People & Leadership

Why employee engagement is key to boosting retention

Want to improve employee retention rates of your business? Rethink your employment engagement strategies. We cover how you can do that.

UK businesses are desperately trying to stop the Great Resignation from impacting their staff retention rates.

Over the past 12 months, record numbers of people have quit their jobs. Traditional tactics for retaining workers are not cutting it.

One way to improve the retention rates of your business is to rethink your employment engagement strategies.

In this article, we look at how you can do that and share some advice on what you can put into place for your business.

Here’s what we cover:

Why businesses are struggling to retain their employees

Several post-pandemic factors are impacting employee retention and businesses must act fast to keep their talent and avoid a drain on productivity.

A study by recruiter Robert Walters blamed the Great Resignation on a “disengagement crisis”, with 60% of professionals feeling disconnected from their work.

High staff turnover, fewer people coming into the workplace, and a decline in team socials were the main drivers.

Kate Ablett, head of people at commercial cleaning firm Mrs Buckét, says the biggest challenge small businesses face with employee retention is increased competition for talent, something that also drives higher pay increases.

“You are competing with bigger companies that workers perceive as safer options or that offer more benefits,” she says. “Also the cost of living crisis has made small pay improvements more significant.”

Hannah Rathgeber, director, talent and culture at consultant matching platform Comatch, says another major challenge is that, post-pandemic, people are increasingly quitting to look for more meaningful work, and more individuality and flexibility.

And that’s in addition to those employers who are allowing their people to reduce their work hours so they have more leisure time, even if it means taking a pay cut.

“The opportunities to work from home mean candidates are spoilt for choice in terms of job and employer,” she says.

“This creates strong labour market competition and means employers need to create more generous and flexible offers.”

Mark Royal, senior partner and employee engagement specialist at consultant Korn Ferry, says you must continually re-win your employees’ commitment in this environment.

“Loss of talent has significant financial implications,” he says. “Soft costs associated with lost knowledge, disrupted customer relationships, and strain on remaining employees can be equally significant.”

How employee engagement can help

While pay rises are tried and tested by employers to retain employees, they don’t always provide the desired result.

Robert Walters CEO Toby Fowlston says: “Despite many employers giving record mid-year pay increases to increase engagement and retention, this is a short-term remedy.

“They need to focus on wider employee engagement, which should no longer be considered a ‘nice to have’ or an intangible HR concept.

“Engagement drives motivation, commitment and productivity, and employers need to appreciate its impact on the bottom line.”

In addition, Korn Ferry research shows that confidence in an employer’s ability to help staff achieve career goals is a critical determinant of retention. Advancement opportunities are often more constrained in smaller and flatter companies, says Mark.

And coming back to employee engagement, you can develop compelling employee value propositions in other ways.

For example, you can allow your employees to be close to the action, develop new skills in multiple roles, and have an outsize impact on customers and company performance.

This in turn can help you build the emotional commitment your people have to the business.

What is employee engagement and why is it important?

Employee engagement encompasses all the reasons people stay with your business and give extra effort.

Engagement approaches enhance your company’s culture and how it feels to work there.

Engaged employees feel involved, passionate, and committed to their work. This boosts retention, productivity and profitability. But a lack of engagement can decrease initiative, participation and output – and increase absenteeism.

Mark Royal says: “Many firms focus on enhancing engagement because, faced with economic and competitive challenges, they need to do more with less.

“This makes employees’ extra effort increasingly important.”

Scott Ward, partner of people, performance and development at consultant Ayming UK, says the Great Resignation is not just a short-term impact of the pandemic but the result of longer-term changes in employee expectations.

To address it, firms must show how their goals correlate with staff needs as part of their staff engagement approach.

He adds: “Without this step, the Great Resignation is likely to continue.

“Work satisfaction, feeling valued and understanding how employees contribute to collective ambitions have all become concerns. Engagement also comes from leadership having the intelligence, self-awareness and empathy to support collective success.”

How to measure and track employee engagement

The goals of your employee engagement efforts may include to increase retention, employee satisfaction and net promoter scores (eNPS), and reduce absenteeism and leavers. You can track these using employee data from:

  • Onboarding surveys
  • Yearly engagement studies
  • Shorter more frequent pulse surveys
  • Feedback from appraisals
  • Exit surveys.

Some elements of engagement are based on emotion, so your plans will likely include a mix of qualitative and quantitative measurements.

Scott says it’s also vital to include a feedback loop that communicates employees’ thoughts as this shows you’re listening, and it builds trust.

Kate recommends that you track and measure engagement through a wide range of regular mechanisms, including formal surveys, and informal catch-ups and socials.

She recommends making formal measurements, such as eNPS scores, action points on meeting agendas, including board meetings.

Hannah says Comatch’s engagement survey is guided by ‘Say’, ‘Stay’ and ‘Strive’.

She says: “Say is what employees say about us. Stay is how loyal and comfortable they feel in the company.

“Strive refers to the atmosphere in the company – such as how meaningful the work is, and how inspiring and motivating managers are. The survey is essential in retaining employees because it shows where the firm needs to improve.”

Another measure could be how much employees enjoy getting involved beyond work, such as organising smaller after-work events, says Hannah.

If they do this often, it speaks volumes for your team culture. Comatch also monitors attrition rate to add to its picture of engagement.

Cloud HR software can be extremely useful in gathering and monitor these metrics.

For example, it can be used to create employee engagement goals and benchmarks, pulse surveys, and engagement surveys.

And you can use it to set up one-to-one meetings with employees, easily share updates with your people, calculate your eNPS, and survey new starters and leavers as part of your onboarding and offboarding processes.

Mark also recommends surveying employees on how long they envision remaining with the company.

He says: “Our research shows this data effectively predicts turnover risks, so firms can develop forecasts.

“They can also use survey data to identify causes of turnover, by comparing work experiences of more and less committed employees or by linking survey responses to subsequent turnover information to build predictive models.”

How to act on the results

You need such objective, quantitative data to help you act quickly and decisively.

Hannah says the biggest mistake is to delay monitoring and action.

“Never stop putting your ear to the ground, especially regarding employees and their well-being,” she says. “We’ve found we must increasingly address employees’ needs individually and flexibly – for example, in whether they want to work in the office, hybrid, remote or even remotely abroad.

“We also find team-building events help retention. After two years of pandemic, it’s important people meet in person and share experiences regularly.”

Kate agrees on the importance of doing something and keeping it up – even if it’s a small thing. “Be timely as there’s nothing worse than asking for feedback then doing nothing with it,” she says.

“It is equally important to say why you can’t do something, providing you have considered it.”

Mark says surveys can be effective even before questionnaires are completed as they allow organisations to show they are focusing on employee experiences.

So it’s critical to communicate the results of surveys or other engagement initiatives, and how you want to change.

What works – the evidence

Mark says no single solution will work for every company or even department. However, Korn Ferry research has identified that, to drive long-term employee retention, most employees need:

  • Confidence that the organisation is well-led and headed in the right direction
  • Positive opportunities to learn and grow
  • To feel valued and see a balance between rewards and contribution
  • Control and influence that matches their responsibilities
  • Efficient work processes and support from co-workers.

Research by consultant McKinsey shows most employees who left their job in the past six months didn’t feel valued by their organisation or manager, or they lacked a sense of belonging. Many said they wanted to work with people who trust and care for each other.

But employers’ responses are missing the mark.

Most leaders want employees to be in the workplace four to five days a week to strengthen connectivity, said McKinsey. But returning to the office will not necessarily solve their problems. It could even backfire.

Employee attitudes have shifted. Rather than forcing a return to the workplace, employers need to give their people reasons to want to come in.

For example, one technology company addressed what employees missed most about in-person interactions while letting them do individual work from home.

In the workplace, it combined the best of working from home and in person – creating soft spaces, such as a coffee shop with a casual ambience, and other communal areas.

McKinsey says many ways to address engagement are social and should emphasise growth, engagement, and well-being equally. It recommends calling team members spontaneously to check how they are, creating more opportunities to collaborate, and giving each team member time to contribute.

Your business should also nurture a human-centred employee experience that personalises relationships and avoids transactions.

Up to 55% of employee engagement is driven by non-financial recognition, said McKinsey.

Employees receive many engagement tactics as transactional, commonplace, and impersonal. For example, giving everyone a one-off bonus risks hitting all the wrong notes.

Instead, you should find out what matters most to your teams, personalise recognition and appreciation, and provide opportunities to build relationships.

These elements create a sticky, relational experience, compared to a more fleeting, mercenary one.

Employees with a positive experience in these areas were eight times more likely to stay and four times more committed than those with a negative experience, said McKinsey.

Boosting long-term engagement

While many small businesses acknowledge the disengagement crisis that has hit them since the pandemic, they frequently fail to address the problem.

They need to create a more holistic experience; promote flexibility, work-life balance, and emotional resilience; and offer easy ways for employees to seek help.

Employee engagement has become indispensable to your long-term competitive advantage.

But with supportive leaders building meaningful relationships – and using your unique advantages as a small business – you can transform work from something your people have to do into something they want to do.