0 Comments | May 06, 2010

Best Practices for Employee Retention

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Why should you spend any time revamping your employee retention techniques now, in this economy? Aren’t employees just happy they have a job?

Not really.

Let me illustrate:

Once, there was a man who lived in a small town, and drove a great distance every day to his work in a different town. The road was bumpy, narrow, steep, and riddled with potholes. Yet every day, the man drove his old car many miles to work. And his car broke down frequently, so he spent a great deal of money on repairs over the years, but he didn’t believe he could quite afford a newer, more reliable car.

So over and over he drove. And the potholes would jar loose suspension parts, the steep hills would strain the engine, and over and over again his car would break down, requiring costly repairs.

One day, the worst happened: his boss told him that due to difficult economic times, he would have to accept a reduction in his wages.

He could no longer afford his car repairs.

What was he to do? He couldn’t get to work, because he needed to repair his car. But he couldn’t miss work, because he would soon be fired from his job.

How did he get in this situation? He didn’t think strategically. He should have invested in his transportation much earlier, before he reached a crisis point.

Let me connect the dots. Your employees are like this man’s car. They’re tired, overworked, and in need of quality attention. You’ve asked a great deal of them, and the road has been difficult, steep, and bumpy. You’ve reduced their wages and benefits because you don’t feel you can afford them, but at the same time, you can’t afford to neglect your employees because they make money for your business.

Your business relies on your employees to be smart, sharp, motivated, innovative, and loyal. You can’t afford to let them break down, or walk away, due to neglect.

Voluntary employee turnover costs the average IT firm over $4M per year, and it costs three times an employee’s wages and benefits to replace her when she leaves. And the important paradox is that your talent is more valuable in a down economy than otherwise, not less. You need to work hard to keep your employees motivated and loyal.

So businesses have a compelling reason to invest in their employee retention plans under all economic conditions.

Here are five employee retention tips, drawn from various sources of best practices for employee retention:

  1. Take a hard look at your employee benefit package. Are you adding value? Have you asked your employees what they want? If you’ve asked for their input, have you delivered?
  2. Add low-cost, high-return extras, such as employee health and wellness programs, budget wellness vacation programs, flexible work schedules, and telecommute options.
  3. Start thinking like an economic buyer instead of a cash miser. You’re investing in the future of your workforce. Strategic workforce investment can have outlandishly positive results.
  4. Get educated on voluntary turnover’s enormous financial impact. Learn how to estimate your turnover costs, so that you can track your employee benefits retention performance over time, and maximize the return on your various employee retention plans and techniques.
  5. Understand that due to the incredible power of perceived value, your employee benefit package can have many times the retention power, dollar for dollar, as a salary raise.

While all of that may sound like common sense, employee retention is no different than the man with the old, broken-down car: a little bit of attention and investment goes a long way toward avoiding a crisis situation. Now is the perfect time to readdress your strategic employee retention plan, before your workforce leaves in droves as the economy bounces back.