Employee Retention Strategies for Driving Profitability
By Jeremias Ramos, CPA
According to the Center for American Progress, job turnover on average costs a business roughly 20% of the departing employee’s wages/salary. The cost incurred also depends on the level of the position, as executive level turnover can, in some cases, cost as much as 213% of total remuneration. It could cost upwards of $320,000 per year to replace a senior executive earning $150,000 annually. Increased recruitment expenses, loss of productivity, loss of employee morale, and increased training expenses are just a few factors that contribute to this expense.
Companies are beginning to recognize the negative impacts of high turnover and are implementing retention strategies to combat this problem through a combination of corporate culture, team building activities, and employee engagement practices. However, the solution to turnover is sometimes quite simple and may not require the services of a consultant. Following a few of the strategies outlined below will lead to a better work environment, increase employee retention, and ultimately drive your company’s profitability.
According to a study by the Society for Human Resource Management, 67% of employees said respectful treatment is very important, making it the top contributor to overall employee job satisfaction.
The research examined 43 distinct aspects of job satisfaction and 37 direct factors relating to overall employee engagement. Compensation, job benefits, and job security ranked 2nd, 3rd, and 4th place, respectively, behind ‘respect for employees’.
Surprisingly, factors that are generally believed to directly relate to overall job satisfaction polled considerably lower. The ’work’ itself ranked 9th, while ‘corporate culture’ finished in 13th place. Other notable highlights included the rankings of teamwork between departments, variety of work, and a diverse work environment, which ranked 17th, 19th, and 22nd, respectively.
Appreciation is Key
A recent survey by OfficeTeam revealed that more than two thirds of employees said they would likely leave their job if they did not feel appreciated. The lack of training, employee benefits, praise for a job well done, being passed up for promotions, and failing to understand employee needs all contribute to employees feeling under-appreciated.
Often, a sense of appreciation can be imparted by simply telling an employee they are appreciated. It doesn’t cost a company anything to say thank you. However, the cost of not saying anything could be damaging.
Happiness and Productivity
An economist at the University of Warwick, who spearheaded a recent study about the correlation of mood and productivity, concluded that happiness led to a 12% spike in productivity, while unhappy workers proved 10% less productive. This equates to a 22% swing in productivity from happy employees to unhappy employees.
Relating this directly back to the Society for Human Resource Management’s study, lack of respect for employees could mean a 22% reduction in productivity. A 2013 Gallup Survey reported that unhappy workers cost U.S. businesses between $450 and $550 billion, annually.
Employee engagement and happiness comes down to psychology. The relationship between an employer and an employee is exactly that, a relationship. When one party in a relationship feels under-appreciated, that party often ends the relationship. While this works both ways, there are little things management can and should do to boost employee morale.
Other factors that contribute to a couple’s break-up can also serve as indicators for poor relationships: lack of communication, unfair treatment, frequent arguments, and lack of appreciation are just a few. The research shows that relationships, whether between couples, or employees and employers, last longer and are more mutually beneficial when both parties are happy. More often than not, people spend more time at work than at home. For this reason, employers should work even harder to develop healthy professional relationships with their employees.
The importance of maintaining healthy relationships with employees cannot be ignored. Compare how you treat employees to how you treat your best customer. If you treated your customers the same way you treated your employees, would you still be in business? If the answer is anything but yes, then odds are you are not tackling the root issue of employee turnover.
As accountants and business consultants, we work every day with business owners that practice these methods in order to sustain the longevity of their employees. These strategies are key contributors to a business’ success and is often an easy solution that can pay dividends for years to come.
About the Author
Jeremias Ramos, CPA, MBA is a semi-senior in Citrin Cooperman’s White Plains office. He can be reached at 914.949.2990 or at email@example.com. Citrin Cooperman is a full-service accounting and consulting firm with 10 locations along the East Coast. Visit us at www.citrincooperman.com.