Employee Retention Challenges: Causes and Solutions

It’s said that no one is irreplaceable in an office. However, replacing an employee comes at a high price. Studies show that the cost of finding a new employee ranges from 50% to 200% of their annual salary, depending on the role and industry. So, employee retention is becoming a pressing concern for many companies across all industries. According to the Work Institute’s 2024 Retention Report, voluntary employee turnover costs U.S. businesses nearly $1 trillion annually. 

In addition to significant costs, high turnover affects team morale, reduces productivity, and disrupts workflows. In other words, when a lot of your staff members leave, your remaining employees become less efficient and may lose motivation.

A well-designed retention strategy can become a great solution that will not only reduce these costs but also improve overall job satisfaction and long-term company success. Companies that prioritize career development, or career champions like Google and Microsoft, have invested heavily in retention programs, emphasizing work-life balance and employee well-being.

 This article explores the key challenges of employee retention, backed by research, case studies, and best practices. We will also focus on how having the right LMS can help you implement an employee training and engagement program that will minimize attrition.

Why Is Employee Retention Important?

High employee turnover can lead to increased costs, lower productivity, and reduced employee morale. That’s why employee retention is one of the critical factors for business success. By endeavoring to retain your employees, you’ll ensure continuity, enhance team dynamics, and foster a strong workplace culture.

A Gallup study found that highly engaged teams show 21% greater profitability and 59% lower turnover rates than disengaged teams. For example, tech giant Adobe implemented its “Check-In” system, replacing traditional performance reviews with ongoing conversations. This approach improved employee engagement and reduced turnover rates significantly.

5 Benefits of an Employee Retention Program at the Workplace

1. Cost savings

Reducing turnover can help you minimize hiring and training costs. Research from the Society for Human Resource Management estimates that replacing an employee costs an average of $4,700, with higher costs for specialized roles. By investing in employee retention, you can minimize these expenses and allocate resources toward higher business performance.

To save on having to hire a replacement, you can use the following best practices:

• Offer competitive compensation and benefits to reduce turnover.
• Conduct exit interviews to identify reasons for employee departures.
• Implement employee referral programs to hire the right candidates.

2. Improved productivity

Experienced employees work more efficiently and require less supervision. A study from the Harvard Business Review found that companies with strong employee retention strategies outperform competitors in productivity by 250%. Stable teams also enhance collaboration and efficiency, reducing the time spent on training new hires. 

Here are some best practices to improve productivity:

• Foster a work environment that encourages collaboration and efficiency.
• Use technology, such as project management tools, to streamline work processes.
• Provide clear career paths to keep employees motivated.
• Recognize and reward employees for their contributions.

3. Stronger workplace culture

Long-term employees contribute to a positive and stable work environment. Companies like Zappos focus heavily on cultural fit during hiring, which has resulted in long-term employee commitment and strong brand loyalty. Employees who feel connected to the company’s values and mission are more likely to stay. 

Some best practices include:

• Hire employees who align with the company’s core values.
• Promote inclusivity and diversity in the workplace.
• Create team-building activities to foster a strong sense of belonging.
• Encourage open communication and transparency.

4. Better customer experience

Consistent staffing improves customer relationships and service quality. For instance, Ritz-Carlton’s strong retention policies ensure that experienced employees maintain exceptional customer service standards. In addition, you can use the following best practices:

• Empower employees to take ownership of customer relationships.
• Offer incentives and rewards for excellent customer service.
• Implement feedback systems to monitor and improve customer interactions.

5. Increased employee engagement

Employee retention programs enhance job satisfaction and motivation. Engaged employees are more committed, motivated, and emotionally invested in their work. They are also less likely to seek opportunities elsewhere, as they feel valued and connected to the company’s mission. For example, Netflix’s flexible work policies and emphasis on autonomy have led to high employee retention rates and improved job satisfaction. 

To boost employee engagement in your organization:

• Acknowledge employees’ contributions regularly through praise, rewards, and career advancement opportunities.
• Provide platforms for employees to voice concerns and share ideas to make them feel heard and valued.
• Empower employees with autonomy: giving employees ownership over their work fosters trust, innovation, and increased job commitment.

The 8 Main Challenges of Employee Retention

1. Dissatisfaction with compensation

Employees might leave if their salaries and benefits don’t align with industry standards. In a study from the Pew Research Center, 63% of respondents cited low pay as a key reason they left a job in 2021. Some companies manage to overcome this challenge. For example, in 2021, Walmart increased hourly wages and introduced education benefits to reduce turnover, leading to improved retention.

Employees who feel underpaid are more likely to seek better opportunities, leading to high turnover rates. Offering competitive pay and benefits is essential to keep top talent. 

To handle salary dissatisfaction, you can use the following practices:

• Conduct regular salary benchmarking to ensure that compensation aligns with industry standards.
• Offer performance-based bonuses and incentives to reward valuable and talented employees.
• Provide non-monetary benefits, such as wellness and physical health programs and flexible work arrangements.

2. Better opportunities elsewhere

Competitors might offer higher pay, better perks, or career advancement opportunities. A Pew Research Center survey found that 63% of workers quit their jobs in 2021 because there were no opportunities for advancement. Without clear career progression, employees may look elsewhere for professional growth opportunities. 

Some best practices to overcome this challenge include:

• Develop clear career paths and internal promotion policies.
• Offer tuition reimbursement and learning opportunities.
• Offer internal mobility opportunities: encourage employees to transition into new roles within the organization rather than seeking jobs elsewhere.
• Foster a mentorship program to connect employees with experienced leaders.
• Conduct employee satisfaction surveys and address concerns before employees start looking for other opportunities.

3. Insufficient appreciation and recognition

A lack of acknowledgment can lead to disengagement and decreased job satisfaction. Studies have found that companies with strong recognition programs experience 31% lower turnover rates. When employees feel valued, they are more likely to stay with a company long-term.

Heineken, for example, overcame this challenge. They faced a situation in which less than 2% of their employees received formal recognition annually. To address this, they revamped their reward and recognition program, resulting in a 50% increase in employees being recognized by their peers within five months.

To address this challenge, you can try the following practices:

• Implement formal recognition programs, such as “Employee of the Month” awards.
• Align recognition with company values to reinforce desired behaviors.
• Train managers in recognition practices: equip leaders with the skills to recognize and appreciate their teams effectively. Encourage them to provide regular, meaningful feedback.
• Celebrate small wins and team achievements.

4. Bad hiring practices

Hiring the wrong candidates increases the risk of early resignations. A CareerBuilder survey found that 74% of companies admitted to hiring the wrong person, leading to significant productivity losses. 

Some best practices to overcome this issue include:

• Use structured interviews and behavioral assessments.
• Define clear job roles and responsibilities before hiring.
• Prioritize cultural fit alongside skills and experience.
• Provide unconscious bias training: educate hiring teams to recognize and mitigate their biases.

5. Toxic work environment

Workplace conflicts, poor leadership, or lack of inclusivity can drive employees away. Toxic workplace culture is 10.4 times more likely to contribute to an employee quitting. 

The three elements of a toxic workplace culture are 1) failure to promote diversity, equity, and inclusion, 2) workers feeling disrespected, and 3) unethical behavior. Companies with inclusive cultures, such as Salesforce, report higher employee satisfaction and retention rates. 

Some common best practices against a toxic workplace environment include:

• Foster inclusivity and diversity in the workplace.
• Train managers on leadership and conflict resolution.
• Create a zero-tolerance policy for workplace bullying and harassment.

6. Unrealistic demands on the employee

Excessive workloads or vague job roles can lead to burnout and frustration. The World Health Organization classifies burnout as an occupational phenomenon, highlighting its impact on employee well-being. HR leaders say up to half (20% to 50%, more precisely) of annual workforce turnover is due to burnout. 

Employees who feel overwhelmed are more likely to leave their jobs to achieve a better work-life balance. What can you do to avoid this?

• Set clear job expectations and provide realistic goals.
• Ensure workload distribution is fair and manageable.
• Encourage regular check-ins between employees and managers. Maintain open communication to address concerns and adjust workloads as necessary.
• Provide access to mental health resources. Offer counseling services and stress management programs to support employee well-being.

7. Technology and automation anxiety

Many employees fear that automation and AI will replace their jobs, creating uncertainty and stress. A McKinsey report found that 30% of jobs could be automated by 2030, leading employees to worry about job security and career growth. As an example, the rise of automation in manufacturing has led to significant job displacement, causing anxiety among workers about their future employment prospects. 

Companies that failed to address these concerns faced increased turnover and decreased morale. Here are some best practices to overcome this:

• Provide training programs to help employees upskill and adapt to new technologies.
• Clearly communicate the degree to which technology is meant to enhance, not replace, human roles. Emphasize the collaborative potential of technology to alleviate fears.
• Offer career counseling and reskilling opportunities to ease automation-related fears. Support employees in transitioning to new roles within the organization.
• Highlight success stories of technology integration. Share examples where technology has enhanced job functions without eliminating positions.

8. Job security concerns

Economic uncertainty, company restructuring, and layoffs can create job insecurity, leading to disengagement and higher turnover rates. Research from the American Psychological Association found that job insecurity leads to increased stress and lower job satisfaction, making employees more likely to leave. 

For example, during the COVID-19 pandemic, many companies faced financial challenges, leading to widespread layoffs and heightened job insecurity. Employees in industries like hospitality and retail experienced significant stress due to uncertain employment prospects, resulting in decreased engagement and increased turnover.

To make your employees feel more secure about their jobs:

• Be transparent about company performance and future plans.
• Offer career growth opportunities and internal mobility programs.
• Provide reassurance through open discussions about job stability.

4 Employee Retention Strategies to Solve Attrition Issues

1. Recruit the best talent

Hire candidates whose values align with the company culture to ensure long-term commitment. This is one of the most effective ways to reduce turnover. Organizations that focus on cultural fit, skill alignment, and long-term potential during the hiring process are more likely to retain employees.

Best practices:

• Implement structured interviews to assess both technical skills and cultural fit.
• Use behavioral assessments to identify candidates who align with company values.
• Provide a realistic job preview to set clear expectations.

2. Focus on retaining the top performers

Offer competitive incentives and career growth opportunities to keep talented employees engaged. McKinsey research shows that companies with structured career development plans retain employees 2x longer than those without.

Best practices:

• Offer competitive salaries and performance-based incentives.
• Provide career growth opportunities, such as leadership development programs.
• Foster an inclusive and rewarding work environment to encourage loyalty.

3. Get onboarding right

A structured onboarding process helps new employees integrate smoothly into the company. BambooHR found that strong onboarding programs improve retention by 82%. 

Best practices:

• Develop a structured onboarding program that covers company culture, job expectations, and resources.
• Use onboarding software to organize training materials, create individual learning paths for different roles, and assess knowledge easily.
• Assign mentors or buddies to new hires for guidance.
• Provide ongoing check-ins and support during the first few months to provide a smooth employee experience.

For example, Mutual Materials, a family-owned business providing high-quality masonry and landscaping products, made onboarding complete and consistent using the iSpring Suite course authoring tool. Thanks to faster course creation, the company improved employee engagement through corporate learning and reinforced its corporate culture.

4. Provide professional development opportunities

Investing in training and career advancement encourages employees to stay. 88% of organizations are concerned about employee retention. Providing learning opportunities is the number one retention strategy for many businesses. For example, AT&T spends $250 million annually on employee education programs, which results in high employee retention. 

Best practices:

• Offer continuous learning programs, such as workshops, online courses, and certifications.
• Implement internal mobility programs that allow employees to explore different roles.
• Encourage leadership development through coaching and mentorship.

Boost Employee Retention Rates with the Right LMS

One survey found that 94% of workers would stay at their current company if the employer invested in their long-term learning. And long-term learning in a modern organization means having a learning management system (LMS) in place. 

An LMS streamlines training and development and ensures that employees have the necessary skills to grow within the company. The iSpring Learn LMS, for example, provides businesses with the tools to measure employee engagement and enforce organizational culture.

Implementing an LMS-based employee retention strategy: a step-by-step guide

1. Assess training needs

Before implementing an LMS, businesses should assess skill gaps through performance reviews, employee feedback, and competency assessments. This will help identify the training areas that need to be addressed first: onboarding, product sales, compliance, or soft skills training. This is important because employees who feel unprepared or lacking in skills might seek opportunities in other places. 

Besides, when employees work on their skill gaps, they become more confident and happier at their jobs.

Best practices:

• Conduct regular surveys and feedback sessions.
• Align training programs with business goals.

2. Personalize learning paths for employees

A one-size-fits-all approach to training is ineffective. Employees have different learning styles and career goals, so you need to tailor training programs to their individual needs. Personalized learning fosters professional growth, making employees feel valued. Additionally, employees are more likely to stay if they see a clear career development path.

To personalize learning, you can use learning tracks in iSpring Learn. They allow you to organize a set of courses into a cohesive learning journey, breaking it down into manageable chunks. It looks much like a roadmap for each employee role, with milestones that lead to the intended learning goals.

3. Implement interactive and engaging training modules

Traditional training methods can be monotonous, leading to disengagement. Interactive learning experiences improve retention and engagement. To make your corporate training engaging, offer various learning formats, including videos, quizzes, and interactive modules. For this purpose, you can use a course authoring tool like iSpring Suite: 

• Training videos. Video lectures and screencasts can help you simplify complex topics and grab learners’ attention.
• Role-plays. Interactive dialogue simulations recreate real-life scenarios and allow employees to practice their communication skills in a safe-to-fail environment.
• Interactions. Clickable images, drag-and-drop activities, and interactive timelines encourage employees to actively participate in training content and enjoy learning more.
• Quizzes. Dynamic quizzes and assessments help test employees’ knowledge by offering a range of question types and immediate feedback after each question.

With iSpring Learn, you can also incorporate gamification, employing incentives like badges and leaderboards, to generate a sense of friendly competition.

4. Provide flexible and on-demand learning

Employees appreciate the flexibility to learn at their own pace, especially in remote or hybrid work environments. With flexible learning options, your team will experience less stress and greater job satisfaction, along with a better work-life balance.

• Offer self-paced courses alongside instructor-led training.
• Enable offline learning options for convenience.
• Use iSpring Learn’s mobile learning capabilities for anytime, anywhere access.

5. Track employee progress and provide feedback

To make sure your employees are benefiting from the LMS, you should monitor their training progress regularly. Employees who receive constructive feedback are more engaged. Additionally, tracking progress helps identify areas for improvement and success.

• Set milestones and acknowledge achievements.
• Use iSpring Learn’s reporting and analytics to monitor progress.

6. Foster a culture of learning and employee recognition

With a strong learning culture, employees feel great about development and naturally strive to achieve new heights in their careers. Recognition of their learning achievements boosts morale.

• Celebrate training completion with certificates and rewards in the iSpring Learn LMS.
• Encourage knowledge-sharing sessions within teams.
• Integrate training achievements into performance evaluations. You can easily do this with a “360-Degree Performance Appraisal” module in iSpring Learn, which allows you to have employee training and performance reviews in one place.

7. Use data to continuously improve training programs

Employee training needs evolve, so it’s important to assess and refine training programs regularly. With up-to-date training, employees remain competitive in their roles. Data-driven improvements prevent training from becoming outdated or ineffective.

• Collect feedback on training courses to improve content.
• Adjust training modules to meet changing industry trends and company goals.
• Analyze user engagement with the help of numerous report options offered by iSpring. With the iSpring Learn LMS’s reporting tools, you can track such parameters as learner progress, learner results, course completion rates, group progress, and active user statistics.

Case study: Employee retention improvement using iSpring Learn

Jitasa, the largest U.S. provider of accounting and bookkeeping services for nonprofits, faced challenges with employee training engagement and retention. Their existing LMS couldn’t provide a consistent learning experience, which resulted in knowledge gaps and high turnover rates. To address this, they implemented the iSpring Learn LMS, enabling structured and accessible training programs.

Results:

• Improved training uptake: 96% of employees use the LMS regularly to learn and stay up to date with company news. 
• Streamlined onboarding: new hire onboarding has been shortened by one to two months.
• More engaging work environment: training has become a key element of the company culture.

By leveraging iSpring Learn’s reporting tools, interactive learning features, and 360-degree reviews, Jitasa improved employee retention through structured training and skill development.

FAQ

1. What are the challenges in employee retention?

Employee retention challenges include compensation dissatisfaction, lack of growth opportunities, poor workplace culture, lack of recognition, unrealistic job expectations, and job security concerns. Additionally, automation and technology anxiety can contribute to employee stress and uncertainty.

2. What are the biggest reasons employees leave companies?

Compensation dissatisfaction and lack of growth opportunities are among the top reasons. However, research shows that voluntary turnover is also preventable with better retention strategies.

3. How can a company improve employee engagement?

Recognizing achievements, providing professional growth, and fostering a positive work culture are key factors. 

4. What role does leadership play in employee retention?

Effective leadership builds trust, motivates employees, and ensures a healthy and positive work environment, reducing turnover rates. A Gallup study found that managers account for 70% of the variance in employee engagement.

5. What are effective employee retention strategies?

Effective employee retention strategies include offering competitive salaries and benefits, fostering a positive work culture, implementing strong onboarding programs, providing career development opportunities, recognizing employee achievements, and using tools like learning management systems to enhance training and engagement. 

Conclusion

Employee retention is a vital aspect of any organization. A well-planned retention strategy can improve overall business performance by reducing turnover costs, enhancing productivity, and strengthening team morale. To make sure your employees feel valued and financially secure, offer competitive salaries. Additionally, by fostering a positive and inclusive culture, you will encourage employee engagement, loyalty, and job satisfaction.

Implementing an LMS can become one of the most efficient employee engagement solutions that will help you enjoy a motivated workforce and a strong competitive advantage in your industry.