Employee Retention - Why Is It Important In A Business Organization?

Implementing Employee retention strategies is important in any business organization that wants to get sustainable development. This article focuses on the need and importance of employee retention in an organization.

In today’s competitive business world, employee retention has become a major concern. It is important for any business organization to implement employee retention strategies to manage employee turnover effectively and efficiently. It must be noted that a high turnover indicates that a company is losing a high percentage of employees as compared to the number of employees who have been hired already. It is also an indication of not doing proper job selection and not creating an environment which helps employees to stay within the organization for a longer period of time. However, a high level of turnover is undesirable for an organization for a number of reasons and affects an organization in many ways causing poor performance, low employee morale, low productivity and the major loss of revenue that comes from the decreased sales.

Employee retention refers to the ability of an organization to retain its employees. Employee retention can be represented by a simple statistic (for example, a retention rate of 80% usually indicates that an organization kept 80% of its employees in a given period).

Making all the best efforts in order to maintain such a working environment which supports the existing employees to remain in the company, while recognizing their abilities and contribution and implementing suitable reward and recognition strategies is always appreciable and one of the most important things that a business management can do to retain its employees. Not only the employees who see the rewards as worth the effort will be more motivated to work harder, but also remain loyal to the company. It thus a well-designed recognition and reward policy creates a work environment where employees feel appreciated for their efforts and their contribution.

High turnover affects the smooth functioning state of an organization. A high employee turnover rate, in addition to being an expensive problem, can negatively affect an organization as well as employees in many ways. Employee turnover on the one hand has a direct impact on an organization’s revenue and profitability; it leads to decrease the morale of the employee and create unhealthy environment on the other. Employees who leave the organization suddenly or unexpectedly can hurt the growth and development of an organization. An organization is affected due to employee turnover rate especially, when the employees leave the organization at their early stage which causes an organization to incur additional expenses towards hiring new employees and job placement processes. . Besides, the performance of organization is highly affected because of a high level of employee turnover resulting in low productivity and work overload.

The difference between the valuable employees and those who don’t put their efforts to contribute much to an organization has a lot to do with employee retention strategies. Thus, it is important for a business management to recognize the value of the employees and implement employee retention strategies in an effective manner, so that the employees may stick to an organization and continue to contribute their sincere efforts and produce the desired results which in turn aids an organization greatly to get sustainable development.

Written by:

K. A. Fareed (Fareed Siddiqui)

Writer, Trainer, Author, blogger, Software Developer

BBA, MBA-Finance, MPhil-Financial Management, (PhD-Management)

MA-English, MPhil-English

Post Graduate Diploma in Computer Applications and Programming

Level 1 - Leadership and Management ILM – UK

Pursuing CMA-USA

Individual Member of Institute of Management Consultants of India

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  • wameyo  21-04-2015


    A high employee turnover is a red signal in any company. As a potential employee I would definitely want to know why employees are leaving. Is it because of low salaries? Is it because of a poor working environment. If it's any of the above then I'm better off looking for a job somewhere else and this is detrimential to the company. A company can't survive with low-morale employees. It won't perform well.


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