A high employee retention rate allows your company to remain competitive and can increase profitability. So how do you keep employees from quitting? Here, Ron Macklin discusses what he's noticed in his career about retaining employees.
Is your company struggling to keep employees on board? Do you spend a lot of your resources on recruiting and training without being able to maintain a steady employee base?
One of the indicators of success for a company is the ability to retain and recruit talented employees. When employees want to work for your company, they will show up fully, wanting to contribute and create.
Ron Macklin realized early in his engineering career he had a passion for leading teams. He went on to lead teams that set nine world records and won dozens of customer satisfaction awards. At Siemens, Ron led a support division with 350 employees that worked over 5 million hours without a lost-time injury and was voted “the best place to work in Houston” by the Houston Business Journal. Twice Ron has created a growth culture responsible for increasing profits by $20 million, and has led seven different groups from worst- to best-in-class.
Here, Ron discusses the three best practices a company can put in place to be able to retain employees:
Kara Large: What is the importance of employee retention for a company?
Ron Macklin: The first 6 months of any kind of employment in general is just acclimating. So you don't really get production out of them until about 6 months in. If you have a turnover, you're wasting half of your salary because you have to bring in someone new. And you have to go through half a year of acclimating.
Let's say you have 20 employees. One out of the 20 leaves each year. That costs you one half of your salary for a year because one of them turns over.
If you have a retention rate of 80%. That means that four out of those 20 people leave and you just basically pay 2 years salary for nothing. Your cost just went up around 10%, in a world where the cost structure is competitive. You're competing on cost versus price, and it makes a difference whether you're successful or not.
For a big company, making 6% profit is pretty good. For a smaller company, making around 18% to 20% profit is pretty good. But let's say you're making 20% profit, and you're at 80% retention. If you can go to 95% retention, you will go from 20% profit to 35% profit. It's almost doubling your profit, but through employee retention. You're so leveraged on how much profit you have when you make a shift like that. You don't have to invest in hiring more people. There's a huge amount of savings.
So why should you care? If you want your company to survive and then thrive you need to be able to keep people. It's a competitive world. Other companies will steal your people, and you don't want them to. My noticing is when you get to the place where you're treating employees so well, so that other offers don't look very good, two things happen. One, they don't leave. The other one is they bring their network in. That's the best place to be.
Ron Macklin: The first thing to look at is, why would somebody want to leave? They have an assessment that they can live a better life somewhere else. They're not leaving because of anything else other than that. There's a better life somewhere else. It can be the best job in the world. You could have the most wonderful work culture. But they have a story that there's a better life for them somewhere else. That's the only reason people leave.
Now, they may show up as angry or upset, or not respected. But that is how they share where they're at, which is they think there's a better life, someplace else.
Ron Macklin: What is it that would keep people at a company? Well, if there's five reasons, money is always number five. It's not the main reason to determine whether someone is going to stay or not. And if you want somebody to stay in your business, the first part starts with you. To keep employees you need to care about them, allow them to contribute, and invest in them.
Ron Macklin: The first action to take is to care about your employees. Care about them as humans. They have families outside of you. It could be they have kids, they have a spouse, they have a significant other. They have a family that they're providing for.
To care about them means that you want them to have a good life by their own standards, not by your standards.
This is the most important part of keeping employees at your company. If you don't care, they're going to leave.
Ron Macklin: Now, if you do care, if you choose to care, what would you do with somebody you care about? You'd value them. When they have something to say, you listen. We all want to contribute to the world. When you can contribute, you feel like you're a part of it. You're not being used. So listen to them, and let them contribute.
Let's say you have a choice of two things. What they want to do and what you want to do. Both get the same result. What do you do? What they want to do. Because you're going to get the same result. But now they contributed, and they feel like a part of the team.
When they go home, they're not going to go home and complain about going to work. They're going to come home and talk about the great success they had at work today and what they contributed.
One of the key elements to having somebody retained at your business is that you don't have a spouse who's saying, "Why do you keep going in there?" If someone is coming home and complaining about work, there will come a time when their spouse asks, "Why, don't you find a different job?" What you want is their spouse to be a cheerleader for how well they're doing at work.
So when you let them contribute, you're actually letting them go home and speak about their accomplishments to their family. The reason they're at work is to enable that family to be taken care of. If you have that family saying it's a really good place to be, they're never going to leave.
Ron Macklin: The next thing you can do for employee retention is invest in your employees. Investing in your employees is not paying them more money. Investing is giving them an opportunity to get education. Investing in them is giving them the opportunity to learn something new, to take on a new challenge, to run an experiment, to participate in a course.
You actually have to spend the money on people and get them in the courses to actually have them develop and create something new.
Ron Macklin: I've never had it work where we paid more money and an employee ending up staying long term. We don't pay them to keep them. We pay them because they've contributed.
If you ever get in a place where people are going out in the world and observe there's another company that will pay extra. That's a good thing. Because that means you're under paying. And people will leave, no matter how much they love their job. They will leave if they can get 40% more somewhere else. They need to take care of themselves and their families.
If this is the case, you need to look at your cost structure. Look at how much you charge other people, because it looks like inflation is outpacing what you're doing.
Is your business a place people are excited to show up at every day? Does your company culture have people lining up to work for you? Are people proud to be a part of your company?
You get people to want to work for your company and stay with you by caring about them, letting them contribute, and investing in them. The very last thing is paying them more. While it is important to make sure you are paying your employees for what they contribute, paying more is not going to make a difference if they don't feel like you care.
Whether you are already in a leadership role, or looking to influence a better environment in your workplace, we are here to help you create a company culture employees want to be a part of. You can schedule a consultation with one of our executive business coaches to learn more about how we can work with your company.