HR Manager's Ultimate Guide to Employee Retention in 2024

Are you struggling to mitigate your staffing problems? Are you haunted by "the great resignation", "quiet quitting", "moonlighting", and "industry hopping", which seem to have possessed the global and local workforce in 2024? Needless to say, you have already realized how deeply entrenched the problems of employee turnover are across industries. 

The fight to acquire top talent and retain them at any cost has always been a perennial problem for HR teams. However, the past few years have seen retention challenges skyrocket due to the pandemic, widening skill gaps, and unrealistic company expectations regarding "hustle culture". To add to your woes, employees are getting increasingly anxious for job security in a highly stifling career heavily disrupted by the new generation of emerging technologies.

It is hard to hold on to the existing workforce. Retention strategies and tactics do not always work in the organization's favor. If your organization is also struggling with similar issues, you will find solutions below, but first, you must understand what employee retention entails.

Theoretically, employee retention is defined as the process of retaining your human resources using managerial strategies until the organization's measurable goals are achieved in a meaningful manner. 

Employee retention is achieved by implementing HR practices along with retention strategies encompassing these activities:

• Training, learning, and development;
• Employee reward programs;
• Flexible working timings;
• Regular performance appraisals and promotions;
• Bonuses;
• Leadership opportunities, and so on.

Mathematically, It is measured in percentage. It is calculated by dividing the number of employees on the last day of a given month or year by the number of employees on the first day during the same period. 

The simple formula for calculating employee retention is:

Example

ABC Enterprises hired 25 new employees in December 2021. It ended the year by retaining 185 out of the 220 employees it started with on 1 January 2021. 

So, the retention rate for ABC Enterprises is:

[185 / 220] x 100 = 84.09%

This retention rate can vary across organizations belonging to the same industry or otherwise. Overall, calculating employee retention in percentage provides a solid metric for you to identify factors that keep employees in your organization while driving away others. 

There are various ways to identify these factors. Using staff engagement and people analytics tools is one way to do it. inFeedo.ai offers one such tool that can save you from the guesswork of understanding how your employees feel. Its conversational AI Amber is designed to help engage with your employees, predict attrition and answer queries. 

Retaining employees has been a century-old problem for all major organizations. The only thing that has changed about retention is the cost of staff replacements. Today, US organizations lose close to 1 trillion US dollars in staff turnover, and most of it is self-inflicted. This calls for the need for organizations to implement retention strategies to take good care of their talented employees and survive the economic downturn easily. 

But, for an employee retention strategy to be effective, you must understand why employees are leaving your organization.

Employees leave a job for one or multiple reasons. The reasons could be voluntary or involuntary and may include: 

• A mismatch between the job role and the expectations;
• Lack of opportunities in terms of pay, promotions, and projects;
• Inability in fitting into the company culture;
• Sexual harassment;
• Gender and racial discrimination;
• Fear and anxiety due to power tussle and lack of trust;
• Lack of DEI initiatives.

A key factor in employee retention is employee morale, which is the overall emotional state of the employees. When employees have high morale, they are more likely to be satisfied with their jobs and less likely to leave the company. 

Employee retention remains a major challenge in various parts of the world where technology influences hiring scenarios. For example, in the US, there were 10.7 million job openings in September 2022. In the same month, 6.1 million employees were hired for different roles, and 5.7 million were separated from their last organization. This shows a major gap between the number of people hired and the number of job openings across the US. 

Employees want to take advantage of this opportunity and apply to new jobs where they can scale their talent and enhance their earnings significantly. Stagnating compensation is a major reason for the increase in employee turnover in certain industries.

Therefore, to truly ace any retention strategy, you must evaluate the nature of your business, the impact of employee turnover, and the role of bringing in automation and AI-driven technologies to get the job done.

In the era of the talent war, the retention of employees is a game-changer. 

Typically, 75% of the workforce that has left an organization in the past could have been retained! Employees can have thriving careers in their organizations if the management designs a robust employee engagement strategy to control attrition and turnovers. Alas, it is often too late for an HR team to calculate the cost of acquisition versus the cost of employee retention. Why, you may ask?

Employee retention is important to organizational development as retained people influence overall culture and inspire others in the company to trust and rely on each other. Here are some of the top reasons why HR teams should focus extensively on retention.

1. Optimizes HR budgets for hiring, selection, and retention

Every dollar counts in retention strategies. For example, job advertisements are costly outcomes that result from an employee leaving the role in the middle of a critical project. 

US-based employers spend millions of dollars in hiring, onboarding, and training new employees which could have been used more beneficially had they been able to retain an ex-employee for the same role. Employee replacement costs could vary between 50% and 90% of the annual salary depending on the tenure and skills required at the job. For some roles in the technology businesses, the replacement cost could be above 200%.

By having a solid retention plan, you can solve the budget constraints in hiring and training new employees.

2. Increases effectiveness of cultural orientation

New employees can take six to twelve months to acclimatize to new culture within an organization. Internally, this can consume time, resources, and money. If your focus is on retaining employees, your organization can save resources spent by new employees as they get acclimated to your organization.

3. Boosts productivity

Retained employees are more productive and happier in the workplace. Employee turnover directly impacts the ability of an organization to deliver on its promises to the customers. In other words, retention strategies can directly influence your organization's productivity. 

4. Improves customer relationship management

High attrition means an increase in the lead time for critical projects. Moreover, existing staff feels the pressure of delivering all the time. Having a solid retention plan enables your company to manage projects and deliver a better customer experience at a critical juncture. 

5. Enhances the change and knowledge management for experienced workers

Companies that retain employees can bring changes to their processes and workflows through systematic knowledge management. From launching a new product to shifting to a new geographical location to hiring new teams, retention of employees plays a key role in forging strong relationships with experienced workers even as the new workforce joins in. 

6. Keeps HR costs in check through effective team-building efforts

The human resources budget typically takes about 2% - 4% of the total annual revenue of an organization. The costs incurred by HR teams typically include hiring costs, training and onboarding costs, lost opportunity costs, attrition costs, and productivity costs. Employee retention strategies can help you control costs and focus on symbolically driving employee relationships into revenue-generation units. 

For retaining top talent, organizations are doing everything possible such as raising salaries, listening to the disgruntled workforce and acting on their wishes, offering more opportunities for upskilling and knowledge acquisition, and signing bonuses. 

Let's take a look at a few case studies that highlight the importance of this novel aspect of employee retention. You will also have a better understanding of how workforce management principles have changed in recent years. 

Case 1: 

The skill gaps and employee replacement costs in the aerospace industry are very conspicuous. So, we chose this industry to highlight the role of retention policies. Boeing, a leading player in this industry, successfully managed to identify the challenges of hiring for critical roles and instead focused on its retention programs by doing two things: 

• crowdsourcing development
• re-acclimatization of current employees

They trained the existing workforce and hand-picked employees who excelled in the training by offering them new roles in the organization. The strong culture helped the company prepare for the COVID-19-induced layoffs and retirements without hampering its reputation and ability to sustain the existing ground and aerial workforce. 

Case 2:

The restaurant industry was devastated due to the pandemic outbreak in 2020. But, one company showed how staff retention can shockproof any business during uncertain times. 

McDonald's has always been one of the world's largest employers. It had more than 11 million employees in 2020. Despite the COVID-19 pandemic, it managed to retain a large percentage of its employees even as it expanded in employee headcount and market share. This was possible due to the company's strong retention of employees using agile management. CEO Chris Kempczinski explained how his company's corporate team highlighted the meaty benefits offered to employees and workers beyond just wages so that people not only stay back but also bring new hires to plug labor shortages in the franchises. 

Case 3: 

The oil and gas industry has among the highest rates of employee attrition. Much before the pandemic struck, oil and gas companies reeled under pressures of global economic recession and inflation. But, one company stood out in the last 5 years. It is Royal Dutch Shell, or simply Shell.

Shell had 80,000 employees working for it globally. Apart from being recognized as one of the best workplaces of 2020, the company is also a magnet for tenured employees in the fast-changing technology-driven industry. The company managed to retain its top talent through an innovative one-time payment of bonuses to its employees after it registered a profitable year in the market. 

All these cases prove that employee retention is key to sustaining through choppy weather. Those who do it proactively are bound to emerge as winners in the race to win the talent war.

Many HR scientists, sociologists, and philosophers have tried to correlate human behavior with workforce productivity and retention. The following are some of the top HR models that you can implement in your retention strategy. 

One of the best-known theories for explaining human behavior driven by motivation, the Hierarchy of Needs or Maslow's motivational model is a five-step straight pyramid. It demonstrates that every human endeavor is based on certain physiological and psychological goals that are required to be accomplished through various means and actions.

Herzberg’s Motivation Two-Factor Theory or dual-factor theory is influenced by Maslow's theory. It accounts for the various factors that influence an employee's behavior, concerning, his/her levels of satisfaction and dissatisfaction. Satisfiers are also referred to as motivators; dissatisfiers are referred to as hygiene factors. 

What are motivators? 

Motivators are factors that influence a worker's motivational levels at the workplace. When these factors are unmet, employees begin to feel dissatisfied with their jobs.

Motivators at a workplace may include: 

• Achievement
• Recognition
• Independence
• Rewards
• Promotion
• Interpersonal relationships
• Accomplishments

What are hygiene factors?

Hygiene factors are defined as the basic elements of the job that cause satisfaction when they are present and dissatisfaction when they are absent in the company. These are:

• Salary and compensation benefits
• Job security
• Workplace environment
• Job policies
• Managerial hierarchy 
• Administration 
• Company reputation

Using these hygienes and motivators, we can categorize employees into the following groups:

1. High Hygiene and High Motivation: Employees with fewer complaints and high motivation
2. High Hygiene and Low Motivation: Employees with fewer complaints but not that motivated in their current role. 
3. Low Hygiene and High Motivation: Employees with many complaints but they are highly motivated at work despite the sub-optimal environment.
4. Low Hygiene and Low Motivation: Dissatisfied and least motivated employees with many complaints about their work environment.

Vroom's expectancy theory is also used for staff retention policies. It states that an employee is always motivated by the willingness to reduce pain or failure and maximize pleasure through enhanced efforts, performance, and self-actualization. Expectancy refers to the set of beliefs that say enhanced levels of effort would lead to greater performance and therefore better results in productivity. 

David McClelland proposed this theory to qualify needs versus desires in a workforce. According to this theory, a person demonstrates three types of motivation factors:

1. need for affiliation
2. need for power
3. need for achievement

David Sirota's three-factor theory is a kind of the antithesis of the Human Motivation Theory. Sirota felt that employees lose interest in a workplace with time until leaders identify the problem and fix it giving them enough motivation to perform better.

5. Job Characteristics Model [JCM]

JCM by Greg R. Oldham and J. Richard Hackman found a way to make jobs better and more enriching to perform. JCM consists of these slabs:

• Skill variety
• Task identity
• Task significance
• Autonomy
• Feedback

Modern problems need modern solutions. As an HR leader, you should have a strong plan for activating your staff retention policies as soon as you see a sharp rise in turnover rates. The following are some of the key strategies that companies can use to retain employees, such as offering competitive salaries and benefits, providing opportunities for growth and development, and creating a healthy working environment that encourages employees to stay.  

1. Match candidate profiles for culture-fit

Your retention strategies can never stand the storm of bad hiring! Improve your quality of hires.

Retention should kick in much before your employees set foot in the role. This means you have to improve your candidate hiring processes and focus on building a strong workforce pipeline that brings in new zeal and energy levels without disturbing your existing workforce. Creating a healthy working environment that is free from stress and discrimination. This can be done by providing employees with resources and support, and by promoting a culture of respect and inclusion.

2. Listen to people, respond with empathy

Focus on empathetic conversations without bias. Leverage a people listening tool and analyze what your employees feel about their role and the workplace in general.

People are always willing to share their experiences. They feel a sense of pride when they are heard and given attention. Managers can leverage an AI-based conversational tool like Amber to forge a meaningful and natural relationship built on the foundations of conversation and personalized replies. Tools like Amber can do more than just converse with your employees. AI capabilities such as sentiment analysis and face recognition can go a step ahead and tell your managers what is bothering your employees using non-verbal cues. 

3. Hybridize your workplace with new working arrangements

Relook into benefits such as flexi-time, hybrid working routines, and rewarding top-performing people as part of the hybridization of your workplace.

Employees who want to balance their work life and personal life often sought hybrid working arrangements. Hybrid workplaces are back in vogue after lockdown effects have dwindled. People analytics tools can be used to build a consensus on what each employee or team wants to do when asked "Are you ready for remote working or hybrid working?", and "What works best for you?"

Hybrid working has many advantages if applied to the existing employee retention plans. For example, employees no longer have to worry about travelling to work and getting stuck in long traffic snarls, getting involved in office politics, saving on infrastructure costs and reducing absenteeism. 

4. Performance management and rewarding employees on time

Compensation management should be closely tied to your staff retention plans.

This one is crucial. According to Robert Half's Job Optimism Survey, 61% of the workers surveyed were looking for new roles that provided a respectable salary boost as part of a well-planned salary structure that includes rewards and career opportunities. To meet these employee expectations, you have to spend time and set aside an additional budget for performance monitoring, appraisal, and systematic interviews. Alternatively, plan rewards and recognition programs for shorter targets but high-value contributions. 

Rewarding a high-performing employee encourages them to feel valued and appreciated.  It is a great way to motivate the individual and the team. When people are recognized for their achievements, they become ambassadors and loyal advocates of employee policy. However, a rewarding system can backfire if it is not done on time, is biased, or is not followed as part of a cyclical system. Retention strategies should focus on a cyclical system of rewards and recognition based on people analytics and feedback.

Rewards could be any of these: 

• Employee stock ownership plan (ESOP);
• Yearly bonus;
• Inclusion in corporate training programs;
• Giving health benefits and incentives;
• Offering mentorship opportunities;
• Annual vacation besides PTOs; and 
• Incentivized upskilling programs such as Executive MBA, training in Machine Learning or entrepreneurship.

5. Involving AI in your mix of things-to-do

AI for everything in your HR teams is a verified strong point

AI could be a great enabler whilst you are planning and executing retention plans for your organization.

Scoring each employee on their level of satisfaction can solve only a part of your retention challenges. But, if you can feed this information automatically to an employee experience management platform and garner actionable insights using AI and data analytics, you can obtain employee net promoter scores (eNPS). 

The ultimate retention strategy is to build an organization that people love working with. By making sure that employees feel valued and appreciated, companies can create a positive work environment that will help to boost employee morale and reduce turnover.

Human capital management suites now get an added layer of integrations to bring in next-gen technologies such as people listening, employee behavioral tracking, and AI-based experience management. Together, they can streamline the way you plan and strategize employee retention policies for current and future timelines. Having a technology that improves retention for you can accelerate your HR department's digital transformation and deliver measurable outcomes—a huge benefit for HR leaders looking to reduce turnover.