How to Use Employee Retention Models to Reduce Turnover

There are many reasons an employee leaves a job. Some are involuntary due to a company’s changing needs, while others are voluntary, like seeking an improvement in the work environment or compensation. In an increasingly competitive labor market, it becomes essential that businesses focus on lowering turnover rates and improve employee retention strategies.

In recent years, the U.S. has seen an increase in voluntary turnover rates. In 2022, voluntary turnover or quitting employees accounted for 70% of all U.S. job separations. High employee turnover means increased costs, product failure, and decreased employee morale. 

To combat increasing amounts of turnover, it is crucial that an organization’s HR leaders evaluate its practices and implements an employee retention strategy. 

What is Employee Retention?

In order to understand employee retention, you must understand employee turnover. According to Forbes, employee turnover is the “percentage of employees that leave your organization during a given period of time.” The turnover rate is typically evaluated quarterly or annually. 

Employee retention is an organization’s ability to prevent employee turnover due to involuntary, but particularly, voluntary reasons. For a company to succeed, they must be able to retain their talent. Employee turnover is costly in terms of time, money, and productivity. Therefore, for a company to thrive, it must be able to keep its employees. 

Employee retention is directly related to the programs and employee retention strategies that human resources develops to help reduce the risk of employee turnover and improve their retention rate. While people leave their jobs for various reasons, employee retention’s focus is to improve instances of voluntary turnover due to avoidable factors like a lack of healthy company culture. 

Why Employee Retention Matters

While an employee leaving is a natural occurrence, making efforts to avoid turnover due to changeable circumstances is beneficial for many reasons: 

1. Reduces spending and increases revenue: Training an employee takes time and money. If an employee leaves quickly, these are wasted costs for the company. It is estimated that the cost to replace an employee ranges from 90% to 200% of the worker’s salary based on experience level and tenure. Employee retention efforts can be an effective way to reduce costs.
2. Increase productivity: When an employee leaves and is replaced by someone new, it takes time for the new person to reach the same productivity level as the person prior. As the new employee learns the routines and structures, it will slow them down, along with those who are either taking on a more significant workload or helping them out.
3. Improved company culture: A natural consequence of a focus on reducing employee turnover is an enhanced employee experience. The efforts can create more engaged staff members and boost morale.
4. More experienced employees: If employees are not leaving, then they grow with the company. This means companies will spend less time on training and more time on improving skills.
5. Improved customer experience: As employees stay, there will be fewer opportunities for a new hire to make mistakes and less staffing shortages. Each of these will bring greater satisfaction to how customers experience the company. 

5 Employee Retention Models to Help Combat Employee Turnover

Researchers create retention models to understand what brings employee satisfaction. Because the majority of these models are rooted in psychology, Human resources can use them to better understand the actions and motivations of their employees. 

As HR researches and understands the various models, they can better create retention efforts that reduce employee turnover. While there are many theories and models aimed at explaining job satisfaction, here are five of the most widely used:

1. Motivation-Hygiene Theory

In the 1960s, Frederick Herzberg’s published “The Motivation-Hygiene Concept and Problems of Manpower.” In this study, he argues that two mutually exclusive sets of factors cause job satisfaction or dissatisfaction. According to Herzberg, the two factors that lead to job satisfaction are motivators and hygiene factors. 

Motivation Factors

Motivators enhance job satisfaction and are intrinsic to the job. They can improve job satisfaction because they accomplish an employee’s need for growth and allow for self-actualization.  

Six of these motivational factors are:

1. Advancement: The ability an employee has to improve their position or status within the company. 
2. The work: The type and difficulty level of the work, directly impacting the employee’s opinion of their job.
3. Growth potential: In the same vein as advancement and type of work, the opportunity for an employee to experience growth and improvement in skills, techniques, professional knowledge, and promotion will improve satisfaction. 
4. Responsibility: Individuals will feel more satisfied when given more responsibility and decision-making power. 
5. Recognition: Job satisfaction improves when an employee is regularly given praise or rewards for what they accomplish for the organization instead of criticism.
6. Achievement: The extent to which an employee can feel like they can complete tasks, solve problems, or see positive results. 

Hygiene Factors

Herzberg and his colleagues compare hygiene factors to “medical hygiene…[which] operates to remove health hazards from the environment.” These factors aim to remove any unpleasantness that may occur outside of the job. 

These factors include:

1. Interpersonal relations
2. Salary
3. Company policies and administration
4. Supervision
5. Working conditions

The main difference between hygiene factors and motivators is that hygiene factors are intended to reduce dissatisfaction rather than provide satisfaction.

Read More: How to Create an Employee Retention Policy

How to Use Herzberg’s Two-Factor Theory to Develop Retention Strategies

The two-factor model can be used to identify ways in which an organization can improve. By evaluating how the company is doing at motivating and providing “hazards” to the work culture, the company can improve the overall satisfaction of its employees. 

Additionally, this model provides a categorization of employees that can determine which employees may be at risk of leaving. From this evaluation, an organization will be able to increase retention efforts for them to retain their talent.  

The 4 categories of employees are:

• High hygiene and high motivation: An employee who is intrinsically motivated to work while also having few complaints. 
• High hygiene and low motivation: The employee has few complaints but is not highly motivated to do their job.
• Low hygiene and high motivation: Employee enjoys what they do but are dissatisfied with the working environment. 
• Low hygiene and low motivation: The employee has many complaints and is unmotivated.

Read More: Do you Need an Employee Retention Bonus?

2. Hierarchy of Needs

Abraham Maslow developed the hierarchy of needs as a way of organizing human needs. In this model, Maslow argues that in order to progress, a person’s most basic needs must be met. The hierarchy of needs from most basic to most advanced are: 

• Physiological: air, water, food, shelter, sleep, clothing
• Safety: personal security, resources, health
• Love and belonging: friendship, intimacy, sense of connection
• Esteem: respect, self-esteem, status, freedom
• Self-actualization: the desire to become the most one can be

Researchers categorized these needs into “deficiency needs,” or those concerned with survival, and “growth needs,” or needs associated with realizing an individual’s full potential.

The main difference between these categories is that deficiency needs are characterized by the lack of something. As the condition worsens, the individual will do what it takes to fulfill the need. In comparison, someone’s growth needs are achieved through intellectual and creative behaviors that allow them to grow.

How Maslow’s Hierarchy of Needs Can Help with Retaining Employees

By understanding the basic hierarchy of how individuals develop intrinsic motivation, you can identify where needs are unmet. This theory will help with the assessment of employees. 

For example, suppose someone is not having their basic physiological needs met, like having enough money for rent, food, or medical care, due to a deficient salary and benefits. In that case, they will eventually seek a position to meet their needs so they can live more comfortably. 

Furthermore, if someone finds themselves in an environment where they feel they do not belong and lack connection, they will find it challenging to engage in the environment. Lack of connection can then be the cause for decreased creative thinking, problem-solving, and productivity. 

According to this theory, as a company focuses on meeting the needs of its employees, then they will find greater satisfaction and more intrinsic motivation. These needs can be assessed quickly through an anonymous employee surveys to collect employee feedback or conduct stay interviews. 

3. Human Motivation Theory

David McClelland built off of Maslow’s work and focused on three needs he believed to be intrinsic motivators. These are achievement, power, and affiliation.  He thought that while everyone has all three traits, everyone has one that is more dominant. 

The theory believes that the dominant motivator impacts an individual’s characteristics as it becomes the driver of action. The characteristics associated with each dominant motivator are as follows:

Achievement Motivator Characteristics

• Needs to set and accomplish challenging goals
• Willing to take calculated risks
• Appreciates feedback
• Prefers to work alone

Power Motivator Characteristics

• Wants control and influence
• Enjoys competition and winning
• Seeks for status and recognition

Affiliation Motivator Characteristics 

• Seeks to belong to a group
• Wants to be liked
• Prefers collaboration over competition
• Doesn’t like uncertainty

Human Motivation Theory’s Impact on Employee Retention

The main impact this theory has in improving an employee retention rate is to gain an understanding of employee motivation. As an organization understands what an individual prioritizes, they will have the tools to increase their job satisfaction. 

Therefore, as you evaluate the motivators, you will know which employees work best on teams, which are goal-oriented, and which would like healthy competition. As a company adapts, its teams will be more naturally motivated and work with more engagement. 

4. Social Exchange Theory

According to Tulane University School of Social Work, “social exchange theory is a concept based on the notion that a relationship between two people is created through a process of cost-benefit analysis.” 

When applying this to employee retention, researchers argue that rules and obligations are negotiated between employees and employers. These terms of exchange are physical, like pay, and social, like trust. In this theory, when an employer breaches the terms, that is when an employee becomes dissatisfied with the work. 

Additionally, this model focuses on how strong social connections will impact satisfaction and influence someone’s desire to remain with an organization.

How to Apply Social Exchange Theory to Employee Retention

Applying this theory suggests that an easy way to avoid employees leaving is to ensure human resources and management are upholding the terms of the agreement. It will take open communication with employees on what they expect from their jobs to accomplish this. It is essential to focus not only on the logistical side of things like pay, benefits, and advancement opportunities but also on the social aspects the employee wishes to see from the organization. These include:

• Honesty
• Trust
• Appreciation
• Understanding
• Connection

As there is clear communication of what both parties are exchanging by working together, there can be a greater opportunity for job satisfaction for the employee as they reach their optimal work life balance. It also will improve the quality work for the employer.

5. Job Embeddedness Theory

The basis of this theory is that the more an employee is embedded within their organization, the more likely they are to stay. It expands the thinking that turnover is simply related to job satisfaction or dissatisfaction. Instead, it argues that more factors are at play, including how intertwined they are in the organization. 

Job Embeddedness Theory addresses three aspects of the employee-organization relationship:

• Links: The connections with colleagues, management, and job activities
• Fit: How well-suited the employee is for their position.
• Sacrifice: How difficult it would be to leave and how much they’d lose if they left.

According to this theory, the more links they have in and out of their organization, the more likely they are to stay engaged with the organization.

Job Embeddedness Application to Employee Retention Strategies

Applying this theory is straightforward: simply develop efforts to enhance these aspects for their employees. Improving someone’s connection with the organization can be done by:

• Hiring people who feel suited for the job
• Adapt workloads to meet the needs of the employee
• Meet with your people to discuss needs and career goals.
• Encourage work relationships through team-building activities and celebrations
• Ensure your employees’ work and efforts are recognized through workplace appreciation
• Communicating openly to build trust
• Create an inclusive environment through DEI efforts

One Easy Retention Strategy to Help with Employee Turnover

Every employee retention model is different and focuses on unique aspects of human psychology concerning job satisfaction and dissatisfaction. The various viewpoints may make it overwhelming to know what are the best ways to retain employees. However, no matter the model(s) you decide to base your retention efforts on, there is one simple retention strategy you can use to improve employee experience: workplace appreciation.

At the core of each of the models previously discussed is a person’s desire to feel valued and connected. Developing a culture of workplace appreciation can significantly impact connections and build loyalty to your organization. 

Read more: Does Workplace Appreciation Actually Work

Kudoboard Can Help with Workplace Appreciation Efforts

Kudoboard is an online appreciation tool that replaces a group greeting card passed around and signed. Whether for special occasions, events, or shoutouts– Kudoboard is an easy way to improve engagement as teammates celebrate each other’s personal and professional wins.

Ways to use a Kudoboard for workplace appreciation: 

• As a place to collect peer-to-peer shout-outs
• 1 to 1 Recognition during a performance review
• To celebrate a promotion or successful finish of a project
• To celebrate an award

Conclusion

Every employee retention model comes with their unique limitations; however, understanding the various theories of what causes someone to be satisfied or dissatisfied with their job can guide leadership in improving employee retention.

Through efforts to improve company culture, develop workplace appreciation, and seek out ways to meet the needs of employees, your employees will find greater satisfaction. Your efforts will not go unnoticed, and the organization may see lower turnover rates.