How to Retain Employees: A Three Step Strategy

by Daniel Hannig

Have you ever heard of the so-called “War for Talents”? Even if you haven’t heard of the concept itself, chances are that you or your company are already knee-deep in this raging battle of recruitment and retention. But what is everyone fighting over? Simply put, it’s the business world’s scarcest and most valuable resource: experienced and engaged employees. In this article we offer you nothing less than the secret weapon that will give you the decisive advantage over other companies when it comes to competing in this arena. The metaphorical one ring to rule them all, the elder wand of HR: Employee retention.

Fact is, one in four companies is already struggling to fill vacant positions. Job profiles are becoming more complex by the minute and as a result, highly qualified employees have never been more in demand than today. Unfortunately, top talent does not grow on trees – quite the opposite actually, they are very short in supply.

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Against this background, an important question arises for every modern day company:

How do I increase employee retention?

“Train your employees well enough so they can leave, treat them well enough so they don’t want to” – Richard Branson

Only 4% of companies have a defined and comprehensive strategy for internal employee retention. A unique retention strategy is therefore an outstanding competitive advantage. Use our guideline to develop your own plan for increasing employee retention at your organization. We will start with analyzing the status quo and then move on to developing your strategy.

Employee Retention: Analysis of the Current Situation

Retention strategies are only effective when they are tailored to the organizational context. In other words, the right retention strategy can vary greatly for each company, depending on the industry, size and corporate environment. Before you can set the right goals and put measures in place, you need to conduct two analyses: a situation analysis and a context analysis.

Mapping out the Situation

Before you can develop your strategy you need to get a full picture of the current situation your company is in, what the strengths and weaknesses are. Based on this you will also be able to draft a possible future scenario for your company. Assessing your risks is a key component of this analysis. Key risks that relate to employee retention are:

  • Departure risk: How high is the risk that employees whose departure is to be avoided will nevertheless leave the company?
  • Bottleneck risk: How high is the risk that vacancies cannot be filled with suitable talent? Useful indicators to measure this risk are the trainee hiring rate or the average duration of vacancies.
  • Adjustment risk: How high is the probability that the actual qualifications of the employees do not correspond to the necessary/required ones? To describe this risk, you can use the number of training days per employee/manager or the company’s qualification structure.

Survey of Key Figures

A situational analysis is only as good as the information on which it is based. It is impossible to collect everything. Now, how do you get the data you need? Regularly recorded company data such as turnover, profit, salaries serve as a good starting point. In addition, employee opinions or the general atmosphere of the workplace are good indicators too.Employee surveys are a useful method for collecting this information. Through the use of surveys, you can start an ongoing dialogue with your employees and gather insights into various factors relating to employee retention such as employee happiness or job satisfaction.

Tip: Too much focus is often set on the factors that are responsible for employees leaving the company. It is however equally important that you pay attention to what keeps the employees in your company. Those are the factors that you have to maintain and enhance when planning your retention strategy.

How to Analyze the Context

With a context analysis you try to gain a full understanding of your company’s environment: your competitors, the labor market conditions you face, and other external factors that potentially influence employees. With a context analysis you try to gain a full understanding of your company’s environment: your competitors, the labor market conditions you face, and other external factors that potentially influence employees. The systemic collection of data on your company’s context over longer time periods will help you to better identify trends and develop forecasts.

Employee Retention – Definition

Knowing how to retain your employees often depends on knowing where you stand. Industry benchmarks are a good place to start. Ask yourself: Where do my numbers meet industry benchmarks, where do we over- or underperform compared to others in our industry? Using the insights gained from your analyses and industry benchmarking, you can now start setting some targets for your retention strategy. It is critical that your targets are clearly defined. As an example, “reducing the fluctuation rate” is not a clear target. It is far too comprehensive and vague for anyone to be able to work with in practice.

It is more effective to break down the big picture into small, easily measurable parts.

Example: Your employee surveys show that the staff is dissatisfied with the feedback received from their superiors. The results show that the employees are particularly dissatisfied with the frequency of the feedback received and the clarity of the personal goals formulated. In order to change how employees feel about this, the measured factors can be strategically targeted by initiatives such as manager training on how to give better 1-on-1s. These initiatives can be implemented as a part of a retention strategy to impact these factors specifically.

In order for the retention strategy to unfold its full potential, setting clear and measurable targets is the key.

Formulating Your Strategy

Now that you have set your targets, you can develop your retention strategy. The formulation of the retention strategy can now begin. In very few cases, a single measure will lead to achieving the envisioned success. In order to strengthen employee retention in the long term, a holistic approach is required. This means that you will have to create many different measures that, in sum, will help you reach your goal.

What are employee retention measures?

A fruit basket, company outings, programs for education and training? -There is a broad array of employee retention measures available. There are many case studies of successful companies on retention measures. For more specific tips, however, have a look at our blog article.

How to Decide Which Measures Make Sense

For an action to be considered qualified and appropriate, it should, as far as possible, comply with all of the following points:

  • Sustainability: the measure should have a longlasting effect
  • Effectiveness: the measure impacts the targets set
  • Economic efficiency: the measure must be affordable and the investment in the measure should be worth its returns

Individual measures must be examined and weighed against each other in light of these three criteria. An example: If your surveys show that your employees do not feel valued, the introduction of company cars for all employees would be a possible measure. This could make employees feel more valued, which means that the measure is effective. However, the measure is economically inefficient, because most companies do not have the necessary budget for this. This measure may also not be very sustainable – initially employees may feel more valued when receiving a car, but the effect may wear off leaving you with the same results as before. In conclusion, each measure needs to be critically evaluated before being included into your strategy.

In addition to current practices, a certain amount of creativity is of course also required in order to best absorb and take into account each company’s individuality. This combination of tried and tested methods and innovation usually results in a unique mix of measures and instruments.

Organizational Anchoring

The early involvement and sensitization of your managers and employees for this topic and its implementation is also very important. Inform all areas of your company, clarify ambiguities and communicate the ‘what’ and above all the ‘why’. In this way you can ensure that all departments are working together.

Employee Retention In a Nutshell

At the end of the day, the war for talent will not be decided by chucking a ring into a fiery abyss or by destroying a Horcrux in front of an enchanted castle. It is much more structured and (luckily) simpler than that. In order to win the war for talent and successfully prepare for a shortage of skilled workers, a solid employee retention strategy should be an integral part of your company’s vision. Your tools are your carefully selected measures, your flexible approach, and above all, your satisfied and motivated employees. Happy employees are a side effect of your efforts. Retention management not only not only enables you to provide a better workplace(and thus prevents your staff from moving away), it also gives your employees a sense of appreciation. And that pays off.


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