Employee retention: a critical success factor for NFPs

Employee turnover undermines success

Addressing complex social issues requires appropriately skilled employees. Some complex roles can take years to fully master. In addition to requiring the appropriate skills, front-line employees can only perform effectively when they have appropriate organisational support, solid leadership, efficient processes, a client centric culture, and adequate system support.

Social enterprises can no longer be run purely on passion and good will, they also need to be efficient and effective. It’s very difficult to be a high-performing and competitive organisation when there are high-levels of employee turnover. This creates an environment where a large proportion of employees are novices.

Employee turnover rates – the good and bad

Little is known about the overall level of employee turnover across the social enterprise sector. Individual enterprises are reluctant to make this information public and it’s therefore difficult to accurately estimate what employee turnover is across the sector as a whole.

Based on our extensive experience in the sector, we have a reasonable sense of what’s actually happening. We know there’s a wide range of turnover rates – from 12 per cent to over 50 per cent per annum (p.a.). We also know that there’s a fair spread of organisations with low turnover (10–15 per cent p.a.), medium turnover (16–22 per cent p.a.) and high turnover (over 22 per cent p.a.).

Organisations with higher turnovers are experiencing significant difficulties and making them unsustainable in the long term.

Resources are strained with employee turnover

Cost of staff turnover is estimated at between 50 and 150 per cent of the employee’s annual remuneration.

The loss of organisational knowledge, skills and contacts associated with the departure of experienced employees has a significant impact on service delivery, productivity and management effectiveness. When an employee who has an intimate understanding of their clients’ needs and preferences departs, it has an inevitable impact on client service and satisfaction.

Productivity of new employees is typically very low to begin with and then gradually increases over some months. During this time, a supervisor or co-worker often oversees the new employee, affecting their own productivity and the productivity of the entire team adversely. There are also substantial HR and management costs associated with managing the separation, recruitment and training process for new employees.

Mitigating employee turnover – characteristic of a low-turnover organisation

• High levels of job fulfilment are a focus. The employees’ interests and skills match the job requirements closely making the role satisfying
• When increasing remuneration is not an option, recognition is provided through flexible working options
• The organisation’s culture matches its vision. It creates a positive environment which matches a genuine concern for all stakeholders
• Investment in staff development is always on the agenda. Education and training are key to ensuring employee satisfaction and organisational growth
• The organisation’s leadership is inspiring. An inspiring vision that encourages innovation is a catalysis to keep employees engaged
• Performance is a focus. Organisations that are committed to best practice, deliver on values and perform well create an environment that people want to commit to.

A recently conducted study by Insync Surveys found that high retention is associated with employee pride and advocacy. Employees who can envisage a future for themselves in the organisation have a strong sense of connection with the organisation.

Employee retention is crucial for not-for-profits (NFP) that want to boost performance and deliver demonstrable social outcomes. Retention in the sector is driven by creating positive working environments where the needs of clients are paramount, and employees receive the training and support they need to meet the end stakeholder’s needs.

Organisations with low employee turnover have also been successful in neutralising the potential negatives that are common within the NFP employment sector relating to pay, work stress and inadequate IT systems.

Systematically incorporating the lessons outlined and from your own experience into a compelling employee value proposition will not only improve employee retention, it will also improve end stakeholder outcomes and enhance your position within an increasingly demanding and competitive sector.