Investing in Employee engagement decreases attrition rates and saves costs on recruitment.
Consider this. The organisation you are working in has high attrition rates. To solve the problem, your company invests in a recruitment scheme which effectively manages to hire enough employees to fill in the vacant positions. Your organisation trains these new employees and the system works as per normal.
So, what’s the problem with high attrition rates?
The problem is that attrition is an expensive affair. It is estimated that the average cost-per-hire to fill a position is $4,129. So, if your turnover rate is at 20% and you have 100 employees, then your organization could be losing up to $82,580 to fill all those positions back.
In sum, a lot of money goes into recruiting new employees. It goes without saying, the higher your attrition rate, the more money you’re going to spend on recruitment. With lower attrition costs, the organization can invest less in training new employees, external recruiters and an internal recruitment team. Therefore, a logical solution seems clear: bring attrition down rates. If less people leave the company, so your company can invest less in recruitment.
But how are you going to bring attrition rates down? The first step is to understand what makes attrition rates so high in the first place. Think about it this way: if a bucket is leaking, you won’t solve the problem by refilling it with water because it will continue to leak. A more cost-effective and more long term solution would be to find the hole that is causing your bucket to leak and patch it up.
Likewise, If your organisation has high attrition rates, then the best solution is to identify the root problem and tackle that issue at its core. This leads to the next question:
What makes employees leave?
Here are just some reasons why your organisation may be experiencing high attrition rates:
- Poor Relationship with Managers
Numerous empirical studies have shown that people join companies, but leave managers. As the main interface between the employee and the company, it is estimated that more than 70% of the variation in engagement levels of employees can be attributed to their interactions with their direct boss.
An individual would be more reluctant to follow a manager they do not like or respect. If there is poor relations between a boss and employee, the employee would be less engaged and motivated to complete their tasks. Also, poor relations means that these employees would prefer to leave the company instead of communicating their concerns with his/her manager.
- Poor Relationship with Colleagues
Having poor relations with the people you see and have to work with on a daily basis can make any individual feel unhappy. A relationship with a co-worker could be personal or purely work-related. Nevertheless, both types of relationships can affect the employee’s mood and satisfaction with the workplace. If the mood and satisfaction levels are negatively affected, the employee might start longing to leave the workplace. .
- Working Environment:
Another important factor is workplace culture. This could include how friendly the employees are to each other and how rigid or relaxed the system is. Employees that hate their working environment are more likely to leave their company, no matter how great the pay is.
- Lack of recognition
Everyone wants to get credit and recognition for the work they have done. The lack of recognition may make an employee demotivated or lack confidence in his/her work. With the lack of recognition, the employees are less likely to find their work meaningful and beneficial. This would make them want to leave to a company that recognises their contributions to the company.
- Autocratic Leadership:
Typically, this style of leadership is accompanied or highly correlated with an ‘us vs them’ culture and a tall hierarchical structure. The employee may feel that the organizational structure is too imposing. The lack of freedom to innovate and use his/her own initiative would make them they don’t belong in the workplace. Without the sense of belonging, these employees are definitely more likely to submit that resignation letter.
- Imbalanced work to pay ratio
An individual would feel dissatisfied if they are not getting paid or rewarded fairly for the amount of work they are doing. On the flip side, an employee who values work-life balance or is overworked despite receiving a high pay might also leave because of overwhelming stress and pressure.
- Lack of support:
Another factor could be that the company has outdated technology or a lack of resources which hinders productivity. This makes the employee frustrated because it is more difficult to complete tasks. Or, perhaps there is a lack of non-work-related activities to motivate the employees.
- Lack of challenging and interesting work
Employees do not like being overloaded with work. That being said, they would be more likely to stay in an organisation that has interesting and challenging work for their own personal growth and learning. This way, the employees get intrinsic value out of their daily tasks, which makes them feel good about the work they do - and the organisation they work for.
- Clash of values
Sometimes, the values, mission and culture of the organisation is not in line with the personal values of the employees. The employee may disagree with the company’s practices and therefore feel conflicted with the work they want to do and the work they have to do. To remedy this, the employee may decide the best course of action for themselves is to leave the company.
You may have noticed that the factors which correlate with high attrition rates are all connected to one major theme: employee engagement. If employees are engaged, it means that they feel satisfied in the organisation. Hence, they are less likely to want to leave for something better.
However, you may be wondering: wait a minute, if we start investing in improving employee engagement, then -
How exactly are we saving costs?
The benefits of employee engagement might not show on the balance sheet just yet. However, over time, engaged employees will be more productive and efficient compared to disengaged employees. This decreases the loss in potential revenue, which is the product of the lack of productivity and output. On top of this, retaining employees means there is less cost in recruiting and training the new employees. Not to mention, there might be decreased productivity with high attrition rates, considering that new employees need time to get settled.
Therefore, considering all the hassle, it seems that investing in retention is much more rewarding than investing on recruitment.
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