By Michele Shauf

Employee retention will become a critical business strategy over the next decade, as members of the baby-boom generation enter their retirement years and the labor pool shrinks. At the same time, the competitive advantage conferred by an experienced work force will be more important than ever. Studies show that companies with high employee retention rates also enjoy high customer satisfaction levels, consistent sales growth, positive morale, and deep institutional knowledge. Employee retention, in fact, is a highly predictive indicator of overall organizational health.

Estimates differ, but it's clear that the length of job tenure in the United States is declining and that the work force is becoming increasingly mobile. With just 18 to 36 months on the job, many employees decide to seek new positions, and for the most part, their transitions are lateral. They're not leaving for higher salaries, better benefits, stock options, or bonuses. Most are simply seeking a better work environment or a better manager.

Creating a positive work environment, developing leadership skills for management, and continually seeking employee feedback are among the keys to retaining your organization's top talent.

Working environments

Although almost everyone works for financial compensation, salary and wages are not the only factors that contribute to employee satisfaction. Considerable research suggests that how employees experience their work environment is a more decisive factor than compensation. Successful working environments often include the following factors:

• Equitable treatment of employees. Most human resources professionals are well attuned to the surprising speed with which employee-related information can flow through an organization. News about marked differences in salaries and assignments spreads particularly fast and creates a perception of unfairness. When employees perceive their work environment as unfair, they'll seek greater equity with another employer.
• Cultivating a sense of ownership. Employees can be profoundly motivated by personal investment in their work. Some employees are motivated by creative or intellectual challenges in their jobs. Other employees are inspired by the knowledge that they are contributing to something meaningful. Successful work environments encourage and support these personal investments by offering employees a sense of ownership in what they do.
• Meaningful opportunities for growth. Talented employees don't become that way by happenstance. Typically, they seek out and capitalize on opportunities to learn new skills, meet new challenges, and diversify their workplace experiences. In short, talented employees are not satisfied unless they are in a work environment that supports their continued growth. Professional development libraries, mentoring programs, and lunch-and-learn seminars are all affordable ways for your organization to demonstrate that it values employee growth.
• Acknowledgment and appreciation of good work. Most organizations have incentive plans that reward the achievements of outstanding employees who exceed targets or quotas. But too often organizations overlook the importance of acknowledging the consistent, everyday work of their most responsible employees. Opportunities for raises and promotions are certainly important incentives, but so is simple gratitude. For example, celebrating employee anniversaries with a day off, gift certificate, or savings bond is an easy, affordable way to say thanks.

Role of managers and supervisors

When employees make the difficult decision to leave their jobs, it's often because they've experienced dissatisfaction with their supervisors rather than dissatisfaction with the organization. The management styles and leadership ability of your supervisory staff therefore play an important role in employee retention.

For most employees, their work experience is shaped by their direct interactions with management. Employees who enjoy supportive, communicative relationships with their managers are much more likely to report high job satisfaction than employees who don't. But mutually pleasant relationships between employees and their managers aren't always enough to retain employees.

To actively retain employees, managers and supervisors must:

• Take time to identify each employee's unique attributes — both strengths and weaknesses — and delegate assignments accordingly.
• Set clear, stable, and achievable expectations for each employee.
• Communicate often with reporting staff.
• Establish — and adhere to — a regular meeting schedule.
• Provide regular performance feedback.
• Seek employee input and ideas.

Many times, managers are promoted to supervisory positions because they possess expertise in a particular operational area. As valuable as this expertise is, an effective manager also should possess strong leadership skills, with the ability to encourage, motivate, mentor, and coach others. Organizations that have a commitment to attracting and retaining talented employees know that ongoing leadership training for management is crucial.

Learning from employees

In developing an employee retention strategy, get help from the experts: your employees. Too often, organizations overlook this invaluable resource.

Many sophisticated survey tools are available to help human resources professionals assess morale and solicit suggestions for improving the work environment, but sometimes less formal approaches work just as well. For example, traditional suggestion boxes can be effective, if they're implemented properly. Whatever approach you take, be sure that:

• Senior management has clearly communicated to employees a genuine commitment to improving the work environment.
• Employee respondents are assured of anonymity.
• A mechanism for providing feedback is available to employees at all times, not just when a special assessment is being conducted.
• Information that you receive from employees is actually incorporated in the work environment — and employees see it in action.

As you gather suggestions from your staff, be sure to also schedule exit interviews with departing employees. Exit interviews can be conducted in writing, but in-person interviews will generate more useful information, particularly if they are well structured and end on a positive note.

During the first part of an exit interview conversation, query the employee for information about his or her decision to leave. For example, you could ask the following questions:

• What factors led you to accept a position with another company?
• Was your job with us what you expected?
• How would you evaluate your performance? Your manager? Our organization?

In the second part of the interview conversation, solicit suggestions from the employee for improving the work environment, such as, "If you were running this organization, what changes would you make?" By concluding exit interviews in this way, employees leave with the sense that their opinions were heard and valued.

Conclusion

Talented employees are the foundation of any healthy — and successful — organization. Creating the right environment, developing leadership skills among management team members, and gathering feedback from employees are the keys to retaining the existing talent in your organization.

About the author  Michele Shauf, Ph.D., is a business consultant specializing in organizational change, strategic communications, and training.