How to Improve Staff Retention in Competitive Markets

Poor retention can create a spiral effect, impacting turnover, productivity, and performance. In addition, rising hiring costs make retaining good staff a high priority for SME leaders. 

In this article, we will cover: 

• Why staff retention matters more than ever 

• Understanding why employees leave 

• Building a positive workplace culture 

• Investing in leadership and employee development 

• Measuring your retention strategy 

Through the Annual Population Survey (APS), conducted by the Office for National Statistics (ONS), CIPD found that the average business had a 34% churn rate in 2023. Whether your business is seeing a higher or lower rate of employee turnover, it is costly.  

The cost of hiring a new team member in the UK in the first year of employment often exceeds the base salary by 50-110%, with estimates reaching £62,890 for a role paying £27,600, according to the British Business Bank.  

This cost is the result of recruitment costs. CIPD found in 2024 that these range between £600 and £1,750 for non-senior roles and between £1,800 and £2,500 for senior roles. Adding in the equipment and setup expenses for new starters (between £560 and £2,750), there’s a significant bill for SMEs. 

Combined with the loss of institutional knowledge, that costs company time and resources. Wiley Edge used data from 500 UK-based business leaders and 1,000 young workers and found that it took on average six months for a hire to be up to speed and have an impact on a business.  

There is also reduced output from the remaining team because of lower morale created by colleagues leaving. This can lead to more valuable employees leaving your business. 

In short, retention is essential for profitability, stability, and resilience in unpredictable times.  

Employees may want to leave for a myriad of reasons, including: 

• Limited career progression  

• Poor management  

• Lack of recognition  

• Burnout and workload pressures  

• Inflexible working arrangements  

• Lack of clarity of job purpose 

• Poor communication or misalignment with company’s mission, vision and values 

Addressing all these issues simultaneously is unrealistic. However, conducting regular surveys to get a pulse on the workplace environment, as well as conducting exit interviews, gives you information on what needs to be improved and creates a meaningful feedback loop. If a recurring issue comes up in exit interviews and surveys, it will be worthwhile to prioritise addressing it.  

The Help to Grow: Management Course gives leaders frameworks to address issues like employee engagement, the mission and values of a company, and the organisational design of a company.   

A positive workplace culture builds trust, improves communication, and creates an environment of inclusion and belonging. 

To do this, leaders can offer: 

• Team building exercises 

• Career development opportunities  

• Employee recognition programmes  

• Competitive compensation  

• Flexible working policies  

• Leadership development  

Addressing the above areas proactively, alongside feedback collected from staff, helps you create a robust retention strategy. This is because it can reduce feelings of burnout and creates a better relationship between managers and employees. 

Naturally, SMEs can’t always offer the most competitive salaries, but working on flexible policies, team building, and development can go a long way.  

Managers are essential for both retention and productivity. An engaged manager can be the difference between an employee leaving and staying. Because of this, managers need to be invested in.  

Danny Buckley, Director of Studies at Loughborough Business School, wrote about the importance of engaged managers: “When managers disengage, their teams follow. The manager-employee relationship is the single biggest factor in whether people engage or switch off: whether they find their work meaningful, feel safe to speak up, and have what they need to do their job well.” 

With this in mind, it is essential to understand how a manager wants to develop and what training can be offered.

Combining training with career planning helps engage managers and the team around them. What’s more, opportunities to learn lead to new ideas coming into the business. 

At the Help to Grow: Management Course, we have seen countless examples of managers leveraging the skills and mentoring provided to implement changes that improve staff retention and make their businesses more profitable. 

When you begin making changes, you must measure the impact. Using feelings as a barometer of success can lead to reactive and misplaced measures when staff leave.  

Important metrics to measure are: 

• Employee turnover rate  

• Retention rate  

• Employee engagement scores  

• Internal promotion rates  

This data will help you review your strategy and refine it over time. Having this data to hand enables leaders to make decisions around workplace culture and training with confidence.  

Staff retention isn’t only a cost saver; it helps your business grow. Whether you need to address an element of culture, leadership, or development opportunities, it’s a worthwhile long-term investment.  

Every workplace has a different set of challenges. For more tailored advice, the Help to Grow: Management Course offers a dedicated module on employee engagement, 1-2-1 business mentoring, and frameworks to address staff retention.  Find out more here.