Reducing the Cost of Employee Turnover by Managing for Retention

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Reducing the Cost of Employee Turnover by Managing for Retention

Employee turnover and the retention of valued employees are major problems facing business in the U.S. The average turnover rate is hovering at 15%. The costs associated with that turnover can be high - generally 25 percent of the individual's annual salary. Unemployment in the United States is at a 24-year low. Employee loyalty is down. Never before has it been so critical to focus on strategies for keeping good employees. However finding a solution to high turnover is not easy.

One major incentive for retaining employees is the cost of turnover. Keeping good employees increases profits. Employee turnover is a direct drain on the bottom line. Another incentive for employee retention is the high cost of recruiting and replacing valued employees. In a low-unemployment market, employees are increasingly difficult to find. Many employers are trying to reduce employee turnover with quick fixes, gimmicks, games, and prizes that just don't work. Organizations are finding that the solutions are more about how you treat employees than tangible items that are given to them. Also, the concept of employee loyalty diminished as employees realized that doing a good job and being loyal to an employer no longer mattered. True solutions require a change in management's attitudes and behaviors toward employees. The ultimate strategy to reduce the costs of turnover and high recruitment is to manage for retention.

A "wait and see" approach will not work. Developing a proactive strategy to keeping key employees is essential. Whether it means identifying employees that contribute the most to the bottom line and developing programs that will satisfy them, providing, com...

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...o do and what they are best at and enjoy doing. Employers that make a significant percentage of the compensation package variable will benefit both the organization and the employee by encouraging high-caliber performance. Few companies truly differentiate between better than average and less than average performers when salary increases are given out.


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Oliver, Judith (1998). High staff turnover- find out why your staff are leaving. Management Today, p.84.

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