The average cost to replace an hourly worker making $10/hr is $3,328.
The average turnover rate in the hospitality industry is approximately 70%.
This means if you have 100 employees, 70 employees will turnover during the course of the year. If each employee replacement costs $3,328, the cost of hiring 70 employees would cost nearly $232,960.
This cost doesn’t even take into account the loss of morale and productivity of the rest of the team, caused by a high turnover rate in the organization.
Can your business afford this hefty cost?
Of course not.
If you want hundreds of thousands of “found” dollars in your business account annually, your company needs a means of reducing turnover.
It’s not enough to assume your employees are happy with their jobs. Even employees that seem “happy” might be dissatisfied—and you won’t know until it’s too late.
Thus, it’s critical that your business have a strong engagement and retention strategy. Without one, you not only lose money on high turnover, but you also aren’t retaining the top talent that your business needs to grow.
A retention strategy improves satisfaction, engagement, and productivity while minimizing turnover delays and costs.
How do you create a strong retention strategy?
Why do employees leave?
In order to understand what retention strategies will work for your company, you need to first understand where your employees are now. What does their current engagement look like?
The most common reasons employees leave include:
- The pay is too low.
- They don’t have adequate benefits.
- They don’t like the company culture or don’t believe in the mission.
- Their leaders don’t promote work-life balance and flexibility.
- They feel they aren’t contributing to the organization.
- They don’t see a clear plan for promotion.
- They’re overworked in terms of hours or tasks.
- There is a poor relationship with their supervisor.
- There was a negative experience that wasn’t handled well.
- They have better options elsewhere (because of the above reasons).
Take an honest dive into where your employees are today. What is their satisfaction level? How is that impacting their ability to do their work effectively?
You might want to take a survey of your employees. This helps you get real data without assumption. Ask questions about their engagement and satisfaction in various areas. Be as comprehensive as possible to ensure you see the full picture.
Use anonymous surveying so that your employees can be open and honest. The goal here is to get the truth about the employee environment so you can improve your engagement and retention. The data allows you to organize and strategize appropriately.
What should you consider when building a retention strategy?
“Compensation” includes salaries, bonuses, paid time off, benefits, and retirement plans.
Strong compensation is the basis for retention. If your compensation package isn’t competitive within your industry, your employees will search for other jobs.
Everyone wants to know his or her compensation is fair and reasonable. This tells them that the work they are doing is valuable to the company. If you pay low salaries, top people will leave to more competitive packages. This will leave only low performers in their wake.
The compensation package tells your employees how much they are worth to your business. Treat them with high value, and they’ll respond by providing high value.
The compensation level you pay is the talent you’ll retain.
Pro-tip: If possible, offer stock options to your employees. This can be a competitive edge in your compensation package. It also gives your employees a stake in their own productivity and results. It’s a natural system of rewarding high performance in the long-term.
Long-term retention begins the moment that the employee enters your company. Improper onboarding can make employees feel like worker bees. Strong onboarding, though, can make your new hires feel like they are instantly a part of the team.
Onboarding is when you teach new individuals how to be a part of your brand mission. You directly define what their role will look like. This is where your company culture is shaped and molded.
Think of onboarding as starting with a clean slate. What you teach your new hires will define the future of your culture.
Focus on onboarding as a key retention strategy if you notice a high turnover in the first six months to one year of hiring.
Learn the six steps of new hire training here.
But learning doesn’t stop after the first few weeks or months. You want to offer continuous opportunities for growth within your company. Top talent will never be content staying where they are. They want the possibility for advancement within your company.
Investing in learning and development is a much better use of funds than paying for turnover and hiring costs. Spend your budget cultivating top talent, and you’ll see a greater return on your investment. Employees will see that you’re investing in their future, and they’ll respond by investing in your business’s future in tandem.
Click to learn how to train employees for engagement and retention.
As part of the training process, you should encourage employees to set goals. This helps workers see their future within your company—as opposed to seeking a future elsewhere.
It’s okay if their goals aren’t related to your company. For example, your restaurant may hire a lot of college students who have other long-term goals unrelated to the food industry. That doesn’t mean you need to force them to have goals in your restaurant business.
Instead, your organization can back up their current goals. Maybe you give them the night off if they have a big test the next day, or the chefs quiz them every time they come back into the kitchen to pick up food.
This still shows that your business cares about their goals, which encourages longer retention and higher employee approval ratings.
This fosters teamwork around one another’s goals, which builds a strong company culture.
Keep in mind that you can have the strongest onboarding and training processes, but motivation has to be intrinsic. If an employee doesn’t truly believe in your brand mission, no amount of training can get them behind you.
That means that retention, at its foundation, has to start with hiring the right people. If you don’t hire people who believe in your brand or want to work for you, they’ll leave no matter what.
Your business is only as strong as its people. You need to bring on the right hires to build the right team. This will be the basis of retention, engagement, productivity, and growth.
Recruit and hire a wide pool of pre-qualified workers with Forge’s Share Talent feature.
One of the best forms of “compensation” is freedom and flexibility of hours. This gives employees control of their schedule and work-life balance. This control helps them feel they have greater power over their own lives, which leads to greater intrinsic motivation. This builds a community of passionate workers who want to come to work and push your business forward.
Flexibility also helps avoid work burnout, which is one of the key causes of turnover. Workers have the ability to take time off to be with their family, take care of their health, and pursue outside hobbies. This minimizes stress levels, improves engagement, and enhances productivity.
Flexibility today means not simply offering flexible schedules and unlimited vacation. Your company needs to embody flexibility. Your leaders need to believe in and promote the importance of work-life balance.
One of the strongest methods of retention is creating an in-house partner program. This works well to train new hires as well as to retain top talent.
Mentorships are a means of training, networking, and building a path of promotions.
Moreover, your business can use mentorships as an honor or reward. Select top talent to be supervisors or mentors; give the position as an acknowledgment based on performance and vision. This provides an opportunity for responsibility to top talent, which keeps top talent interested and engaged. This engagement can help retain both your key players and their mentees.
But don’t overwork your top talent with mentorships—or it could have the opposite effect.
Mentorships are one of the lowest cost (with high return) retention strategies.
8. Performance rewards
Mentorships can function as a “performance reward” for top talent, but there should be other methods of recognition as well.
Rewards can be monetary, like a promotion or bonus, but you also want to add a personal touch to recognition. Make sure you reward your employees in the way that they want to be rewarded.
For example, if you are in a very competitive environment, public recognition might be a strong incentive. If you have a creative environment, the ability to attend a conference or event might be an appropriate reward. If you have an hourly schedule, a reward could be extra paid time off.
You should also consider “small moments” of recognition. Encourage managers to recognize and appreciate employees for the good tasks they do. Praise should happen 70% of time, and the 30% of constructive criticism will pack a greater punch.
Learn more about unlocking employee engagement with Forge’s Star Ratings.
Create a team environment that celebrates one another. From birthdays to acing an exam to buying a house, you want to build a company culture that supports one another.
Creating a friendly company culture is a great way to keep workers around for longer. A job is more than tasks—it’s the people you’re surrounded by. If you can foster a strong community, your employees are more likely to be engaged and motivated.
(Be careful of crossing the boundary between coworkers and friends, though.)
Communication is key—for productivity, growth, and retention. You want more than an “open door” policy. Instead, implement an “open concept” policy. Your staff should always feel comfortable coming to you with ideas, questions, and concerns.
Connect with each staff member on a regular basis. You don’t want any issues—on the employee’s part or the manager’s part—to build up for the annual review. Ongoing communication helps catch any potential concerns early.
Make sure that you not only connect with staff but truly listen to them as well. If employees are making suggestions, look into appropriate ways to address those ideas. This shows that you are taking their thoughts into consideration, which helps earn their trust.
This boosts employee engagement because they feel they have more control over their work environment. You can address something before it bubbles into turnover. This communication also fosters a community of innovation and growth.
Whether the CEO or a dishwasher, all employees want to feel they have a say in their work environment. Workers will only stay with your company if they feel they play an important role in the business.
In fact, Deloitte found that companies that encourage inclusion and leadership development were:
- 8x more likely to coach towards improved performance
- 6x more competent at handling personnel problems
- 9x more likely to identify and build leaders
Inclusion leads to retention and growth.
How do you build this inclusion? Ideas include: incorporate employees in strategic meetings, open the floor for thoughts, create innovative workspaces, and use daily shift Star Ratings. You can even offer stock options to give workers a greater stake in the business’ success.
You’re spending too much on turnover.
It’s time to focus on retention and engagement to push your employees and business to the next level.
Forge’s one-stop technology boosts retention tenfold.
Become a Forge business now to start seeing improved retention rates in months.