Why Companies Should Worry About Retention—Even During a Recession

May 29, 2024

In recent months, when asked “Is retention an issue for your company?” many employers immediately respond with a loud “No!” that is quickly followed with statements about how their employees are lucky to have jobs right now. In these tough economic times, employers often think they don’t have to worry about retaining their workers because they assume that their employees aren’t going anywhere.

This perspective is shortsighted, though, because those employers fail to consider what the turnover cost would be if they lost a good employee today. The general rule of thumb is that turnover costs a company 150 percent of the departing employee’s annual salary—a hit to the bottom line that few companies can afford at the moment. If that isn’t enough to make employers think about retention right now, they should also consider the impact of losing even more employees when the economy picks up and the labor market is short of skilled workers. Perhaps at that point, they’ll be ready to listen to some inexpensive solutions.

What organizations do right now for their employees while times are tough will have a direct impact on what those employees will do when the economy does pick up. Many current employees are already looking for other positions (one recent study found that just over 70 percent were searching for other jobs either actively or passively[1]) Yet employers remain blind to what is happening and believe that they are in power.

In these circumstances, what generally happens is the top employees that a company can’t afford to lose can find other jobs now, and even the average performers will find other positions at least when the economy picks up—and the organization will be left with those who can’t find employment elsewhere. If its top workers haven’t left yet, a company that begins investing in retention now might still have time to show them that it cares about them.

Recruiters are finding out that replacing employees isn’t as easy as one might think it would be when unemployment levels are at 7 to 9 percent. Companies that are actually recruiting now are reporting receiving as many as 1500 or more resumes in response to a single ad on national job boards. After spending countless hours screening these resumes, though, recruiters find themselves issuing the same refrain: “Where are all the good candidates?”

Currently, the country has high unemployment, but the business world is still experiencing a skills shortage; at the same time, employers’ expectations are very high, given the emphasis on keeping expenses down. Filling a position is not an easy task now—nor will it be when the economy picks up.

A company’s best recruitment tool is retention. Organizations should spend their money keeping their employees and training them to do needed jobs. Businesses are likely to spend more money recruiting from the outside—and not finding the right skills, knowledge, and commitment—than what retaining and training the employees they already have would cost.

A company’s bottom line is affected not only by turnover costs but also by decreases in productivity and customer satisfaction. The more dissatisfied employees become and the less focused they are on doing a good job, the less productive they are on the job—and the more likely they are to have a negative impact on customer satisfaction.

To retain their current workforces, companies should start by finding out what their employees feel are the characteristics of a great company. (This information can be gathered through exit interviews, performance reviews, employee opinion surveys, and casual conversations.) Hiring managers and HR should think about what they hope to gain through this process and be sure not to ask questions about things that can’t be changed but to focus instead on questions that will yield information that can lead to actionable results.

After gathering this feedback, a company’s leadership should determine the actions it can take and create a plan (and possibly involve employees in implementing it). Most importantly, it should communicate to employees what will be done based on their feedback, as well as what can’t be done (and why). As long as leadership communicates with sincerity, employees’ responses are often be surprisingly favorable.

Rather than try to copy others’ retention programs, an organization should figure out what will work for its own specific situation—which might require starting with a culture change. Sometimes the most effective solutions that meet employees’ needs can be simple and not too expensive:

  • Training and encouraging managers to give more regular feedback
  • More formal reward and recognition programs
  • More fun in the workplace (e.g., having the boss flip burgers on a Friday)
  • Showing employees how they fit into the company’s mission
  • Some flexibility in scheduling work hours
  • Employee development and training
  • Improvement to company communications (even when the news is bad)
  • Alternative benefits (e.g., concierge services, dinners to go)
  • Competitive compensation
  • Mentoring and coaching solutions
  • Skill development opportunities
  • Respect

Today, businesses shouldn’t take anything for granted—especially their employees. In this economic landscape, companies should regard retention not as just an area of interest but as a top priority

 

Strategic Human Resources is a national full-service HR management firm based in Cincinnati, Ohio. In 2021 it joined Clark Schaefer Hackett Business Advisors to lead key HR solutions. The president and founder of Strategic HR, Robin Throckmorton.

[1] Workable. 2022. “The Great Discontent: 2021 Worker Survey (US).” Workable website, get.workable.com/the-great-discontent-2021-worker-survey-us.

Written by: Robin Throckmorton

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