Enhance Retention – Drive Productivity

Yoko Spirig, Co-Founder & CEO at equity management platform Ledgy explores the relationship between retention and productivity.

A recent study by Remote found that employee turnover rates have increased by 8.7% since 2019, and are estimated to increase even more in 2023 with a predicted 35.6% turnover rate in the UK.

As a result, the ability to retain top talent has become a key priority for organisations. Research from Gallagher found that employee retention became the number one priority for both operations (51%) and HR (66%) this year.

The importance of employee retention has evolved far beyond keeping staffing costs low. It has become a key organisational strategy that drives productivity, innovation, and long-term business growth.

Driving productivity & cutting costs

Productivity is a growing issue for UK firms. According to the Office for National Statistics (ONS), in Q1 of 2023, preliminary estimates of UK output per hour worked were 0.6% below the same quarter a year ago, the weakest annual growth since 2013, excluding the coronavirus (COVID-19) pandemic.

Higher output leads to a strong economy. However, UK productivity has only grown by 0.4% annually since 2008, less than half the rate of the 25 richest OECD countries according to the Resolution Foundation.

Productivity and employee retention are closely linked. Employees with a longer tenure often develop a deep understanding of the company’s culture, values, and customer base. This knowledge enables them to contribute more meaningfully to strategic decision-making and innovation. They know how the company works and have likely built good relationships both internally and externally, improving teamwork and productivity.

By contrast, it can take up to eight months for new hires to reach full productivity and become clearly more efficient.

It’s also costly to replace employees. Centric HR estimates that it can cost, on average, between 6-9 months’ salary to replace an employee due to the recruitment costs, training expenses relating to the new employee, and salary.

By reducing staff turnover, firms can allocate these resources to other areas of the business, thereby boosting their financial performance.

Employee benefits for improved retention

To foster loyalty and commitment, firms can offer a range of employee benefits that go beyond pay rises and traditional reward schemes. One effective strategy is implementing comprehensive employee equity schemes.

When you give people the opportunity to earn a piece of their company, you change how they see their jobs. Giving equity to the team can help employees feel invested in their work and motivated to help their company succeed.

When employees have a personal interest in the firm’s performance, they are more motivated to contribute their best efforts and remain committed to their roles. A recent report indicated that 84% of employees with equity say their ownership makes a tangible difference to their motivation.

Career development and growth opportunities are also important. Firms can invest in training and development programs that empower employees to acquire new skills and take on greater responsibilities.

When employees see a clear path for advancement within the company, they are more likely to stay loyal over the long term, rather than seeking external opportunities for career growth.

Prioritising company culture

While offering attractive benefits is crucial, creating a culture of retention is equally as important. This begins with a leadership team that values and invests in its employees.

Companies are already catching on to the advantages of a strong, transparent culture in the workplace. A report by Heidrick & Struggles found that culture is the leading positive influence when boosting retention rates, with 83% of businesses taking action to strengthen their culture.

Regular communication, feedback and recognition can also help employees feel valued and connected to the company’s mission, encouraging staff to take part in their company’s progress.

When employees are included in conversations about company performance, goals and challenges they feel a sense of ownership and shared purpose – this is particularly important when discussing an employee’s share options and career development opportunities.

Creating a diverse and inclusive workplace is essential for employee retention. Employees who feel they belong, regardless of their background, are more likely to stay with a company.

A way forward for businesses and HR teams

In today’s competitive landscape, the benefits of retaining skilled and engaged employees extend far beyond the HR department, impacting productivity, innovation and business growth. By offering employee benefits such as equity schemes and growth opportunities, firms can create an environment that promotes loyalty and commitment.

Organisations must prioritise transparent communication, diversity and inclusion, and leadership that genuinely values its employees.

When employees feel a strong connection to the company’s mission and values, they are more likely to invest their time, effort, and talent for the long term. As firms continue to evolve, those that champion employee retention will secure a competitive advantage in the long run.

Find out more about retention and how to create a strategy that works for your business by joining our webinar this month: Retention: Holding on to the talent you need – register here: https://www.thehrworld.co.uk/hr-event/webinar/retention/