The Definition of Retention in the Workplace

Unhappy employees may discard their jobs as easily as stale coffee.
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In today's world, everything is disposable – from pens and razors to diapers and mops. Workers have come to think of jobs in the same light, and 401(k) plans make it relatively easy to change employers without losing retirement benefits. You might be tempted to think retention doesn't really matter because there are plenty of candidates to replace the people you lose. But beware: The cost of replacing a departing employee is a lot higher than you probably believe.


    Retention means holding on to your employees – keeping them from quitting and, especially, going to work for a competitor. From a corporate perspective, however, you don't necessarily want to hold on to every employee. Some employees are not a good fit for the position they occupy and others are just not good workers. An effective retention program aims to keep productive employees, find the correct position for those who are good workers but not in the right jobs, and help less productive staff members to exit the company without rancor.

Duality of Retention

    Retention has two faces: creating motivators for good employees to stay and removing or mitigating factors that drive people away from the organization. Some managers think higher pay and benefits will solve retention problems. These are good motivators and they certainly will help, but they constitute only part of an effective retention program. Identifying and addressing the issues that make day-to-day work difficult or disheartening is equally important. Employees need to feel their managers are connected to them, not living on a separate planet.

Non-Compensation Factors

    It's relatively easy to determine what your competitors are paying and match or even exceed it. The hard part is creating an environment that makes employees want to stay for the long haul. The keys are communication and recognition. Talk with your employees, perhaps through focus groups, before you make a decision regarding any significant change. Use a variety of mechanisms to show your appreciation. Recognition can be as simple as orally highlighting an employee's efforts in a staff meeting, or you can make a bigger deal with an award, a gift certificate, a classy desk accessory or a generous cash bonus.

Cost of Turnover

    Employee turnover is demoralizing and expensive. Outprocessing alone is pricey, including the severance package, staff time counseling the employee, outplacement services and administrative paperwork. Then, there is the cost of lost productivity during the time between the employee's departure and the replacement's arrival. Add to this the cost of vacancy advertisements, interviews and possible signing bonuses. A new hire also will require some formal training, plus on-the-job training that distracts another employee from her regular duties. In addition, the new employee will perform at a reduced level until he comes up to speed. In all, these costs typically run about 80 percent of an employee's annual salary, according to the experts at the consulting firm JDA Professional Services Inc.

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