Employee retention is the deliberate act of management to withhold competent people in its fold. It refers to how many current employees stick around over a given time.
Retention of human resources means a big achievement for the organizations as a ‘Great Place to Work’ and provides opportunities for the overall learning, growth, and development of people in the organization in its strive towards excellence and value creation through human capital. This is accomplished by ensuring appropriate policies, tools, and techniques for maximum utilization and retention of competent personnel.
Definition of Employee Retention
According to Frank et al., “Employee retention is defined as the effort by an employer to keep desirable workers in order to meet business objectives.”
According to Workforce Planning for Wisconsin State Government, “Employee retention is a systematic effort by employers to create and foster an environment that encourages current employees to remain employed by having policies and practices in place that address their diverse needs.”
According to Tapomoy Deb, “Employee retention is an organisational strategy to create an appeal. challenging, satisfying and motivating workplace policies, systems, programmes and practices whereby employees are self-motivated to stay in their jobs although they have ready opportunities available to them elsewhere.”
Need for Employee Retention (as per Survey)
Employee retention is critical for organizations for the following reasons:
1. Time-Consuming Hiring Process
Recruiting the right expertise involves HR experts sifting through a vast pool of applicants, engaging in initial interviews, and then passing them directly to line managers for further assessment. Finding an appropriate employee may be a laborious task, and all of the effort invested can go to waste if the employee decides to depart.
2. Investment in Training
Organizations make investments both time and money in training new hires, who often begin with minimal experience. It’s a big waste of resources when a skilled employee all of a sudden departs from the employer.
3. Preventing Information Leakage
When an employee resigns, there is a threat they could be a part of a competitor. In such times, departing personnel can bring sensitive strategies, policies, and even confidential facts to their new place of business. To mitigate this chance, corporations need to require new hires to sign agreements preventing them from sharing any agency information, even after leaving. Implementing strict policies towards personnel about joining competitors is a powerful way to retain talent.
4. Adaptability of Retained Employees
Replacing a current employee with a newcomer can lead to adjustment-demanding situations. Building trust and rapport with a new colleague may be hard. Employees who’ve been with the agency for an extended period are extra acquainted with its guidelines and suggestions, making them better equipped to adapt and carry out successfully. Long-term employees have an in-depth understanding of the organization, which allows them to make contributions extra effectively as compared to individuals who frequently switch jobs.
Importance of Employee Retention
The significance of employee retention is as follows:
1) Reduces Time and Money Investment
When an employee leaves the organization, he does not leave alone; he also takes away knowledge, training, and experience along with him for which the organization has invested an ample amount of time and money. HR has to start the recruitment process all over again for the same vacancy when an individual leaves an organization all of a sudden, which is a complete waste of time and money.
The combined direct and indirect costs associated with the cost of hiring, training, and development with turnover of one employee range from a minimum of one year’s pay and benefits to a maximum of two year’s pay and benefits. Therefore, organizations need to create an environment in which employees would be willing to stay and continue to be productive.
2) Reduces Non-Economic Impact of Turnover
When an organization loses employees, it loses skills, experience, and “corporate memory”. The magnitude and nature of these losses is a specific management issue that affects productivity, profitability, and product and service quality. For employees, high turnover can negatively affect employment relationships, morale, and motivation at the workplace. The problems associated with finding and training new employees can be considerable, and the specific workplace-acquired skills and knowledge people walk away with can take years to replace.
3) Positive Impact on Customer Service
Employee retention has a positive impact on customer service. The revenue brings disturbance in customer service, loss of business, and negative business impacts. An organization’s customer base expects consistent and reliable service. There is a learning curve with new hires and, thus, the potential for error or poor communication with a client.
This can impact business relationships. Long-term employees develop relationships with customers. They know the client’s preferences and can anticipate future needs. This knowledge develops over time. Therefore, employee retention helps in maintaining a positive impact on customer service.
4) Increases Goodwill of the Company
A higher retention rate helps to build goodwill in the company. It creates a healthy working environment not only amongst its employees but also acts as a motivational source for others to join the organization. In addition to this, customers also develop a strong positive image of the organization and thus build long-term relationships with them. This contributes towards more business and, hence, success and growth.
5) Facilitates Knowledge Transfer
Employee retention and knowledge transfer are two elements of a more general concern that might be best termed as management skills, i.e., recruiting, maintaining, and developing the necessary mix and levels of skill required to achieve organizational goals and objectives. Knowledge transfer initiatives ensure that the knowledge and expertise of an organization’s employees and its corporate memory are systematically and effectively shared among employees.
They can offset the negative impact of turnover but can also work proactively to reduce turnover by providing learning and skills development opportunities to employees, thus developing a skilled workforce. For this, organizations need to either create an intellectual capital environment where the transmission of knowledge takes place throughout the structure or continue to lose important individual knowledge that has been developed during the length of service.
Conclusion
However, employee retention is important for a business organization as it is a time consuming hiring process if employee does not retain. Also, it reduces money and time investment in the employees. All the business organizations want that their employees retain to get better remuneration and some extra benefits.