How is a retention strategy developed? 

1. Align your retention strategy to your business strategy. What actions do you need to take to deliver on your organization's business strategy?
2. Know your employees. Do you understand who your employees are? What is the demographic and social make-up of your workforce? What do they value? What do they need?
3. Link your business results to your employees. Can you link the your organization's business performance to your employees? How? (This will help tell you what kind of employees you need to retain.)
4. Be competitive. Are you behind the market and especially your competitors in pay and benefits?
5. Be flexible. Are you prepared to offer employees the "deal" that best meets their needs, even if it is different from that of the person next to them?
6. Be focused. Do your employees know what they should do, and are they recognized and rewarded (with both cash and noncash rewards) when they do it?
7. Be attractive. As an employer, are you aware that every action you take sends a recruiting message, both to potential external candidates as well as to your internal workforce?

Competitive pay and benefits are key. Competitive pay and health benefits appear to be essential to whether or not employees will consider other job opportunities. As a result, an organization must be competitive in these areas to even stay in the retention game. Employees need to see and experience that the top performers are getting promoted, compensated and put in leadership positions. When this is apparent, employees are much more likely to stay in one place.

Other factors that should be considered in developing a retention strategy are revealed in a 2002 Towers Perrin survey of 6000 employees that suggests the top reasons that employees stay with a company. In order of importance, the top ten organizational competencies for effective employee retention are:

1. Developing the skills of employees;
2. Understanding the unique needs of high performers;
3. Providing competitive base pay;
4. Aligning human resources programs with business objectives;
5. Clarifying what the organization expects from employees and what employees can expect in return;
6. Providing real opportunities for leadership development;
7. Advancing talented employees;
8. Having effective senior leadership;
9. Fully utilizing employees' abilities and skills; and
10. Supporting teamwork.