The terms “employee retention” and “employee engagement” share far more than a first word. In this article, we explore why employee retention is such a top-level concern for companies and how the right engagement strategy can make a massive difference.
The only constant in life is change, and the world of work is no different. In 2021, an estimated 47.4 million Americans left their jobs, a noticeable increase on the pre-pandemic figure of 42.1 million in 2019. Countries around the world are experiencing this trend. In the UK, for example, job vacancies hit an all-time high in late 2021.
What these statistics reveal, however, is the constancy with which employees switch companies and careers. The fortunes of different organizations are forever rising and falling, new markets and industries flourish as others disappear entirely, and employees—the very people driving those changes—are perpetually changing, both professionally and personally. That’s why it’s essential for companies to have a strong employee retention strategy.
The pandemic led many people to think more about what they want from their career, leading to the mass talent exodus that’s been dubbed the “Great Resignation.” Now it’s time for businesses to mirror that process and reevaluate their approach to people management and talent retention. The key to a work environment that encourages employees to stay and flourish? Employee engagement.
When employees are at risk of turnover, their level of engagement with the business will always decline. Data taken from our employee engagement platform, Workday Peakon Employee Voice, shows that an employee’s engagement metrics will typically reveal warning signs nine months before they actually leave an organization. Not only does measuring employee engagement give you oversight of the factors driving employee turnover, it also gives your people a chance to weigh in on the issues that matter to them. That creates a culture where employees feel able to speak up and take action.
In this article we’ll introduce each of the essential concepts—including employee retention, employee satisfaction, and employee experience—before outlining the benefits of placing a spotlight on employee retention, and the proven actions businesses can take to help support their employees at work.
Employee retention—also known as talent retention—is an umbrella term. It basically refers to any effort undertaken by an organization to reduce employee turnover. Employee retention typically refers to people who voluntarily leave their position, but it’s important to also consider involuntary turnover, such as redundancies or firings.
Workday Peakon Employee Voice data shows that an employee’s engagement metrics will typically reveal warning signs nine months before they actually leave an organization.
Employee retention once meant providing employees with competitive compensation and benefits, as well as the necessary tools to perform their work. However, as management theory has evolved, so too has our understanding of the drivers of employee turnover. By considering the full extent of each employee’s experience—from the quality of their onboarding, to the hours they’re expected to work, to the diversity of their team—we now understand that retention is influenced by the full extent of an employee’s experience in the workplace.
The answer to the question “What is employee engagement?” isn’t as easily defined. To answer that question, it’s important to understand some of the related terminology:
Employee value proposition: The unwritten contract between an employer and employee that covers every exchange that takes place between the two parties, from salary to work carried out.
Employee experience: The full journey each employee goes on in the company from onboarding to exit. It includes every possible touchpoint, whether it’s an employee’s relationship with their team leader, the flexibility of workplace hours, or your company’s policy on recycling.
Employee engagement: Where employee experience refers to an employee’s journey, employee engagement is a reflection of the quality of that journey. An engaged employee is committed to their work, their colleagues, and their ongoing development, frequently going above and beyond without ever feeling obliged to.
Employee satisfaction: Often used interchangeably with engagement, employee satisfaction is best understood as the emotional component of employee engagement. When an employee is happy with their working life, it’s likely that their engagement scores will be high. Satisfaction, though, is just one of the factors driving engagement, alongside other drivers such as wellbeing and belonging.
The Future Forum Pulse found that 57% of global knowledge workers were open to looking for a new job in the next year.
Employee engagement is one of the strongest measures for predicting employee turnover. Since employee retention initiatives involve improving the overall workplace experience to retain talent for longer, and employee engagement is best understood as a reflection of the quality of each individual’s work life, a company’s retention strategy has a direct and measurable impact on overall engagement.
The relationship between retention and engagement goes beyond the ability to gauge the impact of retention strategy on employee attrition. Because engagement is influenced by nearly every aspect of an employee’s work life—from office location to the transparency with which conversations around wages and benefits are handled—measuring engagement accurately and regularly gives a business strong oversight on the pain points that are impacting retention rates. Then, it can create an employee retention plan that accounts for the issues that matter most to employees.
This link between engagement and retention is further strengthened by how they are measured. Historically, the most popular method for understanding employee turnover was the exit interview, where employees were asked questions about their reasons for leaving, as well as their opinions on the company as a whole. Similarly, employee engagement is typically measured through a survey system, albeit asking such questions more regularly. The major business benefit of this latter approach is that the information is available before each employee leaves, giving organizations an opportunity to be proactive.
Unlike some business focuses, the worth of employee retention represents a clear and present business need: retaining valuable talent. With the cost of replacing an employee ranging anywhere from 50% to 250% of their annual salary, plus the time required to hire, onboard, and train them, it’s essential to act now and create a work environment that’s diverse, engaging, and has high overall job satisfaction.
Without knowing how many people are leaving, when they’re leaving, and what part of the company they’re leaving from, you can’t possibly begin to work out why employees are leaving.
In the next few sections, we’ll go into more detail about how to improve employee retention rates, but first it’s still important to recognize the positive and negative effects that high employee turnover and low talent retention can have on your organization. As we said above, high retention is generally understood as important for business success, but being armed with the right data makes it easier to gain stakeholder buy-in for the new employee retention strategies or employee engagement solutions you want to trial.
For companies that believe the Great Resignation is showing signs of slowing down, all indications point to the contrary. The Future Forum Pulse (a survey of 10,569 knowledge workers across the U.S., Australia, France, Germany, Japan, and the UK) found that 57% of global knowledge workers were open to looking for a new job in the next year. With that in mind, consider each of the four business benefits of talent retention below.
The LinkedIn Global Talent Trends 2022 report found that the top three factors driving people to seek a new job were work-life balance, compensation and benefits, and culture. What those statistics don’t reveal, however, is what your people want. Improving your employee retention rates requires you to open a dialogue with your employees about what factors are most meaningful to them.
It’s important to recognize that on a long enough timeline, employees will always leave their current role. Regardless of how effective they are in that position or how much their manager provides them with help and guidance, there will always come a time when an employee naturally moves on. That change might be premised on any number of factors, be it a promotion, a better opportunity with a new employer, or the decision to change career paths entirely. Companies with the highest retention rates preempt the reasons for turnover and provide internal development opportunities to match those needs as they arise.
A 2021 study by Buffer on remote work found that 96% of those who started working remotely as a result of COVID-19 would like to work remotely (at least some of the time) for the rest of their careers.
When employees leave their role, the ideal situation is that it’s as a result of internal training programs providing room for lateral movement or a more senior opening in their current team (or the possibility of retirement and sabbaticals too). That’s why creating space for employees to discuss their development needs is critical. The benefit of an employee engagement platform such as Workday Peakon Employee Voice is that your employees are asked to share their thoughts regularly through pulse surveys, ensuring they have space to reliably voice any concerns or constructive feedback. Since that feedback is delivered confidentially, it further promotes a trusting work environment where each employee’s voice matters.
In the next few sections we’ll take a closer look at how your company can get a firm handle on what your employees value most about their work life and assess how to help them achieve their work goals. Above all else, businesses should center their employees’ experience, applying the lessons learned to each employee’s individual circumstances rather than attempting to use a one-size-fits-all approach. In doing so, not only do you improve employee retention rates, you improve the overall standing of your brand—both internally and externally.
Before you can improve employee retention, you first have to create a space to understand your people. That’s the basis for a strong talent retention plan—taking the time to gather data and research your existing position as a business.
The most significant metric to start measuring before planning a new retention strategy is your company’s turnover rate. Without knowing how many people are leaving, when they’re leaving, and what part of the company they’re leaving from, you can’t begin to figure out why they’re leaving. By further distinguishing between voluntary and involuntary turnover, you’ll begin to construct an image of employee attrition that accounts for individual motives as well as wider trends. That can highlight potential pain points while further ensuring that no time is wasted on areas where the organization is already performing well.
Once you’ve assessed the how, when and where, you can begin to consider the why. The starting point for understanding why people are leaving can be found by gathering and assessing employee engagement data. Since the main drivers of employee turnover (more on those momentarily) directly correlate with the drivers of employee engagement, asking how your employees feel about their entire experience at your company—from growth opportunities, to salary, to overall business goals—can help you determine which areas need the most attention. That can help you stem turnover, compare how different teams and departments feel about each of the drivers, and learn whether weak spots remain the same across the board.
While low turnover and high engagement are both good goals, you also need to take into account how other factors will impact your baseline scores in each instance. For example, a seasonal business such as a seaside holiday resort would have a drastically different baseline when compared with a thriving city-center bar. Taking into consideration industry, company size, region, and market trends will enable you to benchmark any data against your competitors and gain a more insightful sense of your current successes and/or failings. Regardless, a realistic baseline rate for turnover will never be zero, just as your goal for engagement isn’t likely to be a perfect score.
As with most implementations, employee retention requires sustained collaboration across the entire C-suite, rather than solely the CIO and CHRO, in order to promote a healthy work culture. Gaining cross-department alignment may be easier at a time where retention is a popular topic, but in order for your strategy to be successful, your workforce planning process needs to be well-integrated and account for potential changes and developments. A new plan may be shiny and appealing at first, but sustainable change requires time. Make sure that’s part of your plan from the start.
With your company data gathered, it’s now time to consider what strategies to put in place and where the most attention should be applied. A popular approach is to examine the drivers motivating both retention and turnover, thinking about whether employees are receiving help and support on each count, and whether any steps could be improved or optimized. There’s no set process here, but in the interest of universality we’ve gathered four of the most repeatable and consistent drivers of retention at work.
The value of a sincerely inclusive work environment can’t be overstated when it comes to retention.
When we discuss talent retention, we usually do so under a wider banner: talent management. Put simply, talent management is the process of hiring, developing, and retaining a workforce, and ensuring that they remain competitive and professionally fulfilled at each stage of their internal trajectory. The following four drivers for retaining talent are therefore best understood as the factors that have the largest impact on employees at each stage of this lifecycle. Simultaneously, we’ll explain how monitoring and managing engagement can help in each instance.
1. Recognition and Reward
Without a sense of recognition or the acknowledgement of the potential for increased reward, retaining employees will always be difficult. The basis of the employee value proposition is that an employee will perform their working duties in exchange for their salary and benefits. If one side of that equation isn’t being upheld, it’s natural that the other side would slip as well.
Recognition and reward can take many forms, whether it’s straightforward remuneration or providing employees with the opportunity to nominate members of their team and other colleagues for recognition. Employees don’t just want to be paid more, they want to feel like valued members of the team, with oversight on tangible impacts they’re having on the success of the business. If recognition only comes from an employee’s salary, then it’s likely your employees will still feel overlooked. Make space in team meetings and company all-hands to champion individual successes.
Since it can often be difficult to have a conversation around pay or recognition, employee engagement surveys are very valuable. Not only do automated questions remove the potential awkwardness of a team leader asking directly, it also enables employees to speak up in a space that’s confidential and free of judgment. Furthermore, it provides people higher up the chain to have visibility where they might not otherwise, increasing the likelihood of meaningful action taking place.
2. Work-Life Balance
If there’s one conversation that’s increased in volume and intensity as a result of more remote work during the pandemic, it’s work-life balance. A 2021 study by Buffer on remote work found that 96% of those who started working remotely as a result of COVID-19 would like to work remotely (at least some of the time) for the rest of their careers. That figure was 99% for those who worked remotely prior to 2019. Not only did people reconsider their personal and professional values in the face of a global period of uncertainty, but many were also able to experience the benefits of working from home for the first time. That change in attitude is here to stay.
What this shift in working behaviors has fundamentally challenged is the idea that employees need to be on-site to be productive or that company culture is somehow diluted when employees take a flexible approach to work. Many employees have seen that they no longer need to be limited by the hours of a traditional workweek, especially when it involves extended commutes and separation from their home lives and families. Companies that restrict the working life of their people without reasonable justification risk alienating existing employees and dissuading prospective ones.
Once again, an engagement survey can help clarify exactly what your employees want, giving you a better overview of how those needs differ across the organization. Perhaps a specific team works best in person, while another is separated across multiple countries, removing the necessity for them to be in the office as much. Without asking your employees how they feel about remote work and their working hours, your strategy will amount to conjecture.
3. Professional Growth
One of the strongest correlates with high turnover is a lack of professional growth. Workday’s “Employee Expectations Report 2022” found that growth-related comments represented 8% of all employee comments in 2021—a 2% increase compared to 2020. If employees don’t see a path forward for themselves at your company, they’ll likely begin to see their existing work as fruitless and lacking direction. That frustration then leads to further disengagement, which in turn leads to employees looking for opportunities elsewhere. If you believe in your people, you need to show them that they have a future at your company.
While promotions are an inevitable part of professional growth and development plans, there’s far more you can do to make your employees feel valued. Career growth can take many different forms, from an employee learning a new skill to expand their responsibilities in their existing role to providing opportunities for cross-departmental collaboration. Job satisfaction is far more important when it comes to retention than dangling the prospect of a future promotion, so ensure that your employees feel fulfilled, challenged, and heard in their day-to-day work.
The best way to discover what an employee wants from their professional growth is to simply ask. At Workday, we believe that an employee should always take the reins of their own career growth, but doing so still involves giving them an opportunity to speak up about their prospective career desires. Not only does a confidential engagement platform enable employees to speak up about any specific needs they may feel uncomfortable raising directly with their team lead—such as training and development that may prompt a department change—it also gives managers oversight on who is comfortable with their existing workload and who’s looking for the next step forward.
4. Belonging and Diversity
Everyone deserves to work at a company where they feel a sense of belonging. A study by McKinsey found that 26% of women who perceived themselves as the only one of their demographic were considering leaving their work, compared to 17% of women who were well represented. If employees don’t feel comfortable and well represented at work, they’re not likely to stay for long.
Creating a truly diverse organization requires an understanding of the different types of diversity in the workplace. Your diversity initiatives are only as good as the data you’ve gathered. By providing more self-reporting options, you gain more nuanced metrics and indicate intuitively to employees that all facets of their backgrounds matter. Without an intersectional approach, people from underrepresented backgrounds can feel that their identity is being restricted to one reductive categorization.
The benefits of a company culture that embeds belonging and diversity at its core are manifold, but the impacts on engagement are particularly notable. Not only does a sense of belonging increase psychological safety among employees, therefore encouraging them to speak up and provide feedback more consistently, it also consolidates an employee’s relationship with the wider business, improving their overall engagement in the workplace. The value of a sincerely inclusive work environment can’t be overstated when it comes to retention.
Professional development is meaningless without recognizable markers of progress. The more frequent those markers, the more valued an employee will feel.
In 2021, 27% of surveyed employees were considering leaving their jobs. That’s according to the latest data from a recent Workday report, based on a database of over 180 million employee survey responses across 160 countries. If companies want to make sure their employees are in the other 73%, it’s imperative they reconsider their employee retention strategies.
While there’s no universal answer for how best to retain talent, certain pain points recur at a far greater frequency than others. To combat them, we’ve gathered nine of the most effective retention strategies.
Rather than building a separate step in your retention strategy focused on employee engagement, businesses need to think about how each of those actions impacts employee engagement and how employee sentiment can be harnessed to inform and improve each initiative. For each of the following nine proposed strategies, we’ve included a tip for how an engagement platform can inform your employee retention plan at every stage.
Optimization of employee retention always comes back to employee engagement. A 2020 study from Gallup found that high-turnover companies (those with more than 40% annualized turnover) with top-quartile engagement had 18% lower turnover than those with bottom-quartile engagement. That figure leapt to 43% for low-turnover companies (those with 40% or lower annualized turnover).
A nuanced understanding of employee retention starts with a recognition of one constant: Change is the natural state of the world. By adapting to meet your employees’ evolving needs and reducing the reasons motivating employee turnover, you can ensure that the change is a positive one. Then by grounding any future iterations in real-time employee sentiment, you further ensure that your employees feel heard. Help your employees to help you and your business grow.
Optimizing your employee retention strategies boils down to reiterating on that adaptation. Creating your initial plan of action—based on the retention and engagement data you’ve gathered alongside any additional employee feedback—is far from the final step of this process. Instead, you should view those initial strategies as subject to change from the outset, using them as a means by which to test the waters and find areas to optimize.
This is the stage where employee feedback is critical. Once you’ve started to take action, the most important thing you can do is ask more questions. Are people happy with the changes? Do they feel that their most pressing concerns are being addressed? And where would they like to see further improvements made? By showing that any feedback is heard, taken onboard, and then incorporated into your ever-evolving strategy, you’ll turn potential naysayers and leavers into active advocates for your company. That’s the secret to effective employee retention that a strong employee engagement solution unlocks.
Confused about what employee engagement is or how to measure it? Learn more about employee engagement with our comprehensive introduction to the topic.
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