How to Improve Employee Retention

As the economy revives, companies with dissatisfied employees will experience a swift exodus
of their top talent. Here's how to keep your staff engaged and happy.

By Josh Spiro | Apr 7, 2010

T. Russell/Getty

Tweet
0
inShare

• Mark Murphy
• Linda Argote
• Dennis Hoffman
• Business
• Job Creation
• Worklife

Related Tools

• 19 Strategies for Hiring the Best, Hiring and Interviewing Article - Inc. Article
• Authorization, Waiver, and Release of Liability for Employment-Related Investigations,
Employment Law Article - Inc. Article
• "At Will" Policy, Employment Regulation and Policy Article - Inc. Article
 Subscribe now

In a down economy, employees have fewer opportunities to take a job at another company, but
entrepreneurs would be remiss to take their fingers off the pulse of company morale simply
because employees have fewer options. "Companies that don't think about [employee retention],
that basically rest on their laurels and think 'the economy will take care of us, where are they
going to go?' Those are the companies that, as soon as the labor market picks back up, their
turnover rates are going to go from 5 percent to 50 percent and it will happen overnight," says
Mark Murphy, author of The Deadly Sins of Employee Retention and CEO of Leadership IQ, a
Washington D.C.-based executive education firm.

So what's one of the biggest reasons people quit their jobs? "One of the major reasons is being
dissatisfied with their supervisor," says Linda Argote, a professor of organizational behavior at
Carnegie Mellon and editor-in-chief of Organization Science. And in the cramped confines of a
small business, that relationship can create even more of a strain. "In bigger companies there are
more opportunities to move to other jobs if you're dissatisfied with a particular supervisor but
like the firm, whereas smaller companies may have less options so they run the risk of losing the
employee," Argote adds.

How to Improve Employee Retention: Motivation is Not Enough

Bonuses, vacation days, office parties, and many of the tools in a business owner's arsenal
revolve around rewarding employees for a job well done and motivating them to produce
similarly stunning results in the future. But Murphy says that leaders who dole out these types of
perks are only focusing on half of the picture.

There are "two issues generally going on with employees at any given time: there are 'shoves,'
things that demotivate people, and then there are 'tugs,' the things that motivate you, that tug at
you to stay at the organization," he says. While these factors will differ for every employee,
leaders often make the mistake of focusing on the motivators without adequately considering
what rubs people the wrong way.

Dig Deeper: Recruiting and Retention Secrets of Inc. 500 Alumni

How to Improve Employee Retention: Keeping the Employee Satisfied

Even if you resolve to be more attuned to employee likes and dislikes, it can be difficult to
ascertain what drives your employees especially when their motives differ from your own.

In the last 10 years, as CEO of Engage Direct Mail, Dennis Hoffman learned the hard way that "I
never know what's inside people's heads. I used to assume everybody's ambitious because I'm
ambitious and that everybody's motivated by money because I'm motivated by money, and I've
learned through painful experience that that's not the case."

Despite Hoffman's self-professed learning curve, his company actually has a stellar retention rate
for its 130 employees. Engage has a 90-day trial period during which they evaluate whether new
hires are good fits for the company. During that time their retention rate is about 77 percent and
afterwards it is over 95 percent, which is about as good as you can get. After all, "zero percent
turnover is not a thing to aim for," Murphy explains. You want to retain your high performers
and strong matches and gracefully part ways with your worst performers.

Dig Deeper: Attracting Top Tech People to a Small City

How to Improve Employee Retention: Attracting the Right Candidates

Over the years, Engage has implemented a number of policies that serve the dual purpose of
attracting potential employees and keeping current ones passionate and committed. Here are a
handful of examples:

• Engage gives hiring priority to people who live near the office because they believe that
long commutes are detrimental to work-life balance.

• Instead of a traditional vacation policy, the company lets employees take time off from a
leave bank, in which they can accumulate as many as 60 days off to use as they see fit.
This policy has helped with employee retention, particularly by making it easier for
female employees starting families to take time off and ultimately return to work.

• During the hiring process, Engage administers the DISC Personality test, which charts the
four characteristics, drive, influence, steadiness, and compliance, to build personality
profiles for new hires. All employees' test results are public knowledge, which Hoffman
feels helps people understand one another and get along.

• By setting quarterly goals with rewards attached, such as iPods for the whole team or a
trip to a nice restaurant, Engage can encourage employees beyond the competitive, and
potentially divisive realm of salary bonuses. The group nature of these rewards is
important, says Hoffman, because "somebody who is not motivated by getting an iPod
knows that other people in his or her group are and doesn't want to let them down."
In addition to spurring employees to productivity, this team structure can make them happier in
the workplace. Argote says, "ther

Retention and Motivation Theory==

Retention has a direct and causal relationship with employee needs and motivation.
Applying a motivation theory model, such as Maslow’s Hierarchy of Needs, is an
effective way of identifying effective retention
protocol.<ref>http://en.wikipedia.org/wiki/Maslow%27s_hierarchy_of_needs</ref>

Each of the five tiers of [[Maslow's hierarchy of needs|Maslow’s hierarchy]] of

needs relates to optimal retention strategy. Since Maslow’s introduction of his
motivation model, organizations have been employing strategies attempting to
stimulate each of the five humanitarian needs described above to optimize
retention rates. 4 When applied to the organizational model, meeting the self-
actualization and esteem needs of an employee tend to correlate to better
retention. Physiological, safety, and social needs are important as well, however,
and must be addressed to better the work environment. 4

While implementing a retention strategy is ideal, successful satisfying all five needs of
employees is not only difficult, but also expensive. That being said, managers who attempt to
maximize employee need coverage tend to be more concerned with employee
satisfaction.<ref>Spector, Paul E. "Measurement of Human Service Staff Satisfaction:
Development of the Job Satisfaction Survey." American Journal of CommUseful Articles

More Human Resource - HR Articles

Submit An Article/Poem
 Employee Retention Tools
C In the present scenario, world is turning into a global village and t
o
any destination. In this small world even companies are reachable to the p
n
jobs are also easily accessible for everyone. In this situation, the biggest c
t
e
its workforce intact especially the Knowledge Banks.
n
t All the companies are planning to increase their turnover every mo
workout of increasing the turnover they forget about their loss incurred by
S the expenses of hiring new employees (Hiring Cost, Training Cost, Product
e employee normally costs around 35% or more of the average employee s
r average salary of an employee per year as Rs.20, 000, and then the cost
v expenses come around Rs.7, 000. If you have 2 employees resigning per m
i and taking the same for 12 months comes to around Rs.168, 000, which is
c the company. And after all this there is always a risk of getting a right em
e right attitude.
s
If an employee resigns, then good amount
Additional Web Services
employee and then training him/her and this go
directly which many a times goes unnoticed. An
us of the same efficiency from the new employ
not be). You require time to judge his capabiliti
graver if he/she is Your Knowledge Bank, this c
Articles Center even. And above all these things, one resignati
reaction among other employees, leading to a n

For all these and many other reasons you need to retain your emp
employees, you need to understand the requirements of the employees a
Jobs Bank
them clear about the expectations of the company from them. It’s a gene
human being thinks himself as important and expects the same from the
management should make their employees accountable for their respecti
they are very important for the smooth processing of that process(At the
Care and importance are two things of which every human being is mad o

Below are few of the tools for Employee Retentio

1. Employee Reward P
provision of Monthly or Quarterl
budget) for the best employee,
month. The award can be in ter

If it is money then it should be d

given with the next month salar
In this way he/she can be retain
rewards shall be considered at t

2. Career Development Program- Every individual is worrie

provide them conditional assistance for certain courses which are benefic
Conditional assistance means the company will bear the expenses only if
percentage of marks. And entrance to that course should be on the basis
be limited. For getting admitted to such program, You can propose them t
like they cannot leave the company for 2 years or something after the suc

3. Performance based Bonus- The employee always comes t

unity Psychology 13.6 (1985): 693-713. Web. 12 Mar. 2011.</ref>