colorful blocks on a desk

Building on a firm foundation: How effective retention strategies set the stage for success

Building on a firm foundation: How effective retention strategies set the stage for success

Synopsis
6 Minute Read

In a tight Canadian labour market, employee retention is more important now than ever. The largest barrier preventing most organizations from having better employee retention rates is an over-reliance on outdated methods and mindsets.

As you build your retention strategy, focus on more than just salary and compensation. Consider factors such as:

  • Education, advancement, and development
  • Social impact and purpose
  • Flexibility
  • Relationships with coworkers and managers
  • Organizational culture

Collaborate with your employees as you build and update your retention strategy — find out what’s important to them and what motivates them to stay at your organization.

In the midst of rising costs and economic turbulence, the last thing business owners want to see is dwindling productivity and profitability because of high employee turnover. And yet, Statistics Canada found that 61 percent of business owners say it will be harder to hire or retain staff in the coming year.

Some degree of turnover may be inevitable, but many of the factors that contribute to strong employee retention are within your control.

Organizations that proactively create their employee retention strategies are those best poised to handle the current labour shortage in Canada. Our firm has observed that our clients’ biggest need is, very often, to create or refine their talent retention plan that outlines how to retain and develop key people over the next five to ten years.

Why invest in employee retention?

The macro-economic trends that are driving the current labour shortage will not subside any time soon. Canada’s workforce is shrinking, the general population is aging, and most of the net additions to the working population happen through immigration.

Recruitment is time-consuming and expensive; in most cases, it’s vastly more expensive to recruit and train a new employee than to invest in retaining a current employee.

Even if you’re just thinking from an efficiency standpoint, employee retention is among the smartest investments you can make to foster a healthy and resilient business.

There are human costs to high turnover as well — lost experience and expertise, decreased morale, lower productivity, more superficial relationships with clients and coworkers. While these elements may be less visible on a financial statement, they still impact your bottom line.

Finally, you may have more options for succession and a smooth exit from business ownership if you have tenured employees to take your place. Employees who grow and develop under your mentorship will know your business, market, and customers, and have a better chance of preserving your business legacy.

Is your business ready for anything?

The next challenge for business leaders is never too far away. In an uncertain economic environment, resiliency is a key attribute for successful, sustainable businesses. Complete our assessment to learn where your business is strong and what areas you should prioritize.

What motivates employees to stay?

The largest barrier preventing most organizations from having better retention rates is an over-reliance on outdated methods and mindsets. Employees will stay if they have the proper incentives; business owners who choose to incentivize people the same way they did ten years ago, or even pre-COVID, will almost surely fall behind.

Each organization’s retention strategy must be unique to them, aligned with their culture and employee preferences. Consider how the following tools and incentives could be working for or against you.

Salary

Salary is often the first thing that jumps to mind when you start thinking about staff retention, and given the current inflation rates, rightfully so. A study conducted in 2021 revealed that the majority of Canadians, particularly young people, said they would be inclined to leave their job and take the same role elsewhere, if they got a 10 percent raise.

Another study by Gallup in 2022 finds that it takes more than a 20 percent pay raise to lure most employees away from a manager who engages them, and almost nothing to poach most disengaged workers.

To understand why so many employees feel that way, you need to look deeper than salary. Would your employees leave for a small raise if the culture at the new organization was more dysfunctional than yours? Would they make that trade if your organization offered more fulfilling work, positive relationships with coworkers, and opportunities to develop?

Rewarding high-performing employees with raises, if circumstances allow, is by no means a bad idea. But other pieces of your retention strategy (discussed below) may provide equal, or even greater, incentives to stay.

Benefits and rewards

Most employees understand that getting a small raise at another company doesn’t make financial sense if the benefits package is weaker. But benefits are more than just a financial commitment or a means of saving money for your employees. They hold a certain symbolic value as well.

The benefits you choose to offer reflect what you value as an organization. 

They show your people how well you understand their needs and wants — that you’re willing to “walk the walk” when it comes to their wellness and work-life integration.

When looking at the whole picture of compensation, also consider whether employee profit sharing plans (EPSPs) and employee share ownership plans (ESOPs) are a good fit for your organization. In many cases they’ve been shown to help create loyal teams that uphold business values and priorities.

Relationships

To work with a dysfunctional or toxic team for slightly higher pay is a trade-off many people, particularly young people, have decided they’re not willing to make. Relationships with coworkers and managers hold a lot of weight in an employee’s decision to stay or seek new pastures. The most common reason employees report for leaving companies is their relationship with their manager.

“The real fix (for improving life at work) is this simple: better leaders in the workplace. Managers need to be better listeners, coaches, and collaborators. Great managers help colleagues learn and grow, recognize their colleagues for doing great work, and make them truly feel cared about. In environments like this, workers thrive.”

- Jon Clifton, Gallup CEO

You can’t control whether your employees will become friends, but you can provide an environment that fosters team unity. Events, team building activities, and even how you choose to run a meeting can help your people build positive relationships at work, and by extension drive better retention rates.

The opposite is also true. If bullying, toxicity, or poor communication exist in the workplace — and if management is seen as complicit or lackadaisical in allowing it to continue — chances are your organization will see high turnover even if your salaries are the best in the industry.

Flexibility

The flexibility to work full- or part-time from home took centre stage during the pandemic, and for some businesses this remains a crucial part of their retention strategy. But it’s important to remember that flexibility means more than hybrid or remote work.

Today, the number of Canadian employers who offer some form of hybrid work arrangement is estimated around 61 percent, which means a large portion of Canadians still work in fields that require them to be on-site. What other forms of flexibility can you offer?

Flexibility is closely linked with variety and autonomy: The option to learn a new skill on the job or get assigned more tasks you enjoy.

On-site or not, your employees want to have a say in what their day-to-day job looks like.

Another element of flexibility is ensuring you have enough staffing capacity to allow your people to have flexible lifestyles outside of work. If your people are regularly pressured to forego their kid’s sports games or piano recitals because your staff is too lean, they won’t feel like you’re providing them flexibility.

Education, advancement, and development

Employees who get proper recognition for their work are much more likely to stay. Recognition can take many forms, and your employees may not all want to be recognized the same way.

Opportunities for continuous education and advancement at your organization will often trump a salary raise somewhere else. Be thoughtful about who you give promotions to, and when. Investing in the development of your people requires you to check in regularly and find out what their goals are, where they want to be in two or five years, and then actively work alongside them to help make that happen.

Social impact and purpose

Particularly for young people, your organization’s social consciousness will be a key factor that drives, or diminishes, employee loyalty.

Your employees want to know the positive impact their work is having, not just on your company’s bottom line, but on society in general. They want to know that the organizational leaders they work for share their same values. They want to feel comfortable bringing their full and authentic self to work every day.

Your retention strategy is inseparable from your ESG strategy. If you’re perceived as not valuing inclusiveness, sustainability, or supporting vulnerable people in your community, retaining key employees becomes much more difficult.

Creating your retention strategy

As you build or update your retention strategy, don’t adopt a top-down approach. Solicit the opinions and feedback of your people — find out what motivates them and drives their loyalty. Remember, your strategy should be uniquely yours and mesh with your organizational culture.

Don’t base your strategy on the instincts of your management team, what your competitors are doing, or what external studies suggest you should do. Instead, leverage reliable internal data and people analytics: turnover rates, retention rates, patterns on taking leave, and more. While your HR team should be able to provide the hard data, the best way to understand the story behind the numbers (the “why”) is asking the right questions in exit interviews and regular engagement surveys.

A third-party advisor can be a useful tool as you create your employee retention strategy, providing an unbiased assessment of what your business is doing well and where you have opportunities to improve. MNP’s Consulting team offers skilled HR experts that specialize in areas such as organizational culture, hiring strategy, workforce planning, and much more.

Contact us

To learn more, contact: 

Jaylene Cousins, CPHR, CTMP, Senior Manager, Consulting
[email protected]
306.531.5341

Mary Larson, MBA, ICD.D, Partner, Consulting
[email protected]
514.228.7905

Insights

  • May 16, 2024

    The critical role of the audit committee for internal audit oversight

    Unlock the full potential of internal audit and your audit committee. We explore the critical roles, responsibilities, and challenges to be aware of.

  • Confidence

    May 15, 2024

    What is the impact of financial crime and how can you reduce risks to your business?

    During Victims and Survivors of Crime Week 2024, discover the impacts of financial crime and the steps you can take to protect your business from threats.

  • Progress

    How SMARTPro Helps Enhance Practice Value

    Learn how to get your practice into a ready state for a sale with SMARTPro.