3 Old Employee Retention Strategies Destined to Fail

Written by
George Dickson
George Dickson

Employee turnover is a massive cost center for organizations across the world. Many managers aren't even aware how much it is costing them, but those who do recognize the cost are working hard to implement solutions.

Unfortunately, not every employee retention strategy is effective. Some strategies produce lackluster results, and some even backfire, increasing turnover.

In the rush to deploy a simple and immediate solution, many leaders turn to some of those ineffective strategies. Here are a couple examples of employee retention strategies many organizations misguidedly use, but that you'll probably want to skip:

1. Pay raises

Don't get me wrong: pay raises are not a bad thing.

It's important to offer sufficient compensation for all employees to comfortably provide for themselves, their families, and to know their work is valued. Insufficient pay is a big driver of turnover.

According to Towers Watson's 2014 'Global Trends in Employee Attraction, Retention, and Engagement' states base salary as a key retention factor that both employers and employees agree on.

So why are pay raises a retention strategy guaranteed to fail?

Pay is one important part of a much greater employee retention ecosystem. Without it, you won't keep employees around, but relying too heavily (or solely) on it is problematic.

Pay raises can eventually become unsustainable as a bargaining chip, particularly with skilled employees and knowledge workers who have multiple employment options outside of your organization.

It's not uncommon for employees to receive a larger pay bump/signing bonus to join a new company than they'd receive if they were to stay at their current job for another year. If your go-to plan of action is to increase your bid each time someone gets a competing offer, or starts to feel the itch to leave, you're going to get to a point where another raise isn't only a poor decision, it's not an option.

If pay is all you're offering, you're not getting to the heart of the matter.

There's a good chance you'll hit a point when you can't afford to give more, and an employee will understandably leave to find the next employer willing to up the ante.

There's a reason top employees take jobs at organizations who may not have offered the highest salary and the fattest bonuses: Those organizations offer their employees value beyond a paycheck.

2. Annual bonuses

Annual bonuses are another retention strategy doomed to fail from the beginning—even more so than pay raises.

Just as with pay raises, if annual bonuses are your main employee retention strategy, it's going to be laughably easy for the next employer walking up with a bigger check in their hand to take anyone they want out the door with them.

Although employers listed short-term compensation like bonuses as one of the top seven drivers of employee retention, it didn't even make the list for employees.

Annual bonuses also fall flat because of span of time between the contribution an employee makes, and the reward they receive. With salary or pay raises, at least there's a relatively present reminder every few weeks.

With annual bonuses, such a large gap exists between the contribution and the reward that the reward becomes almost meaningless. There's tenuous context associated between the work an employee is performing day in and day out, and how that annual bonus was 'earned.'

It may feel like a nice token, but it can't possibly compensate for every contribution, every late night, or stressful project. No employee is going to decline an annual bonus (who would?), but that doesn't mean it's increasing their interest in staying at your organization for the long term.

Bonuses can still be a vital element of your employee retention strategy, but there are a few simple keys to improving their effectiveness:

Make them timely

Give bonuses in the moment, when they have the greatest impact, and the greatest association with the contribution that inspired them.

Make them frequent

It's much easier to validate your staff's contributions if bonuses aren't given out in one lump sum at the end of the year. Give smaller bonuses more frequently to maintain an atmosphere of appreciation and recognition.

Make them specific

Make sure you're not neglecting this great opportunity to give employees positive feedback on what they've done right, so they have an example to repeat.

3. Years of service awards

If you think the prospect of a watch, a plaque, or a trophy is enough to give an employee the enduring dedication required to stay at one job for 20 years, you're making a huge oversight.

Modern employeesparticularly millennials, who just became the U.S. workforce's largest demographicare much more likely to change jobs often, or 'job hop,' as it's commonly called.

Years of service awards aren't relevant retention tools in the modern business landscape.

Think about it this way: Do you want to show your appreciation for somebody's skills and accomplishments, or for their ability to hold down a chair for a certain number of years?

This isn't to say that you shouldn't recognize, respect, and reward an employee for their dedication to your organization. The point is, visibly recognizing, rewarding, and appreciating your employees' contributions on a regular basis is a much stronger retention strategy than any 'years of service' award could hope to be.

I hope you found this list useful. Can you think of any other examples of retention strategies that are doomed to fail? Read our Ultimate Employee Retention Guide to learn more about employee retention strategies and tools that actually curb turnover.

Read the Guide to Modern Employee Recognition

Originally published on July 17, 2015 → Last updated August 24, 2019
George Dickson

George is dedicated to strengthening organizational cultures with thoughtful leadership and frequent recognition. George formerly managed content and community at Bonusly.


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