For a nonprofit to thrive in today’s economy, finding and retaining the best employees is important. This is especially true for small nonprofits competing with larger organizations, and larger budgets, for top talent.
Frequent voluntary turnover has a negative impact on employee morale, productivity, and company revenue. Recruiting and training a new employee requires staff time and money.
Some studies (such as SHMR) predict that every time an employer replaces a salaried employee, it costs 6 to 9 months’ salary on average. For a manager making $40,000 a year, that's $20,000 to $30,000 in recruiting and training expenses.
But others predict the cost is even more - that losing a salaried employee can cost as much as 2x their annual salary, especially for a high-earner or executive level employee.
So how can a small nonprofit keep their employees from jumping ship? As our workforce becomes increasingly mobile, a well-thought out employee retention strategy becomes just as important as recruitment (if not more).
Here are seven best practices for nonprofit employee retention.
Employee turnover costs organizations time and money. Turnover disrupts the flow of a functioning workforce. When an employee leaves there can be a significant knowledge gap left, creating more work as the remaining team members pick up the pieces.
While some turnover is inevitable, having an intentional employee retention strategy in place mitigates the turnover, and its costs, for a nonprofit.
Do you know your organization’s current employee retention rate? Before you start thinking about formal employee retention activities, calculate your employee retention rate and track it periodically, such as quarterly or bi-annually.
The calculation is simple. Divide the number of employees who left during a period by the total number of employees at the end of a period to get the percentage. According to industry standards, 85% or higher is considered a healthy employee retention rate.
There are several theories in employee retention strategies. Here's a sample of four common theories:
Positive Organizational Behavior is defined by Fred Luthans as "the study and application of positively-oriented human resource strengths and psychological capacities that can be measured, developed, and effectively managed for performance improvement in today’s workplace"
Valence, in Victor Vroom's Expectancy Theory, is the extent to which an employee's goals match the company's goals. The more aligned these are, the higher the employee retention rate.
Abraham Maslow's Hierarchy of Needs theorizes that companies should first take care of an employee's basic needs, such as job security, payment, and health benefits, and then advance to bigger aspirations, like his or her place in the company.
How important is it that employees feel they are being treated fairly? According to John Stacey Abrams' Equity Theory, if a worker feels he is getting what he considers to be fair for the job he is doing in return, he will be happy and remain in the position.
One of the worst mistakes a small nonprofit can make is to assume that, because an employee is still there, he or she is happy.
Schedule regular, one-on-one reviews with employees. These review meetings serve as a forum where the employee can receive constructive feedback.
Feedback is important. Even the most productive employees should be given feedback as a part of the retention strategy. Studies show employees not only want acknowledgment for work done well, but also want constructive criticism and routine review of goals and expectations. This makes an employee feel valued and helps keep morale high.
Conduct regular, formal evaluations. Employee evaluations are also a good time to get feedback from employees on what will make them happy. With a retention strategy, always keep a balance between what the employees want and what's best for the organization.
Health benefits are a vital part of an employee's compensation package, and thus an important strategy for employee retention.
Work with an insurance agent or broker to evaluate your nonprofit health insurance options including private exchange and individual health insurance premium reimbursement.
If the organization can't afford a group health insurance plan, or cannot meet minimum participation requirements, consider a premium reimbursement plan. Premium reimbursement allows your business to provide employees healthcare allowances for their individual health insurance policies. This is an alternative to an employer-sponsored group health insurance plan.
Turnover of certain employees may be more costly than others, thus it is common to provide different levels of benefits to different classes of employees. This is routinely done by major corporations. For example, office assistants are compensated differently than program directors.
Because health benefits are such an important part of compensation and retention, why not provide health benefits that vary by class of employee? Nonprofits can do this with premium reimbursement allowances.
As there are no minimum or maximum contribution requirements with premium reimbursement, a nonprofit can design their health benefits plan to fulfill their exact recruiting and retention needs.
Exit interviews provide nonprofits valuable information on the reasons employees seek employment elsewhere.
Develop an exit interview survey that asks for feedback on the work environment, employee benefits, areas for improvement, training, supervision, and workload.
Evaluate the exit interview surveys and incorporate the feedback into the organization's employee retention strategies.