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Employee Hiring Development and Retention

Seven Steps To Increase Employee Retention

Mike Poskey | May 1, 2013

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It is no secret that employee turnover is costly. Estimates of the total cost of losing a single position to turnover range from 30 percent of the annual salary of the position for hourly employees (Cornell University) to 150 percent, as estimated by the Saratoga Institute, and independently by Hewitt Associates. The cost can be as high as 250 percent for sales and senior leadership positions.

Costs associated with turnover include the following:

  1. Separation costs: unemployment compensation, Consolidated Omnibus Budget Reconciliation Act, exit interviews
  2. Replacement costs (cost per hire): advertising, pre-employment tests, interviewer time
  3. Training costs: sales training, customer service training, on-boarding
  4. Productivity costs: morale, lower production, increased errors, customer service

Given the high percentage of employees who plan to seek new employment opportunities as the job market rebounds, human resources professionals and business leaders need to understand turnover's costly impact and focus on ways to keep their best employees on board.

As a way to establish an effective retention strategy, we must first uncover the main reasons driving employee satisfaction. A recent Society of Human Resources Management Workplace Survey found the following as it relates to job satisfaction.

Top five factors contributing to job satisfaction include:

  1. Opportunities to use skills and abilities—63 percent
  2. Job security—6 percent
  3. Compensation/pay—60 percent
  4. Communication between employees and senior management—57 percent
  5. Relationship with immediate supervisor—54 percent

It should also be noted that overall employee job satisfaction has decreased from 86 percent to 81 percent since 2009.

Developing a Strategy

When I consult with companies, the subject of identifying and retaining top talent is always one of the critical items executives tell me they'd like to improve upon. However, when I ask what their strategy is in that regard, they either mention that they've found this great recruiting firm that is going to do nothing but send them top-level talent, or they look at me and tell me the people who have left were no good to begin with—basically rationalizing the cause of the turnover.

There are a couple of flaws with this line of reasoning. First, just because a recruiter has sent you top-level talent doesn't mean that employee is going to stay and prosper with your organization. I can't tell you how many talented employees I've seen leave organizations because they were miscast for the job, management style, or corporate culture. Second, never assume a turnover problem is just because the employee was no good to begin with. Job fit and performance go well beyond just having a talented employee. As with any business goal, you have to implement a proven process and strategy to attain that goal. The following will outline a seven-step strategy to increase employee retention, one that helped one Fortune 500 company realize a 67 percent increase in retention in the first year of implementing all seven steps.

  1. Conduct job analysis audits to provide realistic job previews. Conduct job analysis audits with behavioral assessments, cognitive reasoning assessments, job simulations, and hard skills assessments (i.e., computer skills, etc.) to objectively define the core competencies required for success in each role (competency modeling). This helps in providing a realistic job preview for candidates and managers. Often, what managers think they need for a certain role is different from what they actually need.
  2. Implement a well-designed assessment and selection process. Include behavioral assessments and structured behavioral interviewing techniques to increase the likelihood of hiring people who can, and will, do the job at a high level in your environment and for your managers (job fit assessment).
  3. Provide good employee orientation. The people you hire today are, potentially, your greatest resource for corporate success in the years ahead. As a senior leader, your participation in new employee orientation sends a vital cultural and leadership message: "We're all involved here in the drive toward what we want to be in the future." Everyone—even the newest employee—has value.
  4. Implement programs for employee training and development. Provide ongoing professional development to show your willingness as an organization to develop your greatest asset—your people.
  5. Improve manager and employee relationships. Concentrate on the people who stay with you to learn what makes them happy … then give them more of it! "People leave managers, not companies. If you have a turnover problem, look first at your managers," Marcus Buckingham and Curt Coffman wrote in First, Break All the Rules.
  6. Provide an equitable or fair pay system. Be competitive!
  7. Encourage succession planning. Identify roles for which employees may be suited in the future and work with them on designing their succession plan within the organization. Invest in cross-training, job shadowing, coaching, mentoring, and cross-experience.


In summary, many organizations are already using several of the aforementioned steps but may be lacking or may be deficient in the other steps. Each step is critical to the overall success of an overall employee retention plan.

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