8 strategies for improving employee retention

Introduction

The best companies in today’s competitive market are paying attention to retention. If you don’t give them reasons to stay, employees will leave for greener pastures.

Not only is retention important for business continuity and fostering an innovative environment, it is significantly more cost-effective to retain and train your current staff than it is to hire new staff.

What is employee retention?

Employee retention refers to an organization’s ability to keep current employees from leaving the company. 

Many companies set annual goals around retention and attrition, aligned to company goals.

If you know what workforce you need to succeed, setting retention goals can help project talent acquisition expenses, plan the organization’s capacity for upcoming work, and understand any problems within the business that might not otherwise be obvious.

For example, if retention is particularly low for employees reporting to a specific manager, that could be a signal that something is going wrong on that team.

When we talk about employee retention, it’s important to talk about why we’re trying to hold onto employees in the first place. 

Often, HR teams are saddled with unattainable retention goals, in a misguided attempt at gaining vanity metrics. It’s prudent to remember that your goal shouldn’t be to retain 100% of employees 100% of the time. 

Sometimes, it’s just the right time for someone to leave the company. Employers should both celebrate those whose careers are progressing beyond what your company can provide, and proactively work to exit those who are not meeting expectations or are otherwise disruptive or harmful to the business.

But turnover is costly, in both time and money (on average, replacing someone who has exited costs up to 1.5-2x the former employee’s salary), so when you have a stellar team, you want to ensure they will stay happy and committed to your organization. 

It’s a competitive market, and you want your key employees to feel confident that staying with your company is the right choice.

Calculating retention rate

There are many ways to think about retention rate; my recommendation is to focus on regrettable attrition (voluntary departures that hurt the company) rather than on retaining all employees. 

This way, you will be putting resources towards the most impactful retention: retaining your key employees, whose contributions are critical to business success.

A very basic approach to calculating your retention rate:

• Choose a period of time (usually this is a 12-month period, but in a competitive industry, you may want to calculate your employee retention rate on a more regular basis)

• Divide your current/remaining headcount by your beginning headcount

• Multiply by 100.

For example, if you currently have 65 employees, but 12 months ago you had 100 employees, your retention rate would be 65%.

But what is a good rate? What number should you strive for? 

In general, companies aim for a 90% retention rate, but the number you choose should reflect your business goals, expected headcount growth plans, and the stage of your company.

Think about what your company needs. 

What are the skills and knowledge that will take you to the next stage of growth? 

Are you about to enter a difficult season, requiring more stability in your workforce? 

Is your team super solid and in need of specialization to fill gaps, or are you bumping up against the edges of what your current team can handle? 

It’s ok to recognize that how got you here might not get you there; some amount of attrition is healthy! 

This article is an oldie (but a goodie!) that may help you figure out what kind of turnover you’re experiencing, and how to think about setting stage-appropriate goals.

💡 Tremendous Tip: By clearly identifying (and tracking) your retention goals, you’ll be able to implement a plan that drives retention in all the right ways.

The benefits of employee retention

High employee turnover can damage morale and productivity, leading to even more attrition. 

And each lost employee means lost institutional knowledge, and more time spent getting a new hire up to speed.

By contrast, high retention can significantly impact your company culture in a positive way. 

When the same group of employees has time to build long-term relationships, they are able to work faster and smarter together because they have established trust and know each other’s work habits.

A stable workforce also increases employee engagement, which can improve recruitment, operational ability, and even revenue. 

And high retention of good employees greatly improves overall business outcomes, because people have a deep understanding of not only the product and revenue lines, but also how to get things done within the company.

It's worth noting that it is significantly less costly to retain a great employee than it is to recruit, hire, and train a new one - on average, replacing someone who has exited costs up to 1.5-2x the former employee’s salary.

But employee retention is not an exact science - there’s a bit of an art to looking beyond mere perks and benefits in order to create the type of environments that positively impact your retention goals.

8 strategies for improving employee retention

Every company has their own ideas about effective employee retention strategies, and there is no shortage of approaches to explore as you consider the entire employee lifecycle, from hire to retire.

Hiring and onboarding: A thorough, holistic process sets the foundation for employee retention

A truly effective retention strategy starts with the new hire experience, from recruiting and employer brand to the first 90 days of employment. 

Studies have shown that thoughtful hiring and supportive onboarding processes can boost retention by over 80%; and that 70% of employees decide within the first month whether they’ll stay.

Set expectations in the hiring process

When your candidate experience matches your employee experience, you set yourself and your employees up for success. 

Ensure you’re balancing your recruiting pitch with realistic examples so that candidates can get a true sense of what it would be like to work with you. 

Don’t shy away from things that are specific to your organization, like how you run meetings, expectations around time management, or even those little cultural elements that make you unique. 

For example, Tremendous is a high documentation, low meeting culture. Our hiring process has to include writing exercises - for every role.

How we approach the writing assignment may vary from role to role, but we are looking for the same criteria (level of detail, concision) regardless of assignment. But this isn’t just us evaluating the candidate; this is also a chance for a potential employee to get a sense of the kind of writing-heavy culture we have. 

We have also altered our engineering project assignments to be less “brain teaser” and more “practical application”.

It’s important for us that candidates get a sense for what the day-to-day experience of working with us will be like, which means having access to the tools and resources they’d have on the job.

Assignments for engineers are a dry-run of what their real experience will be, rather than a high-pressure whiteboarding puzzle.

You want people to know what they’re getting themselves into and make the decision about whether your company is the right fit for them.

Implement a personalized, simple onboarding process

Keep this intentionality going throughout the first 90 days, setting a clear 30-60-90 day development plan and following up to ensure the new hire isn’t slipping through the cracks. 

It’s not enough to give someone their company laptop and plop them in front of an orientation video.

You need to make sure they know what’s expected of them, how to get work done, and who to go to with questions. Give them a quick-win first project, something they can ship in the first week or two, and they’ll be motivated to keep building.

Think of any communications you send to employees as an exercise in persuasive writing.

Consider including quotes from interviewers to emphasize how excited the team is to have the new hire on board, a copy of the job description to reinforce an understanding of expected job duties, as well as any aspirational or career-development ideas to noodle on.

Set them up with a new hire buddy who isn’t on their team to encourage cross-functional relationship-building, and make sure their manager is checking in with them at least weekly in those first few months.

(Pro tip: keep the love going by letting new hires train to-be buddies after they’ve passed the 90-day mark).

Even if you’re onboarding people remotely, across many timezones, you can provide a content-rich and thoughtful process that makes them feel connected to the company as the “OMG I HAVE A NEW JOB!” high wears off.

It’s the specificity, accessibility, and consistency that will keep them engaged and wanting to get involved.

Your new hire experience should seamlessly transition them from candidate to employee.

Once they’ve gotten settled in their new role, keep a healthy flow of check-ins, career conversations, and constructive feedback so that they can imagine growing their future with you.

💡 Tremendous Tip: The clearer you are in your interview process about how you work and what you’re looking for, the more likely you will be to have a mutually successful relationship once a candidate is hired.

And if you make sure your onboarding program is setting people up for success, you’ll be on the right path to effective retention.

Keeping people engaged: Prioritize career development and invest in culture

Engaged employees are less likely to leave, and some of the best ways to help folks stay connected are by demonstrating your commitment to their ongoing success and ensuring that yours is a culture in which they can thrive. 

Conduct frequent career check-ins and conversations to ensure employees know that you are visualizing their future with your company.

Be clear about the expectations for your company culture so it’s easy to tell when things are going off track.

For example, you could ask questions like:

• Are there skills you’d like to develop that are not a part of your core responsibilities? (This is a great way to begin exploring cross-functional or stretch projects, especially if you’re not in a position to recognize performance with promotions/raises).

• What is something you love about working here, that you would tell a friend who was applying for a role? (This can help you gauge cultural alignment; do they feel connected to your mission, values, or the things that make your company a great place to work?)

• What is something that I can do better to support you in either your daily work or your long-term growth? (Provide examples so the employee doesn’t feel put on the spot to “call you out” for failing them; for example, “Do you need more support on any of your work? Can I introduce you to a mentor or recommend any resources that might help you grow?”)

Recognize employees for the value they deliver

Does your company have a consistent and equitably-run promotions process? Do you invest in Learning & Development? Are there opportunities for stretch projects to build new skills? 

To keep employees feeling engaged and connected long-term, you want to make sure that you are supporting their holistic journeys as employees.

In a 2019 study by The Execu|Search Group, 86% of workers said that they would change jobs for a company that offered more career advancement opportunities. 

More recently, a 2022 Pew Research Center study found that high employee turnover rates were correlated with poor career development opportunities (the second-most commonly cited reason for leaving, after low pay).

Even if promotions are not readily available (either because of a lack of business need or a lack of funding to support higher salaries), seek out opportunities for employees to grow their skills. 

Make leadership opportunities available even for those who are not people managers, for example, leading an internal program or special project. Set up a mentorship program, or suggest trainings or resources to support continued learning. 

Demonstrate that you want to invest in them long-term, and set clear development goals that you will commit to helping them achieve.

Don’t be afraid to course correct, giving difficult feedback when needed and supporting employees through their development. 

It’s never too early to have open conversations about growth, and you create psychological safety when you, the manager, start the dialog.

And if you do have the budget for compensation increases, spot bonuses, or other financial rewards, performance-based incentives are a great way to reward top performers. 

Building a culture of recognition can increase engagement and retention by as much as 43%, because when employees feel appreciated, they’re getting many of their needs met. 

Demonstrating that you recognize employees’ values will keep them feeling seen and appreciated.

Create a culture of trust, not toxicity

Studies show that a toxic workplace is 10x more likely than compensation to cause attrition. 

Things like not acting in accordance with your stated values, treating people with disrespect, or upholding outdated systems will negatively impact your culture. 

You must pay attention to how your work environment evolves, and take responsibility and make changes when things are going wrong — your employees are certainly paying attention.

If you are not accountable to the kind of company you say you’re building, you will lose their trust and they will leave.

Prioritizing flexibility and trust, for example, with a high-documentation, low-meeting culture, carries myriad benefits at an actual cost benefit to the company. 

Communicate consistently and predictably, so that employees know how, where, and what kind of information to expect from leadership. 

Respect people’s work/life boundaries, and proactively support them in upholding them.

Think about the kind of culture you want to cultivate, align your actions to your values, and build systems of accountability.

Setting clear goals, aligning work to the company mission, and utilizing inclusive, clear communication will help employees to feel connected to the company for the long haul.

Solicit and integrate employee feedback regularly

Don’t forget to keep the conversation moving in both directions - while you’re working on your feedback and growth conversations with your employees, make sure to provide them with opportunities to safely give the company feedback as well.

Engagement surveys are a great way to listen, and it’s important to demonstrate you’ve heard what folks had to say.

Utilize anonymity to provide a more psychologically safe environment, and detail how you will be taking action based on their feedback.

As a manager, you should proactively ask a rotating series of questions in 1:1s to keep a pulse on how your team is doing, answer their questions as candidly as possible, and be honest when you don’t know the answer to a question. 

The more you can show you’re truly hearing what they have to say, the more trust you will build, and the more they’ll feel they belong on your team.

Whenever you do receive feedback, do it with curiosity, and always follow up with an action plan.

If you can’t address their concerns, provide an explanation as to why. If the feedback was great, celebrate that.

So often we focus on the negative feedback, but it’s important to thank people for the kudos as well.

💡 Tremendous Tip: Reminding people that their feedback was the impetus for a change within the company is a great way to demonstrate through your actions that you’re really listening.

Graceful exits: Take just as much care at the end as you did at the beginning

Often, when we talk about retention, we overlook the ways in which exiting employees can help to keep people engaged. 

It’s easy to correlate increased attrition with decreased employee engagement - and this is a valid concern.

You might see survey results that indicate that attrition is negatively impacting those who are still with the company (for example, with increased workloads, or even just a drop in morale when coworkers depart - especially if it seems to be a trend). 

But if you handle exits with care, employees will notice, and your alumni will become valuable assets.

Name it to tame it

I once worked for a company that was facing a very high turnover rate. It was demoralizing for the team, and frustrating for management. 

But rather than try to “rally the troops” and push people into a positive mindset, we decided to talk openly about what was going on. 

Identifying the reasons for what felt like a steady stream of departures (and, importantly, what the company was doing to address those issues) and seeking feedback from the team on how to improve helped to rebuild trust in the organization. 

It demonstrated that leaders cared about the experience of our employees, and were willing to invest in making the company a better place to work. 

Even in times of high attrition and low morale, you can earn your employees’ loyalty by saying the hard things, owning your mistakes, and collaborating on solutions.

How you say goodbye

A Gallup survey in 2019 showed that only 45% of exiting employees are satisfied with the way they were exited. But when an employee voluntarily attrits, the way you handle their departure has a major impact on the remaining team. 

Make sure you take the time to hear exiting employees’ feedback through exit surveys, celebrate the impact they had on the company, and wish them well in their journey. 

Remember that the things they accomplished while they worked for you enabled them to grow their career (perhaps in ways you wouldn’t have been able to support anyway) and you should both be proud of the time you spent together. 

Of course, there will be times when an exit is “non-regrettable,” or you’re terminating someone for cause; in those cases, you should still treat the exiting employee with respect. 

Even when employees know why someone is being exited (and even when they agree with the decision), they will pay attention to how you treat the person on their way out.

💡 Tremendous Tip: Engage your alumni with pride by allowing an opt-in alumni mailing list to keep them apprised of company updates. Allow them early access to product launches, welcome their candidate referrals, and continue to be a place that they’re proud to have on their resume. Your past, present, and future employees will take note.

Conclusion

There are many ways for a company to impact retention, and it’s important to be intentional as you build and iterate.

• When you’re thinking about retention, set goals that are unique to your company’s needs.

• Consider the entire employee lifecycle in your strategy, not just the moments before someone’s about to walk out the door.

• Invest in career development and recognition to demonstrate your ongoing commitment to the employee.

• Connect employees’ work to larger company goals; help the employee to see themselves at your company long-term.

• Listen, respond, and listen some more.

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