For some sectors, employee retention is a primary management goal. Nuclear engineers, board-certified physicians, and aerospace scientists need years of training and specialized skills, and for companies in those sectors, keeping those professionals is a must. But for less specialized sectors, managers may wonder why is it important to retain employees when there are seemingly so many available. These three simple reasons that answer, "Why is it important to retain employees?" will make you reassess your retention strategy.
The Cost of TrainingMany businesses don't consider the cost of training when determining why is it important to retain their staff. The Center for American Progress published a report that determined the average cost to replace an employee is 20.7% of the employee's salary. That number drops to 16.1% for employees being paid under $30,000 annually, but still amounts to nearly $5,000 in advertising, interviews, and training.
Training burdens not only the company's infrastructure, but the time of co-workers and managers. Effective training requires a slow down or complete stop to normal duties to ensure that the new employee understands the process and can perform their position adequately. This spreads the cost not only to the employee being hired, but the employees who are providing training. When looking to why it is important to retain employees, the base costs to replace even entry-level positions easily answer the question.
The Hit to MoraleUnfortunately, when determining why it is important to retain employees, numbers alone don't do the question justice. There's also the more damaging and less quantifiable issue of employee and company morale. No one likes seeing a co-worker leave, but when the most senior employee hasn't even been with the company for a decade, the company starts looking like a springboard to another position rather than a place to excel and grow. Employees begin looking for their next opportunity rather than recognizing that job fulfillment and promotion can be found within the company.
Additionally, the longer positions are unfilled, the longer current employees take on that additional workload. This strains employees with already packed schedules and further degrades job satisfaction. Employees who are performing their own job plus another with no replacement in sight become despondent and less engaged in their job. With multiple unfilled positions, employees may interpret this trend as a sign the business isn't performing well or that competitors are offering better compensation. Even an engaged employee may start looking for a new position under these conditions.
The Company's Bottom Line
High employee turnover can decimate a business' bottom line. The cost of training, the slow down in production during training, and the lowered employee morale all translates to decreases in quality and quantity. A high turnover can directly lead to less sales and decreased customer satisfaction.
When morale plummets, more employees become actively disengaged, costing the company money and time by "checking out" of their position. The 2013 State of the American Workplace estimates disengaged and actively disengaged employees cost employers about $500 billion annually. These costs are from time spent loafing, buddy punching, unauthorized time off, and not performing their job entirely.
Why is it important to retain employees? Even for entry-level and unspecialized industries, the reasons are clear. To save money, time, and profitability, it's vital for businesses to keep employees happy and employed. Developing and implementing employee retention initiatives ensures the businesses keep their best and brightest employees and avoid the significant costs associated with employee replacement.