As our economy emerges from pandemic-related challenges, businesses across all sectors are reporting a new struggle – hiring and employee retention. More than half of employees surveyed in North America plan to look for a new job in 2021, according to a new report. The study also found that 46 percent of respondents feel less connected to their company, and 42 percent say company culture has diminished since the start of the pandemic. Just 21 percent said they are very engaged at work. Why is that important? Because engaged employees ensure a positive guest or customer experience in your business. And of course, engaged employees are also less likely to leave you.
Northland SBDC recently hosted a training on Employee Retention Strategies – Keeping Your Best Talent. We chose to host this training about employee retention, because right now, that may be far easier than hiring. Employee turnover can be expensive, too! By some estimates, it can cost an employer one-third to half an employee’s salary to replace them when they quit. Read on to learn some of the key employee retention tips from our recent webinar.
What’s Important to My Employees?
Understanding your employees’ motivations is key to helping retain your workers. What’s most important to your employees? Better compensation and benefits is one of the top two reasons why employees would leave their current job according to a March 2021 report. Desiring better work-life balance is the second top reason why an employee might be job hunting. In a time where potential candidates are in short supply, what can you do to improve retention of your current talent?
Tip 1: Develop a Regular Pay Raise Policy
Regular raises, however small, should be part of your employee retention strategy. If you think you can’t afford to give raises, consider this – how much will it cost you to replace the employee? You’ll spend, on average, 40 days to hire a new employee with training time varying according to your small business’s particular skill set needs. According to some studies, the cost to train a new employee is about 30% of that person’s annual salary.
Remarkably, how much people are paid for their position, relative to the market, matters relatively little in terms of employee satisfaction. What does matter is how they feel about the pay process. In fact, how people feel about their pay has 5.4 times more impact than the pay itself in determining employee satisfaction. How can you leverage this information to help your business?
Adopt a transparent pay policy that outlines the opportunity for regular pay raises based on the length of tenure at the business, based on educational achievements such as certificates, or based on performance. If you do choose to adopt pay raises based on performance, be sure to develop a clear performance review process that enables employees to understand what they need to achieve to receive a pay raise. You’ll need to evaluate the average tenure of your employees as well as starting and maximum affordable wage levels to create a policy that will work well for your small business.
Tip 2: Consider Meaningful Incentives
Benefits are also an important part of a compensation package and can be a great way to make up for a less competitive salary. Employees value items such as insurance, retirement accounts, cell phone stipends, and memberships to gyms or health clubs. These items have significant value to potential employees, so be sure to market your incentives in your job postings and in other recruitment tools. Other potential incentives to consider are birthday or anniversary recognitions, merchandise credits, gift cards, paid time of to volunteer, or memberships and discounts. Be sure to comply with IRS reporting requirements for cash and “cash equivalent” bonuses. Not sure if your company is “big enough” to be thinking about traditional benefits like health insurance and retirement accounts? Sign up for our upcoming webinar on June 23rd to learn more about Affordable Benefit Options for the Small Business Owner.
Tip 3: Switch to a Marketing Mindset
Do you know why your employees like working for you and your company? What does the organization mean to individuals in your community? Particularly with the younger generation, they want to feel that they are doing important and meaningful work. Share this information broadly with your employees. If you give back to your community from your proceeds, let them know. If you sponsor community organizations, let them know. This builds pride!
Tip 4: Work-Life BalancE For Employee Retention
Research suggests that the second highest factor driving turnover is the need better work-life balance. Employees who feel like the demands of their job are affecting their personal lives are more likely to find alternative employment. Giving employees the chance to work from home occasionally and being less rigid with work hours can improve employee satisfaction rates. Take the time to develop a schedule that works for both your employees AND the business. Be willing to adjust.
This takes effort, but do yourself a favor by enforcing that employees come to work on time as well as developing other rules such as how they call in and if shift exchanges are allowed. Being flexible is not the same as not having rules about certain important aspects of their employment. No one wants to pick up the slack for coworkers that don’t have accountability.
Discourage management from calling or emailing employees with requests on evenings, weekends or vacation time. Regularly evaluate the expected responsibilities of each employee and consider how they are managing that workload. A company that establishes clear boundaries to support work-life balance will be much more likely to retain employees.
Tip 5: The “Stay” Interview
Why wait until employees leave to ask what they think? You can instead learn more about what your employees need to stay happy through two methods: connecting with your employees and asking about their job satisfaction. Spending 15 minutes every week with every employee to connect and let them know you support them can reduce turnover by up to 70% according to a recent podcast featuring business consultant Marcus Buckingham. Building relationships with your employees and fostering two-way communication on a regular basis is key to identifying any work-related problems an employee might be facing and improving employee retention.
The second method is called the “stay interview” compared to the “exit interview” that we are familiar with when an employee is leaving a company. The stay interview focuses on identifying actions the business or manager can take to ensure that employees are satisfied with their job and stay longer.
To open the stay interview, a manager may use the following (or similar) statements:
- I would like to talk with you about the reasons you stay with us so I understand what I might be able to do to make this a great place to work for you.
- I’d like to have an informal talk with you to find out how the job is going so I can do my best to support you as your manager, particularly with issues within my control.
To close the stay interview, summarize the key reasons the employee gave for staying or potentially leaving the organization, and work with the employee to develop a stay plan. Be sure to end on a positive note. Examples of closing statements include:
- Let me summarize what I heard you say about the reasons you stay at [Company Name] as well as reasons you might leave. Then, let’s develop a plan to make this a great place for you to work.
- I appreciate you sharing your thoughts with me today. I am committed to doing what I can to make this a great place for you to work.
Need Help with Next Steps?
Northland SBDC is here to help you and your small business with implementing these employee retention strategies. Maybe that is developing a pay raise strategy and policy, helping you evaluate which incentives could be right for your company culture, or providing more training on the “stay interview” process. Northland SBDC human resources expert, Rovena Claxton, is available to work one-on-one with small businesses affected by COVID-19. To access one-on-one HR assistance at no-cost to your small business, sign up for services on our website or contact your current SBDC consultant.
You can also watch our recent webinars on Employee Retention Strategies and Effective Hiring Strategies on Northland SBDC’s YouTube channel. Also be sure to sign up on our website for our next training webinar in this series, Affordable Benefits for the Small Business Owner scheduled on June 23, 2021 at 10:00am.
Post by Vicki Hagberg, Small Business Consultant, Northland SBDC
Special thanks to our Northland SBDC HR expert, Rovena Claxton, North Shore Human Resource Consulting, LLC for providing our recent training on these topics.