Employee retention term paper

One of the most important problems for any company is the problem of employee turnover and retention of successful workers. This problem is sometimes regarded as inevitable, because some rate of turnover within the company is going to exist anyway. But in fact the estimated turnover rates can be significantly lowered; moreover, financial losses caused by turnover are often underestimated.

For example, the Society for Human Resource Management (SHRM) has estimated the total cost of replacing one worker who gets $8 per hour in around $3500. Other research shows that for different levels of employees the effect from turnover and financial loss is different: for junior and unqualified workers this loss equals 30-50% of their annual salary (Phillips 273), while for middle level professional this loss is estimated as 150% of annual salary, and for highly qualified, unique and rare professionals such losses constitute up to 400% of their annual salary (and we also should take into account that salaries of such professionals are also rather high).

Therefore, in order to become and stay successful, any company, and Canco corp. in particular, needs to improve the process of employee retention and develop new strategies of attracting people to work for the company.

This essay is dedicated to analysis of key problems in employee retention, it is aimed to discuss current methods of retention and best strategies of it. Key idea of the essay is to elaborate recommendations for the managers to improve the efficiency of retention and decrease turnover.


1. Why employees leave

Though a great number of managers state that people leave because of low payment, in fact the size of salary (despite it is really important) never is the only reason for leaving. Statistics shows that there are several reasons that make the employees think of leaving the company. The main of them are (Branham 54):

  • Absence of opportunities for career growth
  • Low motivation and appreciation
  • Misfit of expectations concerning work and unexpected duties at work
  • Misfit of employee’s personality and work done
  • High stress level
  • Poor compensation package

Also, there is a large number of people who change work not because they dislike the job or the company, but because they are having stress due to their manager. The interaction between middle level managers and their subordinates needs close examination. It’s necessary to take into account that while one misfitting employee and related turnover costs the company around $3500 or more, one misfitting leader will appear to be many times more expensive.


2. Retention myths

Each company already has own culture of retaining people and motivating them. But there are several key myths about retention that are caused by the “old-style” management (Murphy and Burgio-Murphy 45) and should be avoided in modern conditions.

2.1. People leave for more money

This myth has been partly discussed above. This statement is mostly true for low-paid workers but for the middle and upper class of professionals reasons of money are not the only factor that influences their attitude to the company. So efficient retention strategy should not base on rise of salaries only.

2.2. Incentives are key factor

Different bonuses, presents, corporative parties, free dinners and other free things, surely, increase workers’ motivation, but it is, in fact, the so-called “cheap popularity”. Team spirit and satisfaction from work do not correlate with incentives; however, all these “free” things cost a lot of money which can be spend much more efficiently.

2.3. People avoid responsibility

In fact, people avoid working load, but if someone feels responsibility for the work and is aware of the results of work, he or she is much more likely to work better. Responsibility, however, should go together with possibilities of career growth and getting new skills.

2.4. Nowadays loyalty doesn’t work

Indeed, for lots of companies which regard their employees as simply “workforce”, the whole idea of loyalty is not going to work. But let us remember the Japanese management style with its attention to people and attitude to employees as common family. Turnover in such companies is much lower; thus, loyalty is a hard thing to achieve, but an important benefit in retention strategy.

2.5. Improving employee satisfaction is not important

It is a common mistake: managers think that as long as the employee is doing the job correctly and in given terms, everything is all right. But it is not true. Improving employees’ level of satisfaction, the company may achieve a surprising increase of productivity. For example, research (Dibble 102) has shown that 10% increase in education has resulted in better productivity than 10% increase in working hours. Besides, the satisfaction and attitude of employees directly influence the attitude of clients, and therefore, the company’s profit. In other words, it’s important to deal with intensive, not extensive, development.


3. Cultures of retention

The successful companies have elaborated their own retention cultures which can be classified into 4 groups (Kaye and Jordan-Evans 169).

3.1. The culture of choice

When employees are given freedom of choice regarding the methods of work, parts of work they should do, work benefits and the methods of control for their work ”“ the employees have higher motivation and can make their work environment more suitable. Choice is important in modern word, and it can be highly efficient as an element of retention strategy.

3.2. The culture of balance

Balance of work and personal life is very important, and companies that offer possibilities for establishing this balance, have a significant advantage over the companies who are not so flexible. For example, Canco corp. may use mandatory and optional vacations for workers, flexible working hours etc. as instruments of creating balance opportunities for the employees.

3.3. The culture of development

A company that doesn’t offer chances for career growth and development to the employees will never success, since career perspective is one of the most effective motivating factors, and the absence of career growth is one of the most depressing factors correspondingly.

There are lots of instruments that may be used to give workers space for development: free training, mentoring, planning job profiles and job roles, making interviews with people in order to find out whether they fit the position and are satisfied with the duties”¦ In this culture, communication is also important: expectations and interests of employees are a vital part that should define the company’s strategy.

3.4. The culture of care

In this culture, leadership and understanding between leaders and employees are highly important. Research shows that when workers feel they are cared for, they work much better than when they don’t feel that (Kaye and Jordan-Evans 155). Supervisors and line managers should be chosen carefully; the leaders need to have empathy for the workers and feel inspiration for the work ”“ then they are likely to expand the same attitude on the subordinates. Information aspects are also important: workers need to know the current state of affairs of the company and their own contribution to it. The sense of belonging easily links the employees into one team.


The analysis shows that employee retention is highly important and the strategy of it should be well thought-out. Moreover, the company needs to avoid common management mistakes concerning retention.

The recommendations for retention strategy are the following: for different classes of workers different approaches should be used. For low level workers, payment issues, benefits and bonuses are important, as well as conditions at the workplace. For medium class workers, development opportunities are important, training programs and balance of work and family. For high level professionals, the company needs to listen to the employee’s personal needs, improve efficiency of the employee’s life and work, encourage personal growth and give the feeling of care.

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