employees, it is more important than ever to have a solid plan for employee retention. To combat retention issues there are several things you can do.


  1. Train Management – The number one reason why good employees leave their job is because they are not satisfied with their manager. Often high performing employees are promoted to a management position, but they are not given any instruction about how to approach their new responsibilities. Invest in a program that gives the employees the information that is critical to their success during transition. Some common solutions are mentoring programs, external workshops or training resources.
  2. Be More Critical About Hiring Decisions – Employee retention tends to be a struggle when managers make poor hiring decisions during initial interviews. Managers place too much emphasis on first impressions and what the candidate says, but they don’t critically evaluate the candidate’s skills for the job opening. Paying more attention to experience and training over personality will help you find employees that are a right fit for the job from the beginning.
  3. Make Employees Feel Valued – Employees who are thinking about looking for a new job cite job satisfaction as one of their primary reasons for leaving. An employee who doesn’t feel like their work is recognized or valued is unlikely to remain loyal to the company and will eventually leave. By demonstrating a clear path to promotion or the development of new skills, employees will be more likely to be happy at your company and stay at their job.
  4. Evaluate Non-Monetary Benefits – Modern employees are less concerned about their paycheck than previous generations. Millennial employees in particular look at non-monetary benefits and working conditions when making decisions about whether or not to look for a new job. It may be time for your company to adopt some changes to its policies to allow greater freedom for your employees. Flexible hours and more time off to care for non-work related activities make employees feel appreciated and helps to increase retention rates.
  5. Use Fair Pay Structures – No one wants to feel that they are not compensated fairly for their work, and unfair or unbalanced pay raise structures create a lot of problems. A raise must feel like a significant boost in pay as a reward for loyalty and hard work. Raises that are lower than the rate of inflation, or cap at a low percentage of the employee’s current pay rate, are seen as insulting and drive great employees away.
  6. Track Retention Rates – It is essential that you know if the changes that you implement are having a positive impact. Monitor rates not just across the company, but across departments and for individual managers. This will give you a good picture of which managers are performing as expected and which ones may need guidance to help them cut down on their employee turnover.


Bill Gates said, “If you give people tools they will develop things in ways that will surprise you very much beyond what you might have expected.” Employee retention comes down to finding the right people and then treating them well. When executed properly these two mindsets produce a more productive workforce that is loyal to its organization. The impact of revenue and costs becomes immeasurable.

Training Assessment