The costs of employee turnover in IT have always been high. One study conducted by the Society for Human Resource Management (SHRM) found that replacing a salaried employee costs between six to nine months’ salary on average. In today’s environment, employee replacement costs, even as high as those just cited, might not come close to reflecting the “real” costs associated with losing key IT talent. For organizations looking to leverage new technologies or develop new products around high-demand skills in mobility, Internet of Things, security, analytics, social media, etc., retaining the crucial talent necessary to meet their goals is critical.
The dollar and opportunity costs associated with missed deadlines, reduced productivity, and diminished sales/revenues may even dwarf the out-of-pocket costs of replacing an employee. Companies are increasingly realizing the importance of employee retention. The results from one tracking study found the percentage of companies that are most concerned about employee retention has increased from under 30 percent in 2009 to nearly 60 percent every year over the last four years. For technology firms, that number is now 70 percent.
Given the data, it’s surprising to learn that North American companies spend nearly 50 times more on finding and hiring talent annually than on retaining their existing talent. One can’t help but wonder why such an enormous imbalance exists between recruiting expenditures compared to retention. For technology companies, part of the explanation probably lies in the mismatch between the rapidly expanding demands for skills in the emerging technologies mentioned above vis-à-vis the supply of such talent. If you need a Java developer today, you’re probably going to try to quickly hire one and not spend time training an existing employee. If successful, this approach might solve a short-term need, but in the absence of a well-conceived employee retention plan, the cycle will likely only be repeated the next time there’s a need for a specialized skill — and any assumption that such a need can be quickly filled might prove unrealistically optimistic.
browse employer branding insights, research and case studies Companies that have developed and implemented employee retention programs have been successful at significantly reducing their turnover rates — but it isn’t easy. Smaller firms and non-profits often find themselves at a disadvantage when it comes to retaining hard-to-find talent. Part of what makes developing effective employee retention plans so difficult is that there is no standard template. A tactic that might work for one firm might not for another — there is no “one-size-fits-all” approach.
All too often, companies opt for developing retention plans that focus on what they perceive their employees want — rather than on what they actually want. Plans that emphasize compensation, benefits, and advancement might work for some, but the workforce has changed, and it’s now necessary to incorporate those changes into fashioning retention plans. Characteristics of proven retention plans include the following elements:
- Accommodation of generational differences in the workforce. For example, Millennials and Boomers have vastly different attitudes toward the world of work — plans that fail to acknowledge and address these generational differences run the risk of implementing misdirected tactics.
- Feedback and input from employees foster higher levels of engagement.
- Flexibility and choices in rewards/compensation, career paths, and working arrangements.
- Transparency in corporate goals and employee compensation.
- Training of line managers on how to understand and adopt to the attitudes of the people who directly work for them.
The bottom line is that retaining valued employees is difficult and is likely to become even more so over the next few years. It’s imperative that organizations recognize and attempt to plan for an environment in which the demand for and availability of highly demanded talent is not in equilibrium. This will entail new approaches to getting work done, including new thinking about employee retention.