The Value of Retaining Valued Employees

4 March 2015

It is difficult to overstate the importance of employee retention. Employers need to understand just how expensive it can be to replace an existing employee as well as the broader effects their leaving a company can have.

It is difficult to overstate the importance of employee retention. Employers need to understand just how expensive it can be to replace an existing employee as well as the broader effects their leaving a company can have.

First let us look at some of the more obvious costs of replacing an employee:

  • Before a new hire is even taken on the new position must be advertised and time spent interviewing prospective candidates, only one of whom will ultimately fill the role.
  • Once hired, the new employee needs to be trained. At this point they are likely to be an overall cost to the company rather than a net benefit. Even once they cease to be a cost it may be many years before they reach the skill level and productivity of the person they replace.
  • Any mistakes or errors they make during the training process will not only have a material cost but may also affect your brand value.

Broader Effects


Beyond the direct impact of having to hire new staff members there are a number of less obvious consequences to losing valued employees:

  • All of the time, energy and money that has gone into training the former employee is gone almost overnight. If they go to work for a competitor all of that experience and skill is instantly working against you rather than for you.
  • The burden of the former employee’s workload is now spread across remaining staff members which can create further animosity.
  • Even where the former employee left under the most amicable of circumstances, any departure is likely to raise questions as to why they left and why others should stay.


More to Retention than Raises

For many employers, employee retention translates to raises and so they dismiss it out of hand, particularly when there is little in the way of funds for salary increases. However this is not the case.

Many recent studies show that pay rises have diminishing returns when it comes to productivity. A person’s job occupies a large portion of their life so it is important that they find fulfilment while they are at work. Additional salary does not benefit in this regard as it only really has value outside of work hours.

Engagement is key to employee retention. The employee needs to be engaged with their job. For that to happen the employer must in turn be engaged with the employee. If you are waiting until employees decide to leave before you try and convince them to stay you have already left it too late. By the time employees reach that stage productivity will have dropped off and resentment will have increased.

HR naturally plays the primary role in employee retention and HR Software systems should always provide a diverse range of tools to assist HR staff in understanding how best to keep employees engaged. Tracking conversations between HR and staff regarding career development, contentment and workload is an important aspect of employee retention.

On a broader scale, analytics and data mining in HR software can illustrate companywide patterns of turnover and employee satisfaction. It can show where areas of turnover are higher, whether it is natural or problematic turnover and highlight potential areas of improvement for employee retention.

Ultimately employers have to be proactive in keeping employees engaged and minimising turnover. This requires innovative approaches to improving job satisfaction and utilising the tools available to understand the company’s relationship to its employees.