Create a Killer Employee Retention Plan in 5 Simple Steps
Putting together an employee retention plan is an exciting opportunity. Being successful with employee retention can have a huge impact on your company’s bottom line. More notably, it can have a huge impact on your career!
You’ve seen the stat everywhere: the average cost to replace an employee is 6-9 months of their yearly salary. It’s easy to imagine the impressive savings from just a small improvement in retention. It’d be pretty awesome to get that kind of measurable win.
But let’s not kid ourselves. Putting together an employee retention plan is a major undertaking, and the stakes are high. A solid employee retention plan needs to consider all the moving pieces of your business, be built for scalability, and inspire confidence in company leadership.
Don’t stress though, we’ve got your back. These 5 simple steps can help you create an employee retention plan that could be a huge boost to your business’ bottom line.
Side tip: As you go through each of these steps, start a document and use it for all your notes and calculations – it’ll make it much easier to consolidate all the information into your official employee retention plan document in Step 5.
When retention and turnover are a pressing issue, it’s hard to summon the patience for analysis, but it’s a step you don’t want to skip. No solid retention plan begins without a thorough assessment of the current situation. In addition to preventing history from repeating itself, this serves as a helpful roadmap for your retention improvement plan.
Calculate Your Retention and Turnover Rates
Jump in by taking a look at your employee retention and turnover rates. If you don’t have this data on hand, you can calculate it relatively quickly.
Historical data is also helpful, particularly when you are constructing your employee retention plan document. We’d recommend looking back at least five years, but depending on the nature of your business, that could be much longer.
Here’s a helpful post all about how to calculate all the rates and metrics you should need for your employee retention plan. Cost can be more difficult to calculate, but we’ve included a helpful fill-in calculation template sheet to download.
Taking an Inventory of Your Employee Retention
The second part of this assessment involves a good ol’ fashioned righteous moral inventory. Well, a retention inventory anyway. The level of righteousness is up to you.
You’ve got the pure numbers, now it’s time for an audit of your company’s current retention practices, methods, and successes. There are about a million ways that you can do this, but we think the most effective involves asking yourself (or your team) a set of pre-designed questions to help get at the heart of the problem, (and eventually, the solution).
As the person looking to create this plan, you probably have a very good picture of the human resources management situation at your business. Answering these questions shouldn’t be a problem. Jump right in and begin.
If, however, you think it might help (even a little) to have some input, don’t hesitate to gather feedback or enlist a few people to help you answer questions and brainstorm solutions. Accurate and honest answers are the only kind that will drive really successful results.
The one upside to a low score on this test is that you will reap greater benefits from the changes your make.
Below are some questions to consider. We’ve also added in a few questions to help you dig deeper into the status of your employee retention.
- What is the state of communication at your company?
- Do you have one-on-one feedback sessions?
- How well do different departments communicate?
- What systems of communication do you use within the office
- How are employees motivated and engaged?
- What are your strategies to provide rewarding or exciting work?
- Do your employees feel appreciated?
- Do your employees feel that their work makes a difference?
- What do you do to help employees balance their work and personal lives?
- Do you offer flexible work arrangements like remote work or flexible hours?
- Do your employees feel they can come to management with personal issues and receive help or consideration?
- Are your policies family-friendly? What do you do as a company to make working parents’ lives easier?
- How does leadership/management interact with employees?
- Is there trust and transparency between employees and management?
- Does management have a good understanding of the on-the-ground, day-to-day employee experience?
- Does your company’s leadership inspire your employees? Do they generate company culture buy-in?
- What is your business doing to improve employee health?
- What does your health benefits package look like? What do employees find most frustrating about their healthcare?
- Do you have wellness programs or fitness incentives available to employees?
- Does your office culture promote a healthy lifestyle and do you actively engage employees in this?
- What does your compensation situation look like?
- Are employees generally happy with their compensation?
- Do you have processes or systems in place to reward performance?
- Have raises been an effective deterrent to attrition in the past?
- Do your employees feel like your business offers job security?
- What is the company culture like at your business?
- What are your core values and mission statement? Do your employees embody this?
- Do employees feel welcome to raise concerns or give feedback?
- What is the work environment like? Where are the greatest sources of stress?
- What makes people look forward to coming to work?
- What are you doing for your employees financial wellness?
- Do you offer a 401(k) retirement plan for your employees?
- Is your 401(k) plan something your employees feel motivated to enroll in and contribute to? Can they manage their 401k details directly?
- Do you offer financial planning and wellness consulting for your employees?
- How are you training and educating employees?
- Do employees have all the tools and training that they need? When did someone last ask them that question?
- Do your employees feel they have opportunities to grow and improve their skills?
- Do employees feel they have the chance to move up at your company and develop their career?
- What is the state of your recruitment?
- Do you have a systematic process for advertising your open positions and gathering resumes?
- Do you have an aptitude test or survey that you administer as a part of interviews?
- What is your process for testing if an applicant is aligned with the company culture?
- Do you engage in stay and/or exit interviews?
Once you’ve got the answers to these questions, you should be set to move on to Step #2, where you can begin to craft your plan of attack (or defense, if that’s more your style).
We just offered up a huge list of questions. Now we’ll boil it all down to one (although it’s an important one):
What did your assessment reveal?
You should have a thorough understanding of both:
- What your business is getting right when it comes to employee retention.
- What your business needs to work on.
Armed with the knowledge of what you need to address, you can now begin brainstorming. Without knowing your exact situation, we can’t get more specific on a strategy recommendation. That being said, we wouldn’t leave you hanging. Here are some of the most effective and impactful employee retention strategies.
A Quick Breakdown of Employee Retention Strategies
An employee engagement-based strategy develops a strong sense of connection between the employee and the company, making them feel good about their work, empowered in their position, and excited for the future of the business. There are a myriad of tactics and ideas for improving employee engagement – involving everything from employee compliment boxes to free lunches to fun team-building exercises.
One study found that highly engaged employees are 87% less likely to leave their organization.
A strategy of improved work-life balance seeks to help employees manage their lives outside of work. A work-life balance can cover things from maternity leave and sick days to providing a free laundry service to help your employees cut down on chore time at home. If your business is struggling with employee burnout, this is an excellent opportunity to get creative.
Research from TinyPulse found those with a positive work-life balance are 12% more likely to see themselves staying with their employer.
A refreshed recruitment strategy and process is one of the fundamentals of a solid retention plan. All businesses have to deal with recruitment and hiring – even if it is only once in a while. There’s no reason not to make sure that the candidates you bring in and the applicants you hire are the right fit the first time.
According to the Harvard Business Review: 80% of employee turnover is due to bad hiring decisions.
Salary and Compensation
Though compensation actually has very little to do with why employees stay or leave their position, it can still make a difference, particularly as a quick or immediate measure to prevent top and hard to replace talent from leaving. Be careful though, if talent is looking for the door, there’s almost always something else going on, and that needs to be addressed as well.
According to a Glassdoor study, a 10% increase in employee pay is associated with a 1 point increase in overall company satisfaction.
Leadership and Communication
Developing better communication, coordination, and respect between leadership and employees is a surefire way to improve retention. When employees have confidence in and respect for their leaders, they work harder, perform better, and naturally, stay longer.
According to research from Qualtrics employees that have a high confidence level in their company’s senior leadership are 5 times more likely to remain with their employer for more than two years.
Whether it’s a poisonous workplace attitude or a total absence of distinguishing company personality, poor company culture is one of the most common causes for employee turnover. Luckily, there are hundreds of effective (and yes, fun) tactics to choose from.
47% of people actively looking for new positions say company culture is the main reason.
Financial Wellness and Functional Retirement Plans
Retirement benefits are the top third reason that employees stay, but it’s not enough just to offer a 401(k). Low participation and deferrals indicate poor employee enthusiasm for your 401(k), likely because their experience with it has been pretty confusing. A functional retirement plan paired with financial wellness and consulting services can revolutionize retention.
We ran a study among our current clients and found that the retention rate for employees participating in the 401(k) was 11% higher than for employees who were eligible but weren’t participating.
Once you’re done with strategic brainstorming, it’s time to move on to creating what will become the center of your employee retention plan: the action plan.
You know your situation, you understand the challenges you face, you know what strategies will work best for you. Now, this step is all about execution.
Begin by breaking your chosen strategy down into actionable tactics and achievable goals. These should be practical and well thought-out courses of action, not vague ideas or overly-ambitious projects. Your action plan can be laid out in whichever way is most effective for you, but here’s the general template we like to use:
Timeline (Start and Due Date):
Team Member Responsible:
These sections should be filled out for each tactic you have brainstormed and decided to incorporate into your employee retention plan. A list of these goals makes up your action plan.
Let’s look at an example. The strategy that Sandra chooses to improve retention at her small business is better employee engagement. When planning out her action plan, a couple sections might look like this:
Goal/Tactic: Create an employee happiness pamphlet
- Start – Jan 14th
- Due – Jan 20th
Team Member Responsible: Sandra
Resources Required: $75 to have the pamphlets printed
- Employees are educated on and aware of upcoming employee engagement events and practices.
- Increase trust and transparency between employees, human resources, and upper management.
Goal/Tactic: Host a fruit and ice-cream social
Timeline: Ongoing – every other Friday
Team Member Responsible: Derek
Resources Required: $150/month for food and supplies
- Improved employee relationships.
- More casual communication between management and employees.
- Stronger sense of belonging.
- More productive ends to the work week.
Your action plan can have as many tactics or goals as your strategy and approach dictates. There’s no exact formula for successful employee retention. To build on your employee retention action plan, you’ll also need to answer the following questions:
- How much will it cost?*
- How long will it take to begin implementing the strategy?*
- If necessary, what businesses services would be good choices to partner with?
- How sustainable is this strategy?
- Will this strategy contribute to long-term retention or is it designed to prevent or mitigate an immediate turnover crisis?
- How scalable is this strategy? Can it accommodate any projected growth?
*Educated estimates are fine, particularly when you are first sketching out your employee retention plan.
In our fourth step, all the hard work you’ve done in the past three steps comes together. Your analysis, strategy, and plan for improved employee retention all get laid out in detailed document that will serve as your organization-wide employee retention playbook.
Below, we’ve laid out the basic general structure for an employee retention plan, with explanations and examples for each section:
- Background and Purpose
- A thorough report of the current retention situation at your business, including the figures from your employee turnover calculations and the results of your cost estimations.
- If you’ve received any feedback from employees that is particularly pertinent, this is a good place to present that information.
- The statement of purpose should discuss the overall goal of the employee retention initiative and briefly touch on major steps to achieve that.
- Retention Team Work Calendar and Goals
- This is where your plan of action takes center stage.
- A calendar or table that lays out the tasks ahead, due dates, who is tasked with accomplishing it, and any notes.
- Goals should be neatly and clearly laid out, and when measureable, a plan for gathering that data should be in place.
- Strategy-Dependent Documents
- These should be any documents pertaining to your chosen retention strategies. You may have briefly mentioned some of the data in your action plan, but these should delve deeper.
- While your action plan will include the production of some materials, these should be anything you’ll need to show up-front. A more thorough and developed plan is easier to advocate for.
- Example: Talent Recruitment Advertising and Marketing Plan
- Example: Stay Interview and Exit Interview Questions
- Example: Incentive Program Details
- Example: Employee Retreat Day Proposal
- Budget Plan and Bottom Line Impact Outline
- Your employee retention and turnover rates can be used to calculate what turnover is costing you, and what improved retention could save. Here’s a handy post with all the information you’ll need to do those calculations.
- This section should prove that the cost of turnover exceeds the expenses associated with retention. Your plan requires investment, but it’s a worthy one.
- Timeline for Continual Analysis/Improvement
- This section should outline the timeline and practices for your employee retention strategy analysis.
Clear Cost/Benefit and Calculations
While it’s the human side of things that literally defines HR, few things are better for convincing upper management than cold hard numbers on the bottom line. Get your calculations as accurate as possible, and create estimates or possible savings or financial impacts that demonstrate the power of your retention strategy from a fiscal perspective.
Anticipate the Skeptics and Plan to Win Them Over
If you think that someone in your organization is skeptical of many employee retention methods, bring them in to help. They may have valuable experience or knowledge to share that’s influencing their opinion, and including them in the employee retention process may very well win them over.
Do Your Research
You’re here, so you clearly know what you’re doing on this front, but all the same, it’s never a bad idea to be able to throw down cold hard facts.
Here are a few things to have on hand:
- Industry retention and turnover rates (for comparison)
- Competitor retention and turnover rates (if available)
- Statistics on your chosen employee retention strategies
- Examples of successful implementation at like businesses
You can find much of that (and tons of other useful information) on The Ultimate Round-Up of Employee Retention Articles and Resources.
Make it clear that part of your employee retention plan involves continually re-evaluating your own successes and strategies. If something isn’t working, it won’t remain just the same old non-functional company policy. It’ll be assessed and changed until there is an improvement.
For gauging the success of employee retention, conduct surveys. Conduct one when you start your new employee retention plan, and run the same survey after a 6 month period. A comparison of the results should reveal your most impressive successes, what you might need to tweak, and any parts of your plan that you should consider scrapping.
Sidenote: make sure to address any issues or complaints found in the course of conducting the surveys. Distributing a survey, gathering information, and then doing nothing (from the employees perspective) about any problems can actually have a negative effect on morale and retention.
Retention might not be the sexiest human resources initiative out there, but the impact it can have on an organization is phenomenal. If you’ve been awakened to the retention or turnover problem at your company, it’s easy to be enthusiastic about change. Let that enthusiasm show, and encourage others to develop the same perspective. Every single retention strategy in the book is improved by widespread adoption of a retention-focused mindset.
Often in business, huge sales or product advancements are celebrated and shared, while less-obvious and longer-term achievements go under-appreciated. When you’ve done your 6 month and 1 year review and analysis, celebrate the successes you’ve achieved and share them*.
*With us! Email us at email@example.com to tell us about your business’s retention strategies and successes. We’d love to add your good ideas to the list of The 7 Best Retention Strategies We’ve Ever Seen.
Let’s recap the steps to a killer employee retention plan:
Dealing with employee retention and turnover can be daunting, but if you didn’t before, you’ve now got a solid place to start. Following those five simple steps will bring you to a solution, help you construct a plan, and give you actionable next steps to take.