How Engagement Can Reduce Employee Turnover

Employee engagement has everything to do with happiness on the job. Your team members have to love what they do, and they have to really enjoy coming to work. To reduce employee turnover, you have to focus not just on employee satisfaction, but on true engagement. 

Employee retention is discussed a lot these days because the labor market for certain types of employees, especially tech and other high-skilled workers, remains competitive and attrition or turnover is costly for the organization in many ways. For example, the cost of replacement, lower workforce morale, training costs, lost productivity, to name a few. It's been proven through many studies that companies with low employee engagement have higher attrition rates, making the company more susceptible to unionization. In fact, here at IRI Consultants, we think of it as a domino effect that, in reverse, goes like this: improving employee engagement improves employee retention, which significantly improves the chances of staying union-free because it means you're doing something right. 

Employee turnover is natural, and people naturally move on in their careers, and that’s perfectly normal. The real problem is when high employee turnover starts to become the norm. Today, we’ll share a few stories, as well as give some statistics on why working to reduce employee turnover is so important. We’ll also share several actionable ways you can engage employees to keep employee retention high and turnover low.

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Attrition Vs. Turnover

Attrition refers to employees who voluntarily leave. Turnover encompasses people who voluntarily leave, and those involuntarily laid off or terminated. The interesting point to keep in mind is that even a high rate of involuntary terminations can be due to much more than someone proving to not have the right skills or not able to reach productivity standards. Managers may be doing a poor job of recruiting the right people. Still, it could also be due to low morale in the workforce leads people to let their productivity fall, which results in termination, or they become agitators who try to convince others the management doesn't care about them. 

So, though attrition and turnover are technically different in definition, the same workplace issues impact both. Catalyst assembled some statistics from various sources and for the United States and found:

  • Talent shortages will affect the financial and business sectors by as much as $435.7 billion by 2030
  • Total quit rate in 2019 was 27.9% and has steadily increased since 2015
  • 15% of the total turnover was voluntary
  • Half of all employees have thought about leaving their employer
  • Negative workplace culture contributes to turnover, and 75% of workers surveyed said management is responsible for setting the tone in the workplace
  • Estimated cost of voluntary turnover was $617 billion in 2018
  • The estimated cost of turnover due to workplace culture for the past five years is $223 billion

Why Are You Leaving?

The Work Institute's 2019 Retention Report offers insights gleaned from more than a quarter-million employee interviews as to why people leave their jobs or the factors influencing the employee retention rate. The report contains statistics that show employers directly influence whether employees stay or go. Following are a few of them:

  • 22 out of 100 employees left for career development
  • 11 out of 100 left for work-life balance
  • 11 out of 100 left for manager behavior 
  • 9 out of 100 left for compensation and benefits 
  • 8 out of 100 left for the well-being 
  • 8 out of 100 left due to job characteristics
  • 5 out of 100 left due to the work environment 

The Effects Of Employee Turnover

Have you been part of an organization where you would think there is a revolving door at the front entrance? You’ve seen new hires spend time training and learning job responsibilities and company culture. You’ve also seen them leave of their own volition or because their productivity is too low to support the company’s goals. More new employees are hired to fill the void they leave but have difficulty learning the skills, fitting the culture, or being productive enough to satisfy leaders. This cycle can have a whole host of negative effects.

This turnover cycle lowers morale – even for long-time employees. Companies that don’t consider the effect a lost employee has on their team is doomed to repeat the cycle. High turnover can create a culture of fear, where no one knows how safe their job is. This obviously affects their work, because they spend so much time worrying about their livelihood.

Worry and angst lead to stress and, often, burnout and a falling-out of proper health and wellness habits. Productivity suffers on all fronts, not to mention other health risk factors, such as higher health care premiums/expenses, risk insurance, and workers comp claims. Now your CFO is getting stressed!

Turnover drains time, energy, and other resources away from more productive activities, as recruiters and the HR team must replace lost team members. As HR professionals, your time and energy are needed for handling employee concerns, maintaining HR training/development, and workforce planning. It is more important for your HR team to make the most of their skillset, rather than spending time elsewhere. Employee turnover taxes the entire organization. Disengagement can become rampant – and if it goes on long enough, people lose all belief in the company’s “why.” What kind of stories are these disengaged and unhappy employees telling the marketplace about your company, your brand, and their decisions to buy their products or services?

Retention Directly Impacts Union Vulnerability

The factors influencing attrition or the employee retention rate are the same factors affecting your ability to stay union-free. Matching the factors one-by-one to identify how the causes of attrition are related to the causes of unionization yields the following:

  • Management biases influence employee career development and promotion opportunities, or there is a lack of job security
  • Employees are unhappy with work schedule demands or lack of scheduling flexibility
  • Managers lack practical leadership skills
  • Compensation schedule is not competitive, equitable or fairly administered, or benefits don't meet employee needs
  • The workplace is stressful and causing health issues 
  • Employees receive poor training, have limited resources, have job overload or are not a good fit for the job due to poor selection during the hiring process
  • The organizational culture is toxic, and/or the work environment is unsafe

Organizations that are claiming any of these reasons for attrition has left itself vulnerable to unions. Often, a business that can claim one factor can claim multiple factors, but poor leadership skills are woven through all the reasons. For example, a lack of effective leadership means managers don't know how to handle conflict to minimize employee stress or fail to do a good job of balancing workloads or figuring fair work schedules. An ineffective leader doesn't know how to develop positive employee relationships, which support a positive organizational culture. 

Reducing Turnover Through Employee Engagement

The Importance of Employee Engagement

There are so many people who are unhappy with their jobs. Additionally, their bosses and are totally disengaged. Even the employees that are not considered “actively disengaged” are still not fully invested in the outcome of their work. Taking notice of these employees that are neither fully invested in their development and growth at their place of work, nor “actively disengaged” and taking the initiative to work closely with them can bring them to the “actively engaged” end of the spectrum.

The truth is, the fault is not with the employees, it’s with the company’s leaders. This is absolutely not to say that those leaders are incompetent, but there are many that have trouble getting fully behind employee engagement programs. To reduce employee turnover, your leaders need to understand the importance of engagement. After all, the responsibility lies on your leaders. One of the key aspects of the popular notion of “extreme leadership” is stepping up, assuming responsibility, and being a leader, regardless of title.

PriceWaterhouseCoopers says that 9 out of 10 barriers to the success of these types of programs are people-related. It’s fairly well known by now that most people don’t quit their jobs, they quit their bosses. This is so easy to change, all your leaders need to understand is how to improve their skills, to support, motivate, and connect with employees.

There is often a misconception when it comes to the understanding that investing in employees provides a huge return on investment in the form of higher profits to the company. Companies with highly engaged workers were able to lower employee turnover by 31% according to research by Bersin. Replacing a lost employee is also far more costly than training and inspiring leaders and employees while they are on the payroll. Some replacement estimates are as high as double the initial salary of the employee.

Today, companies are finally realizing that employee satisfaction is simply not enough. Employees need to be engaged in order to perform well. Companies don’t have a choice but to train their leaders to begin appreciating team members. Better leaders reward employees and train them in an intentional effort to reduce turnover.

5 Ways to Reduce Turnover

5 Ways To Reduce Employee Turnover

Here are 5 great ideas to help you reduce employee turnover. As you undertake these efforts, be sure to measure your progress! It boils down to your leaders respecting their employees. Leaders need to treat employees fairly, and in the same way, they'd like to be treated.

  1. First, Provide Regular FeedbackEmployees crave feedback, so don’t be shy about giving it to them very frequently. They frequently are starved for feedback, especially millennial employees. Statistics show that 77% of employees are starved for recognition.
  2. Then, Collect Ideas – Show employees that you value their opinions and listen to them. Ask them to submit ideas that will help the company grow. This one is a win-win for the employer. They get great ideas, while also making employees feel good about themselves.
  3. Follow up by Investing In Them – Employees want to grow. Invest in their development, by offering to pay for courses that they take, and actively encourage them to learn more about the industry and their job. It will make them better, smarter workers.
  4. Create Team Building Activities – There are a lot of great team building activities that you can do (here are 10 great ideas) that you can do to bring everyone closer together, and to make sure that there is a social environment, where everyone gets along. Making employees feel connected to their coworkers is important for employee retention.
  5. Finally, Surprise Them – Rewards often mean more when it’s a surprise! Random acts of appreciation– even if it’s just a coffee shop gift card – go a long way.

Take Initiative to Prevent Employee Turnover

The Work Institute's survey also learned that 3 out of 4 employees who quit could have been retained. Looking at it from a different perspective, 77% of the reasons employees left were preventable. Attrition costs companies more than $600 billion annually. It gives a new perspective on the cost and ROI of initiatives like leadership training. It is reminiscent of the 1972 FRAM oil filter commercial's expression, "pay me now or pay me later, pay me you will." The implication is that, if you don't pay now, you will end up paying more later. 

Companies that fail to invest in leadership training resources, add equity to compensation schedules, address workplace safety issues, strive to create a positive organizational culture, or invest in resources to stay union-free will end up paying much more due to attrition and unionization. It's fair to say the cost of unionization is an ongoing financial burden on businesses during the length of the union contract. 

Investing in the right resources ranks high among employee retention strategies. A key takeaway is that you must invest resources to improve engagement, which leads to good things like lower attrition and lower risk of unions finding a means of leveraging employee dissatisfaction, something they are very good at doing. You must invest in leadership training and development, so they learn practical listening skillshow to receive and give feedback, how to manage change (a fact of life today), and more. Your managers need emotional intelligence and soft skills, as well as hard skills. Anyone can develop policy, but not everyone knows how to communicate the policy's reasons and how it benefits employees.

If you aren’t sure how to begin building better leaders that support your efforts to reduce employee turnover, we would love to be able to provide you with a solution to develop the skills your leaders need. At IRI Consultants, we feel strongly that online leadership training is an important way to not only develop your company’s leaders, but also to increase employee engagement, and therefore reduce employee turnover. 

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About the Author Walter Orechwa

Walter is Director of IRI's Digital Workplace Solutions Group, and the founder of A Better Leader. Walter provides expert advice, highly effective employee communication resources and ongoing learning opportunities for Human Resources and Labor Relations professionals.