Employee Retention

April 29th, 2012 by Michael Page

The estimated cost of replacing a mid-level employee is as much as 150% of that person’s annual compensation package.  A staggering number indeed.  Especially when you take that number and multiply it by the number of employees in your organization.  High employee turnover can basically sink your ship.

There are so many factors in considering the cost of turnover.  There are the “exit costs” like loss of clients, contacts, and knowledge base; severance packages, insurance, and benefits.  There are “absence costs” like loss of coverage, lost productivity, and general disruption.  Then, of course, there are all the recruitment costs that you incur to refill the lost position and here’s hoping that the new person decides to stay on for a while.

While companies need to be mindful of these unexpected but possible expenses, what they really must focus on is a good plan for retention.  A good place to start is with employee engagement.  It is both practical and profitable.  When employees are engaged, they put forth more effort and create more value to and for your business.  Why?  Because when you engage and motivate them, they feel valued.

According to a 2009 study by Towers Watson, operating income for companies with highly-engaged employees increased by 19%.  Companies with low engagement saw operating income dip by 33%.

So what goes into a good retention plan?  Know your employees and understanding the general climate and workflow of the departments or divisions of your business.  Take into consideration non-work-related factors that will make work better such as work-life balance plans and wellness programs.  Find ways to remind your staff how valuable they are to you and they will return the favor.

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