How HR and Finance Can Work Together to Improve Employee Retention
Imagine the pain of going through a complex and taxing hiring process, onboarding your employees, paying for their courses and webinars, and waiting through years of their low productivity until they’re experienced enough only for them to leave on the first occasion.
Employee abandonment rate is a serious bane of the business world, and while it’s not always easy to prevent it, you could use more than a few tools to make them stay. You’ll have to put several departments to work for some of these.
Some would argue that HR and finance are two departments that play the biggest role in employee retention (other than individual teams and team leaders). So, to optimize these efforts, you would have to make them work together toward the same goal. Here’s how.
The critical thing to remember is that, for your salaries to make sense, they must be aligned with the industry average. Then, you can keep them slightly higher or slightly lower than that. Still, it’s the job of your finance to figure out what these averages are.
Your HR department handles employee performance evaluation and tracks the duration of their employment. In other words, they’ll have data regarding when someone’s due a raise or a promotion (to a better-paid position). However, should first talk to the finance to see if this is feasible.
In cooperation, HR and finance can make a plan for each individual’s salary development. This way, you will minimize the chance that your employee will feel underpaid, directly affecting their desire to leave.
Now, before you assume this is expensive, keep in mind that it costs an employer an average of 33% of an employee’s yearly salary for their exit. Saving this money would definitely make a difference.
2. Joint efforts for employee support
Another thing you need to understand is that there are so many ways for a company to help their employees financially without giving them a permanent raise. A lump sum bonus or advance payment can sometimes be a huge help.
Just imagine one of your employees struggling with debt. Even with a strong desire to stay, they will be forced to leave their employer for a better-paid gig. This will make loyal employee leave because they have no way out.
Well, what ifoffering debt solutions could make them stay? What if it could make them so grateful that they permanently remain in your company and you make the team around them (as a veteran employee or a leader)? Just because someone is in debt, this doesn’t mean that they’re necessarily lazy or disorganized. Things happen that are outside of people’s control.
The problem is that your finance cannot know if one of your employees struggles with their finances. There’s even a legal/ethical limit to how much your HR can pry into these private matters. However, if the rapport is good and there is trust between your staff and your HR, these things may arise organically.
3. Incentivizing performance through cross-functional collaboration
Knowing how, when, and how much is the key to incentivizing performance. It would be best to start working with your HR to determine these vital KPIs and then hashing things out with your finance to see how much you can afford to spend on this incentive.
The last thing you want is toover-incentivize your staff. First, rewarding them when they haven’t earned it lowers the significance of their hard work. By doing this, you’re just showing them that their performance doesn’t matter and bribing them to stay/like you. For the same reason, it’s so important that the reward is proportional to their accomplishment.
4. A synergistic approach to training and development
Career development is important to individual employees, so their ability to stay employed depends onhow much they can grow as professionals in your organization. It’s nothing personal; they just have to look out for themselves.
Now, the simplest and the most effective way to show them they’re going somewhere is to invest in their training and development. This needs to be done systemically.
While courses and webinars are costly, even something handled in-house (like a mentorship program or a workshop) has its costs. The problem is that many companies see this category of expenses as something extra when it’s supposed to be the baseline of your budget distribution.
5. Teambuilding as a joint HR-finance initiative
Teambuilding is essential to increasing your teams’ performance and developing a sense of team unity. This latter will make people feel like they belong, making them think twice before leaving.
This topic is worth addressing since 44% of surveyed leaders named retention one of the challenges they hope to solve through team building.
Now, if they develop a meaningful off-work relationship with their colleagues (which happens as a natural side-effect of teambuilding activities), they’ll have one more reason to stay. This means they might pass on a more lucrative work opportunity so that they don’t break the team.
The problem is that team building can be pretty expensive. Sure, paying for a couple of pizzas on Friday is something you can do without much issue; however, what about sending an entire team to a resort? This is something that you’ll have to consult finance about.
6. Providing HR with sufficient resources for effective employee retention
Lastly, we come to one obvious (but often overlooked) point. If your HR is understaffed, underequipped, or underfunded, it won’t be able to function properly. This is why your finance needs to allocate enough resources for your HR.
An underfunded HR can barely handle its most basic functions, let alone do anything beyond that.
Aside from neglecting your employee retention efforts, an underfunded HR provides limited training and development, has ineffective employee engagement initiatives, and exposes your organization to compliance and legal risks.
These things can put your business at risk and facilitate the abandonment rate. So, properly fund your HR before you even think of employee retention.
Employee retention usually requires knowing your employees and using resources to incentivize them to stay effective. The first is the role of your HR, while the other part rests on your finances. By establishing and nurturing an active collaboration between these two departments, you’ll have a much easier job improving your organization’s average talent retention rate.
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