Employee retention is a serious concern for the modern organization. In the past, employers had no need to focus on retention; workers competed for scarce employment resources. Now that the labor market is tight, employers are the competitors, and the competition is fierce. Key personnel are actively pursued by corporate headhunters, which has resulted in high employee turnover in some sectors. Savvy employers respond to the problem of employee retention by creating corporate cultures where employees are valued and empowered.
Employers are devising strategies to retain employees because of the high cost of losing them. Companies lose an average of $1 million for every 10 professional and managerial employees who leave (Fitz-Enz, 1997, p. 1). This estimate is based on an analysis of potential customer retention costs, marketing and sales spending to attract new customers, and employee-based costs. Customer retention costs must be factored in because customers who become irritated with the annoyance of dealing with inexperienced front-line personnel simply take their business elsewhere: "It takes a new sales person two to three years to reach the same level of sales as the worker's predecessor" (Fitz-Enz, 1997, p. 1). Customers lost because of dissatisfaction over service must be replaced or the company loses market share. Losing employees and finding new ones represents a substantial cost to the organization. Factors include the processing and interviewing costs of termination, the cost of hiring and training new personnel, the financial effect of lost production for vacant positions, and the productivity loss for the learning curve of inexperienced workers. Once a company takes all these factors into account, most conclude that it is more cost-efficient to retain existing employees than to hire new ones.
Unfortunately, current economic conditions have most employers in a bind. Unemployment is at its lowest point i...