What You’re Not Doing About Employee Retention May Be Costing You

Nonprofits need to get serious about employee retention. That’s the takeaway message from an important recent study by Nonprofit HR.

The 2019 Talent Retention Practices Survey chronicles staff retention strategies and practices in over 350 organizations from across the US (and some from Canada). Respondents were evenly distributed across the spectrum from small employers (fewer than 10 employees) to large (more than 500 employees), and across budget sizes, from less than $1 million to more than $40 million.

The report is one of the first (if not the first) to identify and quantify the challenges around employee retention in nonprofits.

What’s the problem, and why should you care?

A lot of nonprofits have an “extraction mentality” when it comes to staffing their organization. They’re talent “miners” rather than talent “developers.” They think it’s still the good old days when there was a seemingly inexhaustible supply of talent clamoring to come to work for their nonprofit.

That employment picture has changed. And we need to catch up, fast.

With today’s low rate of unemployment (3.6% at this writing), the employment market is tight and getting tighter.

So, it’s no surprise that research by Gallup found that, across the board, more than half of employees (51%) are actively looking for a new job or watching for job openings. And over a third (35%) have changed jobs in the last three years.

The competition is seeking out your talented employees. And the best candidates that you’re trying to recruit can be increasingly choosey about where they invest their energies and stake their careers.

Moreover, with sites like GlassDoor, Great Place To Work, Indeed, Comparably, Careerbliss, Vault, The Job Crowd, Kununu, and others, it’s becoming increasingly easier for candidates to get “the skinny” on a prospective employer from people in the know – your employees.

And employee turnover is costing you – big time. The Society for Human Resource Management (SHRM) reports that it costs somewhere between six to nine months of salary to replace an employee. And those costs escalate as you move up the management chain. By some estimates, it costs more than 200% of salary to replace a senior executive.

And since most employee retention strategies are simple and cheap – they cost little or nothing – the ROI on employee retention becomes a no-brainer. But you need data and a plan.

What drives voluntary turnover?

According to the Retention Practices survey participants, here are the top drivers of voluntary employee turnover:

  • Lack of opportunity for upward mobility or career growth (59.7%)
  • Compensation and benefits (47.6%)
  • Dissatisfaction or disengagement with current organization or culture (26.2%)
  • Family situation (24.6%)
  • Career change (23.6%)
  • Dissatisfaction or disengagement with current leadership (21.5%)

By the way, did you notice that four of those six factors are within the organization’s control?

What’s an employee retention strategy?

It’s a formal strategy focused on retaining an organization’s employees, especially its best performers. It should be based on solid data about what influences employee retention in your workforce, and it should be designed to address (improve) the areas that are driving your employee turnover. Typically, that’s culture (workplace climate), people (leaders and supervisors), and career-enhancing opportunities (developmental and promotion opportunities).

If you don’t have a formal employee retention strategy, you’re not alone.

Only one in five (19%) of the Retention Practices survey participants reported having a formal retention strategy. Fortunately, putting one in place isn’t complicated or expensive. Read on!

What influences employee retention the most?

According to the report, it’s culture, leadership, and career quality.

  • Culture (the values and beliefs that shape organizational and individual behavior) helps in attracting and retaining talent, drives employee engagement, impacts employee satisfaction, and affects individual and organizational performance.
  • Leadership. The report outlines eight ways that leaders can adversely affect employee retention:
    • Leaders who aren’t credible
    • Leaders who fail to communicate a clear vision
    • Leaders who don’t own their responsibility as culture creators
    • Leaders who are inflexible or rigid
    • Leaders who don’t understand the importance of diversity
    • Leaders who fail to balance between taking and managing risk
    • Leaders who alienate peers
    • Leaders who are tone-deaf
  • Career quality is about providing your employees with opportunities to have career-enriching experiences. Specifically, opportunities to improve their soft skills, continuously learn, and grow professionally.

What are the key strategies for improving employee retention?

While the majority of respondents track turnover rates (97.6%) and tenure (65.9%), few track the cost of turnover (16.5%) or the turnover rate among their high performers (27.1%). And only about two in five (41.2%) track first-year resignation rates. These latter numbers suggest that nonprofits are ill-prepared to calculate the ROI of their retention efforts.

Here are the top five retention tactics from the report:

  • Exit interviews (88.4%)
  • Effective onboarding (65.3%)
  • Engagement surveys (58.4%)
  • Recognition programs (55.5%)
  • Culture or climate surveys (37.0%) 

Here’s an easy, high-payoff retention practice

One of the promising retention practices mentioned in the report and used by almost a third (30.1%) of the survey respondents is retention or “stay” interviews. In contrast to exit interviews, which are useful for learning why exiting employees are leaving the organization, retention interviews focus on why people stay and what would retain them. A retention interview poses questions such as:

  1. What factors cause you to enjoy your current job and work situation?
  2. How much have these factors contributed to you staying at the organization as long as you have?
  3. What reason do you give others for your decision to work and stay at our organization?
  4. Do you feel that you’re currently doing the “best work of your life”?
  5. Do you feel that your work makes a difference in the organization? Do you feel that your work makes a difference externally to the world?

Obviously, the big difference between “exit” and “stay” interviews is rather than asking employees why they’re leaving – when you can’t do a thing about it – you’re asking employees why they’re staying and what would increase the likelihood of them staying – when you can actually do something about it. (Nonprofit HR has a free guide, “15 Questions to Ask in a Retention Interview,” available at nonprofithr.com/15questions/.)

When it comes to the implementation of retention interviews, you don’t necessarily have to interview every employee. These can be periodic, random interviews where you’re gathering data to improve employee retention and the quality of work life for your employees.

What CEOs need to know and do

Know where your organization stands when it comes to retention: What’s your turnover rate, particularly among your high performers and first-year employees? Where are your turnover hotspots? What’s driving those hot spots? And more important, what can you do about them?

  • Recognize, whether you’re aware of it or not, that your nonprofit has a reputation as an employer. If you don’t have a listing on GlassDoor or one of the other employee rating sites, that won’t last long. Word on the street is rapidly being replaced by word on the web. And it’s not just prospective employees who are checking out those sites, but prospective donors as well.
  • Recognize that the three main drivers of employee retention – culture, leadership, and career quality – are things under your direct control. What changes do you need to make to your leadership style or the culture to improve employee retention? How can you enhance your employees’ career quality?
  • Consider implementing “skip level” conversations. These are periodic conversations with front-line employees about how you can make your nonprofit a great place to work and what your people need, specifically, to stick around as your employees.
  • Use programs like TINYpulse (tinypulse.com) to gather direct, unfiltered information about how your employees are feeling about your organization and their jobs and what’s enhancing or hindering their performance.

What boards need to know and do

While your chief executive is your board’s only employee, your board is responsible for the stewardship of the entire organization. That means making sure that your organization’s culture and practices foster the development of the organization’s human and reputational assets. Implementing that is your executive’s responsibility. But holding your CEO accountable is your job. Ensuring your nonprofit is a stellar place to work starts with you.

What HR managers need to know and do

As the organization’s HR professional, you’re probably keenly aware of your organization’s turnover rates and what’s influencing employee retention. Your CEO has a bazillion things coming at them, and employee retention, while terribly important, is just one of those many things. Here’s what you can do to elevate the importance of employee retention and get the resources and leadership attention you need to do something about it:

  • Gather good data about the factors that are influencing your organization’s retention rates. Continue using the retention strategies outlined above, including exit interviews, but consider incorporating retention or “stay” interviews if you’re not doing that already.
  • Make a compelling case to your CEO to help address the areas for improvement. Is it culture? Leadership practices? Or career quality? Help your CEO understand the ROI and the fact that strategies for improving employee retention are usually free or cheap. And those that do cost have a big payoff.
  • Help the CEO understand that creating a great place to work can be one of their enduring leadership legacies.

It doesn’t matter if your nonprofit’s mission is to inspire, support, educate, or transform people, a place or a thing. It’s people – your people – who are the power behind that mission. Are you doing everything you can to improve their effectiveness? Are you doing all you can do to prove that your people have invested their careers and their life energies in the right organization, the right mission, and the right leader?