Employee turnover is costly for companies, posing significant business risks. A new analysis by The Conference Board highlights the strong business case for investing in talent retention—not just to mitigate turnover costs but to enhance competitiveness as well.
“Making employee retention a staple of your talent strategy can provide a competitive edge—preserving institutional knowledge, cultivating a pipeline of future leaders, and increasing employee engagement. Doing so will save organizations a lot of the time and money they currently spend on attracting talent,” said Diana Scott, Leader of the Human Capital Center at The Conference Board.
The findings are based on an analysis of previous surveys and studies conducted by The Conference Board. The analysis consists of two reports: one on the importance of retention, and the other on how to achieve it. In addition, a turnover calculator was developed to demonstrate the true cost of turnover by company. The analysis found four key drivers of retention:
1—Workplace Flexibility
The more flexibility a workplace offers, the higher the retention rate.
- Employers who enforce on-site work policies have significantly more difficulty retaining employees than those who allow them to choose their work location.
- Nearly half of employers enforcing on-site work (45%) report retention challenges, compared to just 15% of those with flexible policies.
Among benefits valued by employees, workplace flexibility ranks second only to a competitive salary.
- When asked about the most important benefit beyond a competitive salary, employees’ top choice is workplace flexibility (65%), according to our recent research.
- A close second is incentive pay (64%), such as bonuses and commissions, followed by generous paid time off (60%).
The key to an effective hybrid work strategy: clear communication around in-office days.
- A successful hybrid strategy relies on strong communication about in-office days, the types of work best done in person, and ensuring employees come in knowing there will be others to collaborate with.
- In-office days can be used for activities such as group brainstorming and planning, whereas work that requires analysis and content generation lends itself to being done remotely.
2—Growth and Development
The potential for future growth strongly influences retention.
- As revealed by our research, a key differentiator between employees with a low intent to stay and those with a high intent to stay is the availability of growth opportunities.
- Over 50% of respondents said they would likely leave a job if they did not receive the development opportunities they needed.
Investing in an internal talent marketplace is a strategic catalyst for growth and development opportunities.
- Internal talent marketplaces provide all employees with a window into a long-term future at the organization.
- They help enable internal mobility, increase visibility into work and project opportunities, highlight learning and development opportunities, outline potential career paths, and provide the tools necessary to achieve growth.
3—Compensation and Benefits
Competitive and comprehensive reward packages ensure workers feel motivated and valued.
- These packages foster a sense of loyalty and commitment—and reduce the likelihood of employees seeking financial opportunities elsewhere.
Leaders are refining compensation strategies to offer clearer opportunities for financial growth.
- Human capital leaders plan to enhance targeted compensation efforts this year.
- These efforts include increasing promotions, internal pay equity, and skill-based raises.
An effective rewards program relies on transparency and regular reassessments, as well as tailored solutions.
- Pay transparency, equity, and iterative reassessments are key to remaining aligned with the market and with employee priorities. These practices also build trust and ensure fairness.
- For example, pay audits can help identify gender discrepancies within similar roles.
- Tailored benefits that meet diverse employee needs—such as health insurance, retirement plans, parental leave, childcare, or professional development—can help employees feel valued and supported.
4—Leadership and Culture
Leadership sets the tone: A culture of caring and value starts at the top.
- Leadership and culture are critical in shaping the relational factors that are most highly valued by workers.
- These factors include a sense of belonging, feeling valued by the manager and the organization, and having caring and trusting teammates.
A culture of care, value, and belonging can be nurtured through thoughtful programming.
- To put these principles into action, organizations can implement initiatives like:
- Onboarding programs that foster networking opportunities to help new employees engage with others and develop a sense of belonging.
- Well-being programs that link benefits to retention (e.g., sabbaticals earned after certain years).
- Stay interview programs between managers and their direct reports provide visibility into what motivates employees to stay—and helps identify any potential challenges.
“While compensation and job security are critical factors in retention, workers today are more focused on respect, meaningful work, career growth, flexibility, and alignment with organizational values. Employers who focus on these areas have happier employees and higher retention,” said Robin Erickson, PhD, Head of Human Capital Research at The Conference Board, who has studied retention for more than 20 years.