8 Steps to Improving Retention Strategies

Employee Retention Myths and Tips

EMPLOYER MYTH #1: Employees are browsing but not actively looking around for new jobs

FACT: Over 60% of employees are actively looking to leave their employer within the next three months. Additionally, the intensity of employees’ job search is grossly underestimated by many employers.

Many employers understand that their employees may be looking – especially in the beginning of the New Year. However, employers greatly underestimate the specific actions employees have taken and their timeline for leaving. Employees are twice as active in their search than employers think, taking very specific actions to find new jobs. Nearly 75% of employees surveyed had updated their resume; 50% of employees had posted their resume online and over 30% had gone out on interviews. Meanwhile, employers underestimate the intensity of their employees’ job search and believe only 36% are very likely to leave in the next 3 months.

Tip: Be proactive in identifying employees with the greatest risk of leaving. Create or update a list of key talent that you want to retain and check it against the key risk characteristics of employee dissatisfaction to ensure you have a comprehensive picture of your company’s potential voluntary turnover profile. Once you know who is at risk of leaving, you can proactively identify the sources of their dissatisfaction and take the appropriate corrective measures.

EMPLOYER MYTH #2: Entry level employees are the most likely to leave.

FACT: Companies are most likely to lose the employees who have been in their jobs for 3 to 10 years. Often, these tenured employees have the highest levels of productivity.

Entry level employees are indeed at risk. However, companies run the greatest risk of losing employees who have been in their current jobs for 3 to 10 years. Employees in this range are often looking for career advancement and development opportunities as well as recognition for their hard work. Neglecting these areas can cause employees to become bored in their jobs and intensify their job search.

HR professionals tend to think that career development and lack of job challenge are less important to employees than benefits, job commitment and corporate culture. This type of disconnect could put employers at risk for losing key talent. If realized, excessive turnover in this group could have large hard and soft costs for employers.

Tip: Pay close attention to your tenured employees—those with 3-10 years of service—here boredom and/or lack of development may be creating increased or exaggerated dissatisfaction. This group of employees is more likely to respond to areas within the purview of HR such as recognition, development and/or succession planning programs.

EMPLOYER MYTH #3: Salary is the main influencer of an employee’s decision to leave or stay in their job.

FACT: Inadequate compensation leads the list of reasons workers cite for wanting to leave a job, but it is not the only reason nor is it the key reason they stay with an employer.

Both HR professionals and employees agree that salary is one of the key reasons to consider leaving a job. If employees feel underpaid or undervalued versus the market, they will become dissatisfied and question their employment options. However, employees also cited four other key factors that contributed to their job dissatisfaction.

The second and third most critical factors to employees were the lack of career advancement opportunities and lack of recognition by their employers for their contributions. While employees want to be fairly compensated, many also want to be recognized for doing a good job and rewarded with additional opportunities for advancement. Many times, if these opportunities are not available, employees begin to feel unappreciated. Additionally, over 20% of employees cited boredom as a key factor for leaving. Without career development or advancement programs, many employees lose interest in doing the same job over a long period of time.

Tip: Implement career advancement or skill development programs that allow employees to be challenged, build their skills and help your company achieve greater productivity. Also, design a system that provides performance-based incentives, increases internal recognition of employee accomplishments and builds opportunities for employees to feel empowered.

EMPLOYER MYTH #4: Employees understand their own market value.

FACT: Employees have a perception gap of their own. Many think they are underpaid, when really, they are not. Roughly 50% of respondents said they believed they were underpaid, when in fact, only 22% were actually paid below the market average for their job; 15% were overpaid and 33% were paid fairly. Nearly 30% were likely over-titled, being paid far below the market range for an inflated title.

6,481 of the survey respondents provided details regarding their current job and pay. Our team of Certified Compensation Professionals® analyzed the titles and salaries of these participants and compared them to market pay rates.

The results indicate that only 22% actually were underpaid (paid well below their fair market value), while 15% were actually overpaid (paid well above their fair market value) and 33% were paid reasonably close to their fair market value.

Additionally, we found that 30% were likely over-titled. That is, they were being paid far below the market range (less than 70% of their job’s market value) most likely because of ambiguous or inflated job titles. Over-titling can either over-represent the level of a job, or misrepresent the duties of the role, either of which can lead to an inadequate job match and artificially high salary expectations.

Well-intentioned employers occasionally offer inflated job titles as recognition in lieu of salary increases. These inflated titles often reflect what the employee would like to be doing rather than their actual job responsibilities.

Tip: Discuss fair job pricing with your employees so they can understand how their salary is determined, what their industry peers are making, and the factors that will impact future salary increases.

EMPLOYER MYTH #5: Counteroffers are ineffective and not a good use of compensation funds.

FACT: Often times, inadequate compensation, if validated against market benchmarks, can be corrected with an equity adjustment between 10-12%.

Losing a valued employee due to compensation issues can be a costly process. HR professionals estimate that turnover costs an average of 33% of a replaced employee’s annual base salary. Conventional wisdom suggests that the actual cost could range from a minimum of 50% to several times the incumbent’s annual salary, depending on the individual being replaced.

In the survey, employees were asked to name the minimum salary increase it would take to keep them in their current position. We matched the salary increase amounts against the primary points of dissatisfaction with their jobs. It was determined that employers may be able to stave off turnover with salary increases between 5% and 11%, depending on the reason for dissatisfaction.

Most employees, however, say they could be convinced to stay in their current job for another year for 10% to 15% in extra pay. Counteroffers can be an effective tool if retention is mutually beneficial to both sides. If a counteroffer was used to keep a valued employee making $80,000, it would cost $8,000 to retain or well over $40,000 to replace in hard and soft costs.

Over half of employers state they have used counteroffers but not as an on-going retention tool. Effectiveness comes into question because the average counteroffer often comes in under the employee’s minimum to stay. When used, counteroffers average just 8%, which is below the typical employee salary goal – reducing the likelihood of retention and rendering the tactic less effective.

Tip: Use counteroffers to entice key talent that is otherwise satisfied with their position and company. While counteroffers should not become a blanket retention strategy, it can be effective when implemented appropriately.

EMPLOYER MYTH #6: Managers are a key reason why employees to leave

Fact: After compensation, employees place the highest value on advancement, recognition and development in their jobs. Managers landed eighth on the reasons why employees become dissatisfied and want to leave.

Employers and employees agreed on 3 of the top 6 reasons why employees leave: inadequate compensation, no advancement opportunities and lack of recognition.

However, HR professionals missed 3 key factors that employees valued highly by focusing on 1) managers, 2) undesirable commute and 3) poor working hours as reasons that employees would consider leaving.

Employees placed greater emphasis 1) no development opportunities, 2) boredom and 3) insufficient benefits as the main reasons to leave a job. This perception gap can be costly to employers as they design retention programs that fail to align with the factors that matter most with their employees.

Tip: Many employees seek continual feedback on their performance and input on where they can continue to grow within the company. Consider creating a clear communication plan for employees that highlights career advancement opportunities, succession plans and development programs.

EMPLOYER MYTH #7: Employees clearly identify people (both managers and coworkers), good working hours, benefits and job challenge as the critical factors in wanting to stay in a job.

A disconnect exists between what employees say keeps them at their jobs and what employers think is important to employees. Employees clearly identify managers, coworkers, good working hours, adequate benefits and job challenge as critical retention factors. Employers miss the mark by neglecting two factors—good working hours and job challenge—and not matching the importance of each item given by employees.

Employers believe the top retention factors to keep employees satisfied and motivated were coworkers, job commitment, compatibility with corporate culture, adequate benefits and managers.

Tip: In order to design the most effective retention programs, employers must align their goals and initiatives with the factors employees have designated as most important

8 Steps to Improving Retention Strategies

To summarize the conclusions of the Employee Job Satisfaction & Retention Survey, we have created 8 steps that will help you to identify employees at risk of leaving, develop processes to improve employee satisfaction, and increase overall employee retention.

Step 1: Identify key employees at risk. Determine the factors that put them at-risk and take steps to prevent turnover among at risk workers.

Step 2: Check the market rate for the positions held by at-risk employees. Roughly 20% of the time, employees are underpaid and salaries can be adjusted proactively to reduce turnover.

Step 3: Review goal-setting and advancement opportunities for key talent. Look at time in position to assess the risk of boredom.

Step 4: Determine opportunities to increase job challenges and responsibilities for tenured employees at-risk of becoming bored.

Step 5: Evaluate communication plans for internal positions. Ensure employees are aware of and can apply internally for job advancement opportunities.

Step 6: Evaluate internal succession planning processes and career paths. Ensure valued employees know their path if performance and company growth support plans. Good communication can go a long way to eliminate the employee’s desire to leave.

Step 7: Assess the strengths and weaknesses of company benefits programs vs. employee expectations. Insufficient benefits are a key driver of employee turnover. Look at where your company’s biggest gaps are to predict and/or resolve retention issues.

Step 8: Consider a 10% counter offer programs to address inadequate compensation when appropriate and where internal equity permits.