The Effects of Employee Retention on Businesses and Effective Retention Strategies for Business Owners

Employee turnover can significantly affect an organization’s operations and long-term success due to its financial impact and delay in hiring and onboarding new team members.

While most organizations try to manage high rates of retention and keep current employees stay longer, it comes with downside, high rates of retention can also have unforeseen consequences for organizations when disengaged employees make up a significant portion of the overall number of retained employees.

Too many percentage of disengaged employees is a potential downside to retention that many leaders don’t consider until it’s already a problem.

Employee retention can directly affects performance, productivity, culture, profitability, and customer satisfaction of an organization in positive and negative ways. While the high costs of turnover make retention essential for an organization’s future success, retaining the wrong employees can have negative impact on performance and the organization as a whole. 

Building engagement strategies that help organizations retain the best employees requires a thorough understanding of the pros and cons of retention and how they impact organizations.

So what actually is Employee Retention ? Today, I want to walk you through what is Employee Retention and we talk about its benefits and disadvantages for organizations and we will also talk about some retention strategies for business owners.

What is Employee Retention ?

Employee retention refers to management, planing, strategies and effort of an organization to keep employees working at the organization for a long period of time.

A high rate of retention is achieved by reducing employee turnover, which is the number of employees who leave a job, either voluntarily or involuntarily, during a certain period of time.

Increasing employee retention rate can lead to significant impact on organizational performance and success.

Generally, it is more efficient to retain qualified and highly-skilled employees than hiring and training new employee. Retention is good for an organization’s overall performance, productivity, and profitability. 

According to the Society for Human Resource Management (SHRM), employee retention programs play an important role in attracting and retaining skilled employees and reducing turnover and its associated costs. 

You can check out more information on Put Recognition in Your Employees' Hands

The Importances and Benefits of Employee Retention

For an organization, high retention rate can indicate that people working in the organization is highly engaged, performing well, and providing better result and more customer satisfaction. Engagement is particularly important as employees who care more about an organization’s mission will feel a sense of purpose in their roles and demonstrate more commitment to their jobs.  

There is a report on SHRM showing that turnover costs companies a lot, on average, six to nine months of an employee’s salary to replace them with new hires.  You can check the report here. SHRM (Essential Elements of Employee Retention)

High rates of retention mean lower rates of turnover(lower number of employees leaving a company), which is so important because the cost of turnover can have a devastating effect on a company’s bottom line. Companies typically want to avoid turnover as much as possible to avoid the costs that come with recruiting and training. 

High turnover can also hurt employee morale and lead to burnout. Employees can become overworked due to the increased workloads and responsibilities they have to take on until roles are filled. Even newly hired employees can experience low morale as they struggle to quickly learn their new job duties.

In addition to the cost, the time and effort the management teams must expend on addressing attrition takes time away from the aspects of their job they should be focused on. Management teams spend less time and effort on the recruitment and training process when there is low number of turnover.

Disadvantages of Employee Retention

Employee Retention has a lot of benefits for an organization, but it does not come without disadvantages associated with it.

High retention can also have its disadvantages. Though the cost of turnover can negatively impact a company’s performance, profitability, and bottom line, not all turnover is harmful. 

One of the main disadvantages of high employee retention is disengaged employees who stay in their jobs, hurt productivity, create toxic work environments, and drive good employees away. When this happens, an organization’s retention rates will be high, but the quality of the work being done and employee morale can suffer.

Disengagement is a serious issue many organizations are facing these days. According to article on HR university Gallup poll show that, 17% of full-time and part-time employees are actively disengaged. Check out the report here What is the Cost of Disengaged Employees?

Disengaged employees lack the enthusiasm their peers demonstrate for their jobs and  show a lack of commitment to the organization. They don’t see themselves as playing a vital role in the organization’s success and will not be invested in its future. They often exhibit toxic behaviors, underperform, and lack a strong belief in or dedication to the organization’s mission, vision, or core values.

These employees are not interested in problem solving, process improvement, collaboration, or innovation, and they may be resistant to change and learning new skills and processes to improve their productivity. 

Conclusion

Employee retention is a double-edged sword. On one side, the advantages of employee retention are essential for organizational success, and the benefits of retaining employees are clear, cost savings, enhanced productivity, performance, and the bottom line . On the other side, there are challenges like low performance, potential stagnation and resistance to change.

Because this article is a bit long, so I have write more 3 articles to expand on the benefits, advantages and the strategies in more detail in the module section.

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