The cost of employee turnover
The cost of employee turnover can be high, and not just financially. It’s true that it can cost a business up to 33% of an employee’s annual salary if that employee leaves, according to a 2017 study by Employee Benefits Network. But other unseen costs include:
- Opportunity costs — How much could your business have grown if you kept your team together?
- Culture costs — How will the departure of good employees impact the rest of the team? When you lose employees who make positive contributions to your culture, what happens to your culture when they take those contributions elsewhere?
As a small business owner, any time you spend on recruiting, hiring, and onboarding is time you could have spent on running your business instead.
We sat down with Clint Smith — Founder and President of CareerPlug and author of the upcoming book, How to Hire — to pick his brain about why retaining employees is more important than ever and about employee retention strategies that work.
Why is employee retention so important to businesses during the COVID-19 pandemic?
According to Smith: “Your team is what keeps your business going. This is not an ideal time to have to replace a bunch of your long-time employees with new hires. You need as much stability as possible right now. Your customers need that too. Some of your regular customers are coming back to you sooner than they’re comfortable because they want to support you and the employees they have relationships with. You need your team to help you ride this out.”
Employee retention strategies
Smith’s advice for employee retention goes far beyond the climate of COVID-19. Here are his top ten strategies for creating a workplace with high employee retention.
1. Hire the right people who share your core values.
Take the time to develop a structured hiring process you can count on to produce the right hires every time. It’s time (and money) you’ll save on the backend. Recruiting problems become retention problems.
Smith’s advice on how to accomplish this: “We developed specific interview questions for each core value and we devote a section of the interview to it. We also try to get peers involved in some of the interviews so that you, as a leader, have different perspectives.”
“The number one recruiting strategy is retention. Hire the right people and do everything you can to keep them,” says Smith.
At CareerPlug, the first step in our hiring process is to create an Ideal Candidate Profile. This serves as a guide for hiring managers to determine who the potential right person could be for the role.
For more advice on how to create an ideal candidate profile, check out this video featuring CareerPlug’s Director of HR, Natalie Morgan.
2. Invest in enticing benefits.
Smith says: “Benefits can be your secret weapon when it comes to a compelling compensation package. I think that every dollar you spend on benefits is worth $3 to $5 in compensation. Plus, offering your team benefits says more about your commitment to being a great place to work than a raise ever will. And they are an excellent retention tool: People will think twice before giving up their benefits. Think of benefits as an investment in your growth.”
But what if your business is in a tight place financially?
Smith adds: “All benefits don’t have to be expensive like healthcare or 401k. For example, flexibility is something that a lot of people value right now. Or giving people a paid day off to volunteer at a charity.”
“A lot of times, there isn’t even one thing that keeps people at your company. But if you have enough small benefits, they end up being more than the sum of their parts — they’re the signals to employees that they’re valued, they’re treated well, and the business has made a commitment to caring about its people.”
Benefits should also align with your company’s core values. For example, if your company’s careers page advertises volunteer opportunities and charitable donation matching as a benefit, that will resonate with job seekers who value those things. On the other hand, job seekers who don’t value those things may not be won over by the opportunity — and that’s okay. They may be looking for a different environment than the one you’re offering.
3. Be generous with recognition and appreciation.
According to a 2017 Gallup study:
- Only 30% of employees say that they’ve received recognition or praise for doing good work within the past week.
- Employees who do not feel adequately recognized are twice as likely to say they’ll quit in the next year.
Smith cautions against a lack of verbalized, concrete recognition in the workplace. “One of the biggest mistakes business owners make is when they take current employees for granted, especially their top performers. You need to show them that you care about them — about their health and safety first and foremost.”
Smith says this is especially true during the COVID-19 uncertainty. “Gratitude and appreciation are so important, but so is being open with your team about what you are thinking — even if you don’t have all of the answers. And you need to do it more often. Anything that you were doing before COVID-19 needs to be amplified. More frequent updates. More thank yous. More recognition.”
Upgrading to formal employee recognition programs can also be an effective way to keep employees engaged and performing at a high level, especially during the COVID-19 crisis.
4. Give employees a sense of purpose in their work.
The 2017 Gallup study we mentioned earlier also found that when employees have a sense of purpose in their work, their engagement skyrockets. Workers who said they can link their individual goals to the organization’s goals were 3.5 times more likely to be engaged in their performance.
The downside is that only 44% of those workers polled said that they can actually see these connections. You can put your business at a significant advantage in terms of retention if you’re able to connect people’s work with a greater purpose.
Smith likes to lead with empathy by imagining and answering the kinds of questions his people have about purpose. “Is this going to be challenging work? Is this a team I’m going to like to work with? Do I like my boss? Do I feel good about the impact that we’re making, both for our clients and for the community? That’s what people are asking themselves,” Smith says.
Smith believes the message he sends his employees at CareerPlug is clear: “For us, as a company, our purpose is to help people hire better, but we’re also able to help job seekers find the right jobs for them. Every role at the company exists to contribute to our greater purpose in some way.”
Smith advises spending time figuring out how to give each role on each team the 3 things that drive intrinsic motivation:
- Purpose — Articulate a clear basis for how their work contributes to the company’s purpose.
- Autonomy — Give them their own space to perform and innovate without micromanaging. What parts of the process do they have ownership of?
- Mastery — Ensure they feel like they’re honing their craft and growing.
When people are intrinsically motivated to perform, they’re more engaged in their work and will think twice before leaving your company for the uncertainty of another organization.
5. Provide frequent feedback to help employees improve and grow.
Smith admits that as a manager, he used to be terrible at providing critical feedback to employees. “Part of it had to do with being a naturally conflict-averse person. The other part is that I would blame myself for their performance issues. I did not set them up for success — at least, that was the story that I told myself,” he says.
“Then one day, I got called out by one of my leaders. He told me that I owed him feedback, and that getting honest feedback was the only way he was going to improve. He was totally right.”
“Feedback got easier for me after I read Radical Candor by Kim Scott. She uses a quadrant to teach the Radical Candor concept. To get into the Radical Candor quadrant, you have to 1) Challenge Directly and 2) Care Personally. I had the Care Personally part covered, but I was failing at Challenge Directly. That put me in a quadrant called Ruinous Empathy, which sounded terrible to me.”
Smith says this change in thinking allowed him to deliver feedback that challenged his employees to improve and grow. Now, the culture at CareerPlug is one that fosters frequent open communication at every level of the organization.
“I usually give my feedback during our weekly one-on-one meetings or directly after an event that created new feedback. If it’s positive feedback, I will praise people in front of their peers. If it is negative, then I will pull them aside and address it as soon as possible,” he says.
But his most important piece of advice: “Don’t wait until formal performance reviews to deliver feedback. We do them twice a year, and I put a lot of energy into them. But most of this is feedback — positive or negative — that I’ve already shared with my employees. My goal is for there to be no surprises when I give performance reviews,” he says.
6. Find out people’s big dreams and motivations and help them achieve what they want.
This retention strategy starts with the job interview. When Smith thinks about the hiring process, only three things matter when evaluating a candidate:
- Can they do it? (Ability)
- Will they do it? (Motivation)
- Will others do it with them? (Culture fit)
All too often, hiring managers overlook the “motivation” component when hiring, maybe because they think it’s not relevant, or they need to hire someone quickly… even if that means cutting corners.
We think this is a mistake. If an employee’s motivations are unknown to you during the hiring process, how do you know what they want out of a role at your company? How will you be able to give them what they want? Which begs the question: How will you retain them in the long term?
Just like your work is not 100% of your life (we hope!), your employees have a life and goals outside of the workplace. “When you connect with your employees’ motivations and give them opportunities to advance toward those goals, they’ll work hard for you (and themselves),” says Smith.
Smith says: “The best way to evaluate a candidate’s motivation is to look at where they have been and where they are headed. You can learn a lot by listening to someone’s life story and then asking them about their goals. With high performers, the motivation usually comes through loud and clear. If it doesn’t, then you need to think twice before making the hire.”
To learn more about how we evaluate for motivation during the interview process at CareerPlug, watch this video from our Director of HR, Natalie Morgan.
7. Develop growth paths or career tracks.
Growth paths and professional development are so important to CareerPlug that Smith makes sure to include a discussion of professional development opportunities when making the initial job offer to a candidate.
Smith says, “The best candidates are going to want to see how this position will help them grow professionally. They will often turn down a job that pays more if they see a path to growth at your company. Show them what they will learn by working with you and what a potential growth path could look like for them. This is what gets the top performers really excited.”
One important thing to note: make sure not to confuse employee training and employee development.
Employee training is focused on the short-term instruction that enables a person to perform the logistics of their job.
Employee development, on the other hand, focuses on long-term growth. These are skills that employees will be able to carry with them throughout their careers and personal lives, such as leadership skills and soft skills. A growing body of research suggests that this kind of whole-person development is crucial to maintaining high employee engagement and long-term retention.
8. Find ways to nurture social relationships between employees.
Research shows that employees who say they have a “best friend at work” are seven times as likely to be engaged in their jobs. Those with besties are also rated as having higher levels of productivity, retention, and job satisfaction than those who do not.
Smith agrees: “People want to like who they work with. They want to have friends at work. That might be another reason for them not to leave.”
At the beginning of team meetings, Smith encourages the team to “share something good.” People take turns sharing a good thing that’s happened in their lives, either personally or professionally, that week. It’s a great way for people to continue to get to know one another and build empathy and camaraderie.
“We try our best to create what we call culture moments, or little things that add up collectively to become what our culture is. For example, we have an all-team meeting Friday afternoons where people can give their peers shoutouts for things they did during the week. We also make a big deal about people’s work anniversaries (or ‘workiversaries’) with us. Our HR leader, Natalie, came up with the idea of a workiversary prize wheel people can spin on their special day.”
9. Create transparent and equitable policies around hiring, pay, promotions, and terminations.
HR shouldn’t be a mysterious, secretive entity. Employees should be able to trust that leadership is being forthcoming with information at all times.
Smith explains: “At CareerPlug, that starts at the very beginning of our relationship with all our employees in our hiring process. We take an open and straightforward approach with compensation. We start by listing compensation on every job posting. Then we share the exact compensation with every candidate on the phone screen and confirm that this works for them, as we don’t negotiate.”
“This helps us be more equitable and ensures that there are no surprises when we get to the offer stage. The candidate knows exactly what they’ll see on the offer letter. Candidates really appreciate it, and it helps us convert almost every offer we make into a hire,” he added.
10. Communicate openly, even during tough times.
Transparency shouldn’t end with compensation policies. Smith says: “Communicate Openly is one of our core values. When you’re in a crisis, that’s when you live your core values more than ever. That’s why you write them — for a time when you need a guidepost to help you make tough decisions.”
Take for example, the COVID-19 crisis. Smith took an approach in which he was completely open and honest with his staff about what his plans were for weathering the storm that was coming.
“I really just tried to put myself in their shoes and consider the kinds of anxieties they were facing. When you go into a crisis, there’s a lot of uncertainty. I think that’s what makes people more anxious than anything,” he says.
Smith decided to share his plans with the entire team. He showed them financial models he created to predict the worst case scenarios for the business. His philosophy: When there’s a plan in place, people can be free to feel safe.
“It’s hard to get anything done if you’re full of uncertainty and anxiety, and we needed everyone to double down and work hard to get through this,” he says.
Need more tips to revamp your recruiting? Check out these guides created by the hiring experts at CareerPlug.
- Ask a Hiring Expert: How to Build a Hiring Process — This guide shows you how to design a hiring process proven to result in the right hires.
- 2020 Recruiting Metrics: Benchmark Data by Industry — CareerPlug analyzed hiring activity for 10,000 companies to shed light on key recruiting metrics for small businesses.
- 12 Applicant Tracking System Benefits to Help You Hire Better — Learn how an applicant tracking system can give you the tools to improve your results at every stage of the hiring process.