Employee Retention: Why do my Employees Keep Leaving

Understanding the Psychology behind what makes Employee’s Feel Fulfilled is the First Step to Keeping Them Around for the Long Haul.

I can’t tell you how many times that I have come across frustrated managers or business owners who aren’t able to put their finger on why their key employees keep walking out the door. They seem to have everything in place to attract good talent – above-market salaries, and a fantastic benefits package. But something is luring people to go elsewhere. It must be something missing from the compensation structure, right? Yeah, probably not.

I attended a local economic development meeting a few weeks back and ended up spending a lot of time with a very pleasant gentleman from a growing construction company. He, we’ll call him Jack, seemed to have a rather concerning problem on his hands – He was paying above-market salaries for his staff but he was having employee retention issues.

Jack told me how he had many long-term employees who were happy with their jobs and seemed grateful to be working in a time of economic turmoil, short-term contract work, and low job stability. But it was the new people that he kept bringing on, that were the issue – They weren’t staying for very long and there seemed to be a lack of company loyalty amongst them, in general. Jack talked about how he was thinking of implementing a new bonus structure, to supplement the regular pay, and how that should entice people to stay put.

This prompted a discussion about employee engagement and retention, what attracts employees to one company over another and what keeps them there. With many studies showing that the total cost of losing an employee can range from 1.5 to 2.0 times their annual salary (along with several other direct costs, such as recruitment, training, management time, loss in productivity, etc.), it has a significant impact on an organization’s bottom line.

In a study by Bersin by Deloitte, employee retention and engagement were listed as the #1 problem that companies today are facing – They are struggling with their culture because of a variety of factors. First, Millennials now make up the largest part of the workforce, and they demand flexibility, mobility, and accelerated development like never before. Second, every company’s employment brand is now “On the internet”, so if you have weak management or a poor working environment, people know about it. Third, companies have not kept up with their leadership development and performance management practices – so often management itself is not driving the right behaviours to make people want to stay.

Now Jack seemed genuinely concerned about his retention issues, but what he failed to realize was that they were obviously not related to compensation. If they were already paying above market and still had employees walking out the door, the problem was related to something other than money.

In order to understand what motivates an individual (And sorry if I digress into a psychology lesson), I refer to Abraham Maslow, and his Hierarchy of Needs. Maslow stated that people are motivated to achieve certain needs and that once one need is fulfilled, the person seeks to fulfill the next one, and so on, until ultimately striving to fulfill the need of self-actualization (self-fulfillment, personal growth and peak development).

Compensation plays a role in employee retention, but not as much as you might think – over-compensating people does not make up for a poor working environment. In the case of Jack, and his company, it appears that they are meeting the Basic and Safety Needs of their employees, so it is safe to surmise that the retention issues lie within one of the top three levels of employee needs (Social, Esteem, or Self-Actualization).

Non-compensable factors that are bigger than ever now are job fit, career opportunities, and work environment – basically a company’s culture. Maybe, like Jack, you think your company’s cultural values are self-evident, but unclear values can lead to drift and eventually to counterproductive behaviour. The last thing an organization wants is a culture that is clouded by uncertainty.

Making changes in management behaviour, can influence an employee’s decision whether to stay or leave a job. Things that can go a long way in improving employee motivation are providing constructive feedback on a regular basis, recognition for a job well done, sharing information with employees and clearly communicating the work to be done, making sure employees have the training they need to do their work, and getting employee input before making decisions that affect their work.

It’s interesting to note that most of these changes cost nothing to implement and the impact can be significant.

Is your organization suffering from a retention challenge? Are your employees feeling “disconnected” or perhaps unrewarded? If the answer is yes, perhaps your leadership needs to be thinking about retention in a more strategic way and an organization and culture analysis is in order.

The most successful organizations are those that have a common sense of core values, mission, vision, and respect for their employees. They spend time and money into building a highly engaging environment, and they put the effort into ensuring that they hire the right people for the job and invest in their future.

Andrea MacLean is the Managing Director for HR Strategic Partners, an HR Outsourcing and Leadership Coaching company.

You can follow HR Strategic Partners on Twitter at @HRSP_CA, or check out their website at www.hrstrategicpartners.ca.