The Huge ROI of Strategic Employee Retention

Keep and motivate your best employees – without breaking the bank – by providing strategic long-term benefits

When you think of the value inherent in your organization, you most likely first think of physical, financial, and intellectual assets. But in most cases, your company’s number one asset remains its human capital. Without highly-skilled leaders, an organization won’t just flounder, it will fail. With them, it can soar to new financial heights on the back of a quality team.

Compounding the issue is a competitive labor market; for many executives, the thought of switching jobs can be tempting, especially considering that all an individual needs is a smartphone to receive job offers from nearly anywhere in the world. In today’s economy, keeping highly-skilled workers satisfied isn’t just a good HR practice – it’s a requirement.

Salaries are typically the greatest expense for most organizations, begging the question: How do you incentivize workers without simply writing budget-busting checks?

Step one: Identify your key players

In order to retain an organization’s most valuable employees, you first need to grasp who they are. Some are simple to identify and simple to quantify, such as your top sales manager or an IT worker who possesses unique knowledge. Others provide less easily-quantifiable benefits, such as a key creative manager who routinely produces exceptional work and pleases clients. Nevertheless, the first step to crafting a retention plan is carefully evaluating who is essential to the success of your company.

Once they have been identified, the organization can design specific benefits that entice them to remain for the long haul.

To stand out, offer employees things they might not simply get in a paycheck

You need to give them something of value they won’t be likely to find elsewhere. Ask yourself what can you provide (other than a straight pay raise) that they would not want to give up if they left. And emphasizing the right incentives not only helps convince your employees to stay, it boosts their productivity.

Some creative examples:

• Specialized benefit plans such as specialized pension or tax-exempt savings plan for key, high-income employees.

• Organizations can also offer employees free auxiliary services as part of their benefits packages, such as tax and retirement planning or executive coaching.

• Flexible work arrangements are extremely valuable for many workers, such as those raising children or caring for elderly relatives.

• In some instances, it may be sufficient to agree to send a key group of employees to attractive training and professional development events, such as conferences.

The costs of an employee leaving are high

When an employee leaves, it can often mean much more than a simple hiccup in operations. One study by the Center for American Progress found that the loss of an average employee costs a company one-fifth of the employee’s annual salary. This overall estimate reflects average workers; in contrast, “very highly paid jobs and those at the senior or executive levels tend to have disproportionately high turnover costs as a percentage of salary (up to 213 percent).”

Key relationships and friendships are severed, both within and outside of the organization. In certain circumstances, entire functions may be disrupted until a replacement is found.

In many businesses, the departure of a major executive often brings with it the departure of major clients, vendors, and even other employees. Despite a recent increase in the use of non-compete agreements forbidding employees to ‘take’ clients with them when they leave, many still do. In some cases, one high-level employee can effectively ‘transfer’ thousands or even millions of dollars of client contracts from one company to the next – and that can be a devastating loss, especially for a firm with a small, centralized client base.

In addition to the external financial losses, losing a key employee may cause massive operational inefficiencies, especially if the individual served in an essential technical role. Operations could slow down for months until a workaround is developed or the employee is replaced. If you don’t already have a replacement in mind, you will have to pay employee search firms or spend resources conducting a search yourself. And even when you do make the hire, you’ll have to weather inefficiency while training them, especially for challenging roles.

Retain your best employees without breaking your budget

Because losing key workers can be so damaging, it’s worth it to preemptively invest in your employees. Make them feel valued and motivated to work even harder for your firm.

Fortunately, there are several ways to incentivize employees without simply cutting an immediate check. These have the added benefit of causing employees to think long-term and invest themselves in the success of your company. Some examples:

• Vesting provisions: Create a long-term incentive plan for the employee tied to specific financial targets for the firm. The closer you can align these targets with the employee’s responsibilities, the better the outcome will be for both parties.

• Life insurance: A company can pay an employee’s premiums on a life insurance policy with deferred cash benefit that can only be accessed after a certain period of time.

• Deferred compensation plan: A compensation plan can be directly tied to major life events, such as retirement or kids going to college. If an employee leaves, they’ll get an agreed-upon (and much smaller) lump sum instead of sticking to the predetermined plan.

If you’re unsure how to craft benefits that work, consult with an expert

Knowing how to properly implement an employee benefits plan can be tough, especially if you’re on a tight budget. But you shouldn’t have to develop a plan alone. Karp HR Solutions has designed creative strategies for a range of companies across multiple industries that boost employee retention without destroying the bottom line.

To learn more about implementing employee benefit plans that can be tailored to any employee, contact us today for a free consultation.