Remote Culture and Retention

Below is a whitepaper I wrote for my company on remote work and how companies can improve their culture.

Executive Summary:

Because of changes in the workplace due to covid, remote work is now becoming the norm for many technical jobs. 75% of executives plan to shift at least some of their workforces to full time remote work after the pandemic subsides (MIT Sloan). This will certainly cause increased competition for good remote workers and increase the importance of retention. But how does a company keep good remote employees with increased competition in the market? Employee Engagement is the best way. Simply put, employees that are highly engaged and satisfied at work, they’re less likely to leave (Linkedin, Gallup). Study after study has found that among remote workers, a positive onboarding experience, consistent two-way communication with leadership and investing in employee career growth are the biggest factors in retaining and engaging employees for the long term. Furthermore, investments in new technologies and engagement programs (like a standardized onboarding experience) are far cheaper than the costs of employee churn. The following paper will dig into why employees leave, how employers can improve corporate engagement and culture as well as the costs related to churn compared to engagement programs.

Why Employees Leave

Employees leave companies for a variety of reasons. However, there is a disconnect between management and employees as to why employees leave a company. 89% of bosses believe their employees quit because they want more money (Linkedin). Yet while some surveys find that as high as 38% of employees leave jobs for better salary and benefits, 71% of employees would accept a pay cut to take a better job (Hays Recruiting). . According to multiple sources the real reasons employees leave is corporate culture and employee engagement. 43% of workers claim corporate culture was the reason to search for a new job (Hays Recruiting). 79% of American workers say company culture is an important job satisfaction factor (Speakap). 59% of employees feel companies view profits or revenue as more important than how people are treated (Randstad) and compensation was only mentioned in 9% of exit interviews (SHRM, Work Institute). So we know that corporate culture is more important than pay, but what do employees mean when they think of corporate culture?

Communication is a very important piece of the culture puzzle. We know that communication has a high impact on employee performance (OC Tanner, Forbes). But communication and communication tools consistently ranked as the #1 challenge for remote workers (Linkedin, American Express). 2/3rds of employees have considered quitting solely because of a lack of workplace communication (Dynamic Signal). The frequency of communication and feedback (both from and to management) during onboarding is also key, since 20% of turnover happens within the first 45 days, 50% within 90 days and 40% of workers leave within 12 months of starting a new job (SHRM). One fourth of employees who left within their first year indicated that employers did not communicate the details of the job, job schedule or other key details about how to succeed in their role during onboarding (SHRM). On top of that 70% of millennials surveyed said they would quit a job if they lacked high performing and fast technology that could help them accomplish their job responsibilities (Linkedin). Clarifying expectations of a job as well as getting feedback and engagement from employees can give management clear insights about the company’s culture as well as leads on employees that are struggling.

Employees view good management as an important piece of corporate culture. Employees who rate their supervisors performance poorly are 4x more likely to be job hunting (G2). 75% of employees who leave jobs quit their bosses, not their jobs (Roger Herman). 53% of employees left jobs or considered leaving because they didn’t believe their employers recruit or retain high performing individuals (Randstad). Not only that but a 2018 Udemy study found that half of employees quit because of a bad manager and 2/3rds believed their manager lacked proper managerial training.

Workers viewed career and technology investment as the third largest piece of being engaged at work. 94% of employees in LinkedIn’s 2018 Workforce Learning Report say they’d stay longer at a company if it invests in their career (Doist). Also over 70% of “high-retention-risk” employees want to leave because they see no future advancement in their current job (linkedin). Bad managers, career development and work/life balance are frequently cited as reasons for why employees job hop (SHRM, Work Institute).

Engagement Strategies for Corporate Culture

We now know that Culture and Employee Engagement is more important than pay. Also we know that Employees view communication and communication tools, good management, and career development are the biggest pieces of what workers consider to be a company’s culture. Also Engaged Employees are 59% less likely to seek out a new job in the next 12 months (Gallup). Let’s look at what employers can do to mitigate these issues and keep good employees.

As we stated above Communication is the #1 challenge for remote workers (Linkedin). But what can the leadership of an organization do to improve communication? Having a standardized and positive onboarding process is one of the easiest improvements that can be made. A great onboarding experience will lock down 69% of employees for 3 years. (OC Tanner). 53% of HR Professionals say employee engagement rises when Onboarding is improved (G2). Also a seamless onboarding process where performance goals are set clearly and company values are presented vastly boosted remote employee retention (Linkedin). Zapier (one of the bigger remote companies) has a program called Zap Pal where each new hire is set up with an experienced buddy to help them thru the first month of onboarding. At GitLab, as soon as employees start they have access to a ‘working handbook’ with 5,000 searchable pages that has industry knowledge and information about the company. McKinsey & Company management consulting decided to focus their engagement efforts around engagement teams (Harvard Business Review). They have 5,500 teams distributed around the world which are constantly forming and reforming dynamically and creating micro cultures. At the outset of each project the McKinsey Team develops a Team Charter specifying how they will share the work, make decisions and give feedback etc. Basically what this team’s work culture will be. By allowing the teams and team leads to set their own team culture, employees are more engaged. Ulfire (an Australian consulting firm) has a similar team centric approach. They suggest that teams meet early on in a project and hammer out what the goals are, how it relates to the greater business, what the roles are of each team member and how often the team needs to communicate.

Leadership of a company can also affect management skills and training to improve retention and engagement. 92% of employees said they would be more likely to stay with their jobs if bosses showed more empathy (BusinesSolver). 53% of employees said they would stay at their jobs longer if their employers showed them more appreciation (OC Tanner). Furthermore remote employees who receive regular feedback from their manager are 3x more likely to be engaged (Linkedin). Feedback from coworkers is important too. Other companies like LucidChart have a peer recognition program that allows employees to award kudos to their coworkers (Lucidchart). McKinsey & Company invests personally in employees by trying to build strong social and learning environments. They celebrate promotions and personal milestones, on top of meeting face to face once or twice a year. McKinsey also makes every office hold a ‘Values Day’ each year with a focus on renewing employee commitment to McKinsey’s norms and beliefs - their underlying assumptions that underpin the firm’s culture (HBR). Every newly promoted engagement manager at McKinsey is sent to a week-long training program at Cambridge University. Research from Harvard Business Review has also shown that workers care much less about which firm they work for than which team they are on. Especially in the consulting firm space where work is conducted in small teams. Only 40% of the workforce reports knowing their company’s goals, strategies and tactics (Bain). Several companies (Zapier, McKinsey, LucidChart, Miro) and researchers (Forbes, HBR) recommend communicating your company’s mission and goals clearly and frequently to employees, not just doing onboarding. Researchers and remote companies also find that telling their story of how they are different from their competitors can improve retention (Miro, Zapier, Forbes). On top of that companies should be explicit about what your ‘flexible’ work policy is so applicants and new hires know the rules. Companies that establish regular ‘Rituals’ like happy hours and lunchtime activities also see a bump in retention (Forbes, Zapier, LucidChart, Miro). LucidChart and Zapier both have internal message boards or weekly updates where leadership can communicate directly to employees outside of an all hands meeting. Management Transparency like this about the state of the company and its progress towards goals generates 30% better retention rates (Manilla recruitment). MIT also surveyed global HR leaders during the Pandemic and found several interesting results. Personal check-ins were more effective and more highly ranked at improving employee engagement than virtual social activities. Transparency from leadership about how and why choices were made one way or another fostered trust among remote teams. Also easy to navigate information hubs and two way communication from employees using pulse surveys or town halls improved employee engagement greatly (MIT Sloan). Furthermore, some new employees may not be accustomed to remote work and may struggle with isolation and personal accountability. Frequent check-ins, regular communication and feedback loops can drastically improve engagement (SHRM)

The third most important part of improving employee engagement is career and technology investment. As said earlier, 94% of employees in LinkedIn’s 2018 Workforce Learning Report say they’d stay longer at a company if it invests in their career. Also workers who feel they are progressing in their careers are 20% more likely to to stay at their current company (G2). Some companies accomplish this by assigning employees personal ‘Do’ projects. These can be small projects that benefit the company but allow the employee freedom in how to accomplish them (Doist, Zapier). Also research has also found that a strong learning culture led to 30-50% higher retention rates (Robert Half). Some companies accomplish this by pairing creating mentoring programs or by having virtual learning events (Zapier, Miro). Zapier specifically likes to use technology to randomly pair 2-3 people a week to chat about life and work, so that remote coworkers can get to know each other and mingle without having a shared office. Harvard Business Review similarly found that productivity of employees can be greatly improved when pairing experienced employees with new employees, even more than incentives (HBR2). Technology investments can be interpreted as career investments as well, and be used to improve engagement. As stated above, 70% of millennials surveyed said they would quit a job if they lacked high performing and fast technology. MIT similarly found in their research of the Covid pandemic that investments in technology to support remote work or collaboration platforms improved engagement in 45% of employees (MIT, Mercer).

Costs of Turnover and Retention

Now that we have analyzed why employees leave and what companies can do to stop it, let’s talk about the costs related to turnover. Turnover costs are more complex than first glance. First to note, the more skilled an employee is, the greater the cost of turnover. Sometimes this can be as high as 213% of annual salary (PeopleKeep). This includes hiring, advertising, interviewing, screening, onboarding and training. Also a business must consider lost productivity – it may take a new employee 1-2 years to reach the productivity of an existing person and new employees usually take longer and are less adept at solving problems (PeopleKeep). The average cost for employers to replace an existing employee among all roles is 6-9 months (SHRM). For a Salesforce Consultant in the Dallas - Fort Worth area this amounts to $53,000 - $79,500 per employee that needs to be replaced (Linkedin). Research has also shown that on average it takes 2 years for a new hire to match the productivity of a tenured employee (G2). So it is pretty expensive to lose a good employee! Lets look at the costs of some popular retention strategies. A collaboration tool like Slack will cost you just under $7 a month per employee (Slack). Zoom or a similar virtual meeting system costs around $12.50 per month per employee (Zoom). An onboarding program for a new employee will cost on average $3,000 per employee, including a $20-100 welcome kit (Linkedin, SnackNation). More sophisticated onboarding programs can cost up to $4,125 per employee (BambooHR). Other programs such as a 100 hour mentoring program can cost around $7,500 annually depending on the hourly cost of your workers and lost productivity time (MentoringComplete). Even combining all that together, for a 30 person team hiring a new person every year with Slack for $2,520, Zoom for $4,500 and a Mentoring Program for $7,500 and onboarding 1 new hire well for $4,125 your total annual costs would be around $18,645. This cost is far lower than replacing one employee a year.

What do Do?

If you made it all the way down here you hopefully gained a few insights along the way. For those of you who need more, these are the following recommendations I gave my leadership team.

Recommendations:

Implement a structured onboarding program.
Invest in a collaboration tool like Slack, Teams or Discord
Hold regular virtual events
Start a mentorship program

At the bare minimum, a structured onboarding (and fun!) program will reap you major dividends in employee engagement. The rest is pretty self explanatory. Engaged employees make strong companies! Don’t lose your top talent because you fumbled the cultural football.