Employee Retention: A Best Bet for Better Performance in Any Economy

Employee retention programs drive better bottom line performance in growing and uncertain economies. In fact, engaging and rewarding employees with financial or non-financial awards are retention actions that can no longer be overlooked or dismissed as trivial. Today there is convincing evidence that these actions make a difference, according to VIST Insurance.

“The costs of replacing talented and effective employees far outstrip the expense of retaining and developing new employees,” said David Lacey, vice president of Human Resource Business Development at VIST Insurance, which is based in Wyomissing, Pa. “Recruiting and training new employees acts as a drag on earnings from three to six months until the new employee is performing at the expected level or better. However, retained and highly motivated employees contribute to the company at a higher, more consistent and sustained level of performance.”

Studies estimate that it takes roughly six months for a new professional hire to be trained and performing at or above the level of a prior employee. The timeframe does drop to three months for C-level positions because more is expected from the executive level. Both time frames take into account learning a new position’s responsibilities, the structure and the culture of the department and organization, as well as meeting clients and positioning a company’s products/services in relation to its peer competitors.

For example, over the course of a year, if a small company loses three long-time employees, each making $50,000 in cash compensation, it will cost the company a minimum of $75,000 to prepare the new hires to be effective and productive.

“Even if they are replaced at the same salary, it will take an estimated six months for the new employees to be up to speed and as productive as the prior employees. Also, the company will incur the additional expense of advertising the positions, recruiting fees, and training,” said Lacey. Quite often these expenses are sizable, even as much as $75,000.

But for a fraction of that, the company could have had an Employee Retention and Development Program in place and seen most of that $75,000 added to the bottom line as an increment to net operating profit), says Lacey.

Employees who feel valued are more engaged in the company and perform at higher levels than disengaged employees.

“Without an engaged workforce, a company is merely going through the motions instead of being a top performer,” said Lacey. “It’s a challenge to persuade a company and its management to retain and engage their employees, and then become a top performer in its business sector.”