What is employee retention rate & how to calculate it?

What is employee retention rate & how to calculate it?

Receiving an unexpected resignation is every manager’s nightmare. Not only does it makes it challenging to find an equally talented, if not more, replacement but it also makes others in your team contemplate looking for other opportunities. Leaders and HR executives must address the causes of attrition to retain their workforce. A low employee retention rate constitutes a high employee turnover rate, which is a costly problem for companies.

What is the employee retention rate?

An organisation’s ability to retain its employees over a period of time is referred to as its employee retention rate. It comprises several functions within an organisation, typically relating to HR policies and their efforts in engaging with their employees in order to retain them. Policies such as offering perks and benefits, a steady work-life balance, and maintaining a healthy working environment play critical roles in an employee’s decision to stay at an organisation.

An organisation’s retention rate throws light at the company’s success and ability to focus on its employees. A low employee retention rate incurs high costs to a company and makes it challenging to re-hire in tight market conditions. In addition, this not only gives an organisation a holistic view of its current workforce stability but also enables them to understand and restructure their strategies to maintain a higher employee retention rate.

When an organisation is focusing on employee retention, then it shall be fruitful in retaining the motivated and trained employees in the organisation. This will result in increased productivity and better performance in the organisation.

How to measure employee retention rate?

The procedure to measure employee retention rate within an organisation is pretty straightforward; divide the number of employees on the last day of a given time period by the number of employees on the first day. Let’s use the following example to easily explain to you the calculation of a company’s employee retention rate.

A BRH Cement – an Indian cement company – has 100 employees on the 1st of January 2019. By the end of its first fiscal quarter, the company has 105 employees, of which 10 are new hires. Across the course of the next three quarters, 25 more people were hired and as of 1st of January, 2020, BRH Cement had a strength of 125 employees.

Define The Period Of Time

Usually, employee retention rates are calculated across a period of one year; however, you can decide to calculate it for shorter periods of time as well. For the purpose of this example, we will calculate BRH Cement’s employee retention rate for the whole year

Period = 1st January 2019 – 1st January 2020

State the number of employees on the first day of the defined period

You can check the company’s payroll to find out the number of employees on this particulate date.

As mentioned in the example, BRH had 100 employees as of 1st January 2019

Total employees on the first date of the defined period = 100 employees

Determine the number of retained employees

The goal of calculating the employee retention rate is to determine the number of employees the organisation has been able to retain over the defined period of time. Hence, new hires cannot be included as part of this calculated as they will interfere with the end result.

To determine the number of retained employees, subtract the new hires from the total number of employees on the last date of the defined period. Referring to our example, BRH Cement had 125 employees at the end of the defined period (1st January 2020) and had 35 total new hires.

Total retained employees = Total employees at the end of the defined period – New hires throughout the defined period

Total retained employees = 125 – 35

Total retained employees = 90 employees

Calculate Your Employee Retention Rate

Divide the number of employees at the end of the defined period by the number of employees at the start of the defined period and multiply the result by 100 to convert it to a percentage.

Employee Retention Rate = (Total number of employees on the last date of the defined period / Total of employees at the start of the defined period) x 100

Employee Retention Rate = (90/100) x 100

BRH Cement’s Employee Retention Rate = 90%

What is the average employee retention rate in Indian companies?

There are two types of attrition in companies – voluntary and involuntary, both of which incur high costs to a company. While involuntary attrition happen when an employee is asked to leave the organisation if they are under performing or if they don’t seem fit for the role they were hired for, voluntary attrition mean when an employee chooses to step down from his role at an organisation for various reasons. Employees can choose to quit an organisation to pursue a better opportunity or to take up a better paying job or for any personal reason such as marriage or relocation.

While a good employee retention rate would be 90% or more, India has an average employee retention rate of 80-85%, which is reducing at an alarming rate.

Why does India have a seemingly low employee retention rate? According to a KPMG report, the top three reasons are:

  • Better Pay Elsewhere (28.1%)
  • Better Career Opportunity (23.4%)
  • Personal Reasons (19.6%)

If you are an Indian company and want to improve your employee retention, download our guide

What are some of the employee retention rate statistics?

The attrition rate in the Indian industry is alarming! In India, long-term employees who are retiring or leaving the organisation are replaced by younger employees who tend to change jobs frequently. It is not uncommon for a 20- or 30-year employee to be replaced with a millennial who tends to change jobs every two to three years. Even Generation X hops more jobs compared to the veteran/traditionalist generations.

The same KPMG report shows the retention rates across all the industries in India with the retail industry having the lowest employee retention rate at 81.5%.

Below is the industry-wise employee retention rate statistic for the financial year 2018-2019:

  • Retail – 81.5%
  • Insurance – 81.7%
  • Financial Services – 81.8%
  • Professional Services – 81.9%
  • Banking – 82.2%
  • ITeS – 84.9%
  • Life Sciences/ Pharma / Healthcare – 85.2%
  • Telecom – 85.4%
  • IT – 85.4%
  • Transport & Logistics – 86.3
  • Infrastructure & Real Estate – 86.7%
  • Consumer Goods – 87.2%
  • NGO/NPO – 90.8%
  • Energy & Natural Resources – 91.5%
  • Engineering & Manufacturing – 91.6%
  • Automotive Components – 92.1%
  • Automotive – 93.4%

Meanwhile, the employee retention rate at Indian startups is at a staggering 20-50%

How to improve employee retention?  Have a look at some strategies to improve employee retention rate

One consistent truth across every type of worker, regardless of age, gender, ethnicity, or geography, is that compensation is king for both recruiting and retention. If you don’t pay employees fairly, they will leave—and no perk will change their mind. This is the main reason behind the attrition in the Indian industry.

With dynamic market trends, it is in an organisation’s best interest to focus on employee retention using encouraging motivated and talented employees to remain a part of the company and contribute to its success.

Employee retention meaning and definition

Employee retention meaning and definition

For any organization, its employees are its backbone. For the growth of the company, it is important that employees give their all. But this is only possible when employees see the company as more than just a place of work and are willing to contribute their best. Many a times, employees quit their present position in an organization because they are unhappy with the environment and culture at their workplace or the compensation being offered to them.

A company can address grievances of its employees effectively and ensure that their employees do not quit. However, this takes work and strategy which fall under the umbrella of what is known as employee retention.

Let us take you through employee retention meaning and definition first to help you understand this concept in greater detail.

Employee Retention Definition and Meaning

Let us first try and understand what employee retention is. Or what is known in Hindi as कर्मचारी प्रतिधारण.

Employee retention, in extremely simple terms, may be understood as the ability of a company or an organization to retain its employees and ensure a low turnover rate. In a broader employee retention definition, this may include strategies implemented by the company or employer to keep the employees employed in the company within a given period of time. The employee retention meaning in Hindi too remains the same: strategies that keep the employees in the company for a longer duration. Employee retention is generally attributed as a function of the Human Resources (HR) department of a company which is responsible for ensuring that the number of employees leaving the company within any given period remains low.

However, it must be made clear that employee retention only pertains to the retention of employees who contribute value to the company. Low-performing employees and top-performing employees in a company are not valued at the same level. Therefore, employee turnover is also a function of the performance of the employees.

Read: Employee retention facts and trends

Why is Employee Retention important?

For any company, employee retention is an extremely important factor in ensuring the growth of the company as a whole. There are several reasons which make employee retention important for a company and some of these are as follows:

Value of the employee

Employees are an asset for any organization, contributing to its growth. The longer an employee stays with a company, the more value they create for the company. Since longer serving employees are more familiar with the company’s systems, work culture, goals and targets, they are more driven towards helping the company realize its goals.

The financial cost to the company in replacing an employee

The financial cost of replacing an employee in the company adds to the costs incurred by the company in any given period. According to a 2017 study by the Work Institute, the cost of replacing a mid-level worker in a company is at least 30-40 per cent higher than the existing salary of the employee who quit. Another report by Perito mentions that the average cost of replacing an employee of India can almost be ten times as high as the salary of the replaced employee. This is because of the various costs involved in looking for a suitable candidate
which include the cost of advertising, conducting interviews, background checks, training costs, bonus and incentives to the new employee, etc.

Employee morale

Low turnover rates also speak for the company’s work culture, which in turn affect the employee morale. If a greater number of employees continue to quit the company frequently, it creates a negative attitude among the remaining employees. This dwindling morale also affects the productivity of the workers and the overall work of the company. On the other hand, the high retention rate of the company promotes the confidence of the
employees in the company. Employees in companies with high retention rates are more confident that the company is willing to take the necessary steps to keep their workers happy.

Boost to the company brand value

The higher the retention rate of employees in a company, the greater the boost to the brand value of the company. It creates a perception in the job market that the company values its employees and makes the company a sought after the name to work with.

Want to know more about retaining your top performing employees? Get the complete guide to employee retention

How to measure employee retention

Given how crucial employee retention is for an organization, measuring it through verifiable metrics is an important aspect. The calculation itself is not difficult and can be done periodically to assess the effectiveness of various initiatives taken by the organization.

Basic formula

The simplest formula for how to measure employee retention rate requires the division of the total number of employees who quit the organization during a given period by the total number of employees at the end of the same period. The percentage obtained is an effective employee retention rate.

Let us understand this with an example. Say an organization has 100 employees in the first quarter (Q1). In the same quarter, seven employees leave the organization. Then, the employee retention rate will be calculated as follows:

Employee Retention Rate  = Total number of employees – Number of employees who quit

Total number of employees = 100, Employees who quit = 17

Employee retention rate = (100 – 17) x 100% =  83 %

The Data Set
The first step towards calculating employee retention is collating the data. For this, there are two methods. One is the regular collection of data about all employees who join the company as well as employees who leave the company. The other method is to go through the records of the company for the period for which the employee retention rate is to be calculated.

A complication in the data collection for the calculation of the employee retention rate arises from the change in roles of employees. If the calculation is to be made department-wise within the company, for the same employee to have changed roles within the company creates a duplication. In such a case, only the last held position of the employee is to be taken into account as this provides accuracy to the calculation.

How to improve employee morale and retention

Improving employee retention rates is always a challenge for companies, and it is an important one for the growth of the company. Employees leave companies for a variety of reasons and dissatisfaction with their salary is just one of these. This is why it is important that companies work towards understanding the reasons which push their employees to the brink of considering quitting their jobs. Working on these will reduce the turnover rates and improve the employee morale, which in turn will go a long way in boosting the employee retention for any organization as well. Here are some tips on how to improve employee morale and retention:

Communicate effectively

Communication gaps between the employees and the employers can significantly affect employee morale and also whether employees want to stay on in the company or quit. Allow employees to express their opinions on work-related issues with frankness so that any grievances or miscommunication can be addressed at the beginning. Pass information clearly and create a work culture where junior employees are not hesitant to approach their seniors to ask for clarifications or more information. If there are any grievances from either
side, they must be addressed clearly. Clear communication, ethical behaviour, and positive work conditions go a long way in improving employee morale and hence, the retention rates.

Work towards ideal salaries and perks

In the 2019 Randstad Employer Brand Research report, it was found that 33% of the respondent employees left their jobs due to inadequate compensation. When workers feel that they are not being paid in proportion to the contribution they are making to the organization, they are bound to feel dissatisfied. Appraisals and reviews not resulting in salary increments as expected by the employees also contributes to this feeling. A structured
system of periodic performance-based or tenure-based salary increments is an effective way for organizations to boost employee retention. At the same time, perks and annual bonuses create attractive incentives for the employees to stay in the company over the long term instead of considering a job change.

Create a flexible work environment

Flexible work environments are excellent morale boosters. Be understanding of the requirements of your employees. Rather than enforcing office timings, if an employee seeks to work from home on account of pressing circumstances, allow them to do so. In the recent coronavirus outbreak, major private sector companies in India allowed their employees to work from home to prevent the spread of the disease. This is an apt example of companies taking the extra step to protect their employees which the latter will surely appreciate.

Encourage teamwork

When people work together as a team, it creates bonding and. A culture of collaboration and cooperation results in a healthy work environment where workers are happier and more satisfied with their work. Apart from teamwork within the office, also organize group outings such as a picnic or a tennis match where colleagues can get together and socialize and feel a greater affinity towards each other as well as towards the organization.

Acknowledge and reward achievements and milestones

Everyone craves appreciation for a job well done, and it is the same for the employees in a company too. Reward employees for targets achieved not just to encourage then but also to encourage the other employees to emulate the achievements of their colleagues, An even a better way would be to incorporate a system in place where achieved milestones, such as achievement of targets or completion of a specific number of years in service automatically qualifies an employee for promotion or a salary increment.

Do read: Top 9 employee retention strategies

Clearly, employee retention is an aspect every company must pay more attention to. The more willing employees are to stay on in the company, the greater their contribution will be towards the growth of the company. Regardless of their size, companies must seek to ensure that they take the necessary steps to hold on to the value-contributing employees. There will be some turnover, but a lower rate is in the larger interest of the company in the long run.

Employee retention facts and trends

Employee retention facts and trends

The corporate doesn’t operate the same way it used to anymore. The rule of the law that used to govern the corporate has changed. There are certain factors that have contributed immensely to these changes. Some of which include the complete overhaul of the technological landscape, exciting and sometimes borderline strange employee demands, and societal expectations among others.

As a business in the corporate world, you know how important employees are and how important it is to keep them happy and content. However, this is easier said than done. Employee retention in India is not easy, more so because we have so many startups that are backed by renowned investors springing up every other day. So, in order to retain your employees, you need to first listen to them. You need to show them that you want them to continue working with you. You need to take them into confidence that you are willing to do everything to keep them. But, there are not many companies in India that are ready to go that extra mile. They don’t understand how important employee retention is to their long-term success. No wonder a lot of businesses have to shut their doors even before they start to find their footing.

All is still not lost. There are ways that can help businesses in turning the tide in their favour. The biggest thing that businesses need to show is that they value their employees and that they are ready to do everything that is required to reward them. Best companies are those that don’t give their employees any reason to look elsewhere. If you are willing to respond to your employee demands, those that are justified, you will have little problem in retaining them. You need to understand that no employee wants to leave a good employer. It is only when an employer pays no heed to heed to an employee’s demands that they start looking out for other opportunities.

You can’t get caught off guard as an employer. You need to always stay ahead of the trends. Let us now set the context straight. Let’s put before you employee retention trends and statistics that will help you better understand your workforce perception and come up with an actionable plan to not let your performers drift away.

What are some employee retention facts you should know?

The things you need to do to keep great employees or stop that from leaving can be unsolved mysteries if you are not aware of your company work culture, or if you are still building on your business. We are going to put before you a few surprising facts and then discuss employee retention analytics based on those.

  1. Forbes studied a number of surveys done recently in India to understand employee retention KPIs. What it found out was unexpected, to say the least. The cumulative study of these surveys revealed that over 50% of Indian employees are considering leaving their jobs. Out of these, more than 65% of the employees belonged to the below 25 years age bracket. These figures aren’t too promising in today’s India where the startup revolution is at its peak. Now, startups are looking for young talents, but only those that are willing to stick with them for a few years. And well, they have their work cut out. Investors don’t put money on businesses that see high attrition.
  2. HireRight published its India Employment Screening Benchmark Report 2018 to give employers valuable insights into how employee retention works. The report featured a survey that gained inputs from 6,000 HR professionals. We are only going to talk about the biggest takeaways of this report here. 85% of Indian organizations were considering hiring more people. This figure for the entire APAC region was 77%. So, Indian companies seemed more intent on freshening up their teams than their counterparts in the Asia Pacific region. Another important finding was related to hiring expectation and employee retention. Nearly half of the companies that were spoken to during the surveys pointed towards investing more money in retaining their staff. This figure is more than double of what it was when the survey was last conducted in 2017.
  3. Finding a fitting replacement for an existing employee that could leave you is a big investment, both in terms of cost and time. A lot of time and money goes into finding the right talent for your needs. You need to advertise vacancies, get in touch with recruitment agencies, screen and interview the candidates, and then finally hire a candidate. Onboarding is another important part of the process. A study by Employee Benefits News reveals that when a company loses an employee, it bears a loss that is equivalent to nearly one-third of that employee’s annual salary. So, when an employee leaves you, it isn’t just a resource that you no more have access to, it is as much the cost associated with it. The easiest way to do away with these concerns is to retain your employees by providing them enough reasons to stay loyal.
  4. Employees that perform want to be recognised for their efforts. If they aren’t recognised or rewarded, they are highly likely to look out for a new job. According to data released by TINYpulse, only 12.4% of employees that are recognised for their efforts start looking for a job whereas 21.5% of employees that aren’t recognised prefer switching their job to a better option than continuing in their current company. If employees get validation for their work, they are more than willing to stay. Employees that are appreciated by their managers are far more likely to continue with a company than ones that are seldom acknowledged. Similarly, employees who are assisted by their managers in managing their workload are more likely to stay. According to TINYpulse, only 13% of employees who receive regular recognition from their managers look for a change in employer. The figure stands at 24% for the employees who think they don’t receive recognition regularly enough from their managers.
  5. Employers that don’t pay too attention to the work-life balance of their employees, pay the ultimate price by losing them. It has been found that employees that value their personal life as much as they value their professional life are likely to stay with a company that helps them in maintaining this balance. In a study conducted by Kronos, it was revealed that 95% of HR leaders agree to the fact that employee burnout is seriously hampering retention. Whether or not they are allowed to work remotely on some days or in certain situations and whether or not their work hours are flexible are factors that employees consider when choosing to stay or move on. Let your employees maintain a work-life balance and focus as much on their personal lives as they do on their professional lives. You will start seeing great results very soon.
    Employers that empower their employees give them another reason to stay. According to TINYpulse, employees who have complete control of their professional careers have a 20% higher chance of staying with their existing company. Employees that are clear about the direction their career is taking, and are aware of the support and guidance from their leadership, are more loyal.

Employee retention trends in different companies

Well, you need to understand that there is a lot common between employee retention and being a company that everyone wants to work for. Let’s take a look at some companies that have done really well in keeping employees happy. Future Magazine named Google as the best company to work for, again. It is the sixth consecutive year that Google has topped this list. Its attrition rates are not as high considering the huge size of its human capital.

So, what does Google or Facebook for that matter do to keep employees happy? They employ a set of straightforward strategies to not let their employees run out of the door, if you like. One of the things that hiring managers at Google or Facebook do is take their time when hiring a candidate for a role. A big reason that people want to leave your company is because they don’t fit the job profile or role. Hiring done in haste often leads to repeated training and manager-employee frustration among other things.

It is very important to have a hiring plan in place that mentions the required qualification, skill set, experience, and other things that a hiring manager needs to look for before giving a candidate a heads-up. Google posts about 5,000 jobs every year. Over two million candidates apply for these. However, Google gets its hiring right every time of asking because it follows an exhaustive recruitment process.

Give it a read: Complete guide to employee retention

How do companies use employee retention analytics to improve retention rates?

Let’s take you back to the first quarter of FY 2019-2020 and see what top IT companies had posted regarding their attrition rates in that period. Cognizant reported a jump of 4% from 19% in the last quarter of the previous financial year. Infosys reported an increase of 3 % from its attrition rate of 20.4% in the period from January-March 2019. Wipro did comparatively better than its counterparts in this regard. Its attrition rate saw a jump of only 1% in the last 1-1.5 years. What did Wipro do that the others couldn’t?

This is what data analysis and employee retention all about. You work on the previous data and try to bring in reforms to make your employees stay. So what Wipro did was it brought out certain initiatives to reward performing employees. At the same time, it started reskilling its employees. It had learnt its lessons. That’s why it gave its junior level employees a retention bonus of Rs.1 lakh. That’s how it was able to retain its employees. It wasn’t doing as well in terms of retention about 18 months from when these figures were reported in the first quarter of FY 2019-2020.

This is what Ayaskant Sarangi, Senior VP (HR), Wipro had to say about these employee retention efforts, “We recognize the contribution of high performers by offering them better opportunities and substantially higher increases. They are rewarded with promotions and managerial roles where they are entrusted with team-leading responsibilities. We also offer them opportunities in client-facing roles.”

Infosys is also learning to make better use of employee retention analytics after the period of its well-documented struggle with keeping employees. According to Salil Parekh, CEO and MD, Infosys, the company has formed a task force, which will be working under COO, Pravin Rao, to turn its retention situation around. The task force will be responsible for preparing a list of actions, which will be put to work in the next few quarters.

Cognizant also learnt from its mistakes and was quick to make amends by setting up a transformation office for reviewing factors that can help them in improving upon their employee retention rates. It has upskilled and reskilled nearly 150,000 employees in the last year or so. It also released retention rewards worth $48 million to not allow great talent to leave.

Also read: Top 9 employee retention strategies

Conclusion

Many companies pay all the attention to their bottom line, in order to maximise their growth. However, there are other things as well that need as much attention, if not more. These companies need to realise that the most important asset of their businesses are their employees. Employees that work with all honesty to achieve the goals set by a company can ensure long-term success. So, need to focus on employing employee-first approaches to retain their best resources.

EQ – The need of the hour for leaders

EQ – The need of the hour for leaders

What comes to your mind when you imagine the ‘ideal’ leader? The ideal leader is someone who doesn’t let his temper get the better of him no matter how complicated the situation is. The ideal leader is also the person who leaves their doors open to communication with everyone and anyone in their team – they are ready to listen – they have the complete trust of their team members – and they make informed decisions keeping in mind the interests of all the people involved. Well, if you look at it generally, you won’t find anything special about these qualities, but there is more to these qualities than meets the eye. A deeper understanding would lead you to an essential quality that a leader must have in this day and age. We are talking about emotional intelligence, which is most commonly referred to as Emotional Quotient (EQ).

You can take courses and join training to develop your technical skills and move ahead in your career. But, there comes a point when your technical skills aren’t enough. At this point, you are required to showcase your leadership skills, of which EQ is a big part. In simpler words, it is man-management. You need to be emotionally involved with people you work with. By doing this, you will be able to deliver feedback, coach teams, manage stress, and collaborate more efficiently. Before we move any further, let us first understand what EQ exactly is.

What is emotional intelligence or emotional quotient?

Simply put, EQ is the ability of understanding and managing emotions, both your own as well as of the people around you. This term came into being in 1990 and was first used by researchers Peter Salovey and John Mayer though it was made popular by psychologist Daniel Goleman.

Goleman had this to say to the Harvard Business Review about emotional intelligence’s importance in leadership, “The most effective leaders are all alike in one crucial way: They all have a high degree of what has come to be known as emotional intelligence. It’s not that IQ and technical skills are irrelevant. They do matter, but they are the entry-level requirements for executive positions.”

Goleman was right. EQ has emerged as a must-have quality that separates great leaders from ordinary ones. In research done by TalentSmart, it was found that EQ is the aptest indicator to gauge performance. A survey conducted by CareerBuilder to study the impact of EQ provided us with some interesting insights into the minds of hiring managers. Of all the employers who participated in this survey, 71 percent said that for them EQ is more important than IQ as people with a higher EQ are more likely to show empathy while responding to colleagues, stay calm under pressure, and resolve the worst of conflicts more effectively.

What is EQ in leadership?

To begin with, leaders with high EQ are considered better change agents – they are better at connecting not only with their team but anyone who has anything to do with their company. There is a huge misconception that only emotionless and ruthless leaders can get their teams to work and drive businesses forward. Everyone has a different personality and qualities. You don’t just have to portray yourself as a leader to the world; you need to be a leader from the inside. That’s how it works.
A business isn’t just about revenue generation and investments; it’s more about relationships. If you have a leader who shares a great relationship with the team, you won’t have any trouble. When you have a leader who knows how important it is to be emotionally involved with the employees, you will have more loyal employees who will happily stick with you for years on a stretch without complaining.

Leaders with high EQ see business as a love affair with their team members and other people involved. These leaders love what their work and the people they work with. These leaders lead by example, respect the values of everyone involved, build trust, are determined, are motivators, are optimistic, and are empathetic. They address the needs of their people and ensure that they do everything in their power to fulfill those needs. When you invest in leaders with a high EQ, you can expect great success in the long run.

Emotional intelligence allows leaders the power to make employees aggressively and collectively perform towards achieving a common goal. When the employees believe that their leader is on their side, they would listen to everything he says and do everything he asks them to. A great example of arguably the greatest leader in sporting history is Sir Alex Ferguson. He managed to stay at the helm at Manchester United for as long as 26 years and won everything there was to win in this period. How did he manage to do that? He was emotionally involved with every player. He managed some of the biggest egos in the sport and made them all believe that winning is a habit. No wonder he and his Manchester United teams were so successful.

Why is EQ important in leadership?

Emotionally intelligent leaders create safer working environments in which employees thrive. Employees openly communicate, share ideas, and take risks in such environments. This leads to the building of organizations that have collaborative working ingrained in their culture.

An emotionally intelligent leader has what it takes to take an organization on the path to success. When they bring about necessary changes for the betterment of the organizations and their people, they take into account the emotional standing of each and every employee and how they are going to react to those changes. They are better prepared to deal with adverse reactions.

Leaders with high EQ are so successful because they don’t take things personally. They are always thinking a step ahead and don’t allow small things to trouble their egos in the slightest. While personal vendettas between employees and leaders are amongst the most common hindrances to efficiency and productivity in organizations, emotionally intelligent leaders ensure that nothing of this sort ever happens in their teams.

There are so many organizations that continue to struggle out there, even with all the experience and technical know-how they possess. The biggest reason for their struggles is that they don’t have emotionally intelligent leaders at the helm. Organizations can enjoy several benefits when they have emotionally intelligent leaders calling shots.

  • You will see better engagement in the team. Teams that don’t go along too well or don’t go along at all with their leaders find it very hard to capitalize on the benefits of working as a team. A leader that is emotionally connected with the team will never let this happen.
  • You will have a great company culture. Organizations that think they have a great company culture are often miles away from reality. The common feeling in their employees is not the same. Experts believe that the relationship between leaders and teams only thrives when there is a culture of high trust and openness. Leaders with high EQ promote open communication, which eventually leads to the culture that organizations want to achieve.
  • High-performing employees. Employees that are trusted by their superiors and aren’t subjected to negative emotions, perform at a very high level. All these benefits that we talked about have one thing in common – emotionally intelligent leaders. These leaders manage their own energy and encourage as well as reward people displaying positive energy.

What are the 5 characteristics of emotional intelligence?

A. Self-awareness:

Self-aware people are always in sync with their emotions, and know-how their emotionally-driven actions can affect the people around them. A self-aware leader knows about his strengths and weaknesses, and also how important it is to behave with humility. Here are a few things you can do to become more self-aware:

  1. Stay calm. It is not easy when emotions are running high. But, that’s how you are going stand in a crowd of ordinary leaders as a great leader. Whenever you experience strong emotions, don’t react. Take your time and examine how you can deal with the situation in a better way.
  2. Keep a journal. Many people have used this method to improve their self-awareness. Write down your thoughts every day and analyze them. This is how you are going to reach a higher level of self-awareness.

B. Self-regulation:

Always stay in control of what you are going to say and what you are going to do. Leaders who exercise self-regulation never make emotional decisions, compromise their values, verbally attack people, and stereotype people. So, what it is that you can do to improve self-regulation?

  1. Accountability. Take accountability, never blame others. It takes a strong personality to accept mistakes knowing the consequences. But, that’s what makes a strong leader who commands respect from everyone around him.
  2. Understand your values. Spend some time knowing and understanding the values that are dear to you. Are there things you are never going to compromise on? What about your code of ethics? Finding answers to these questions will help you make correct ethical decisions and be on the right side of morality every time of asking.

C. Empathy:

Leaders with empathy are critical to managing an organization or a team the right way. Empathy lets you be in the shoes of someone else, which in this case could be employees. Leaders with this quality play a crucial role in developing the members of their team, providing constructing feedback, listening carefully to what others have to say, and challenging those who aren’t fair in their actions. If you want your team to be loyal and respectful to you, you have to empathize with them whenever required. What can you do to improve empathy?

  1. Understand the importance of body language. When you are listening to people, don’t ever behave as if you aren’t interested. You need to make them comfortable and give them the impression that you are willing to listen to them. Imagine how you would feel if someone did the same to you. Would you ever talk to them again? And listening properly and maintaining the right body language also allow you to prepare a proper response.
  2. Put yourself in their situation. Everyone can support their own point of view. It is the easiest thing in the world. But, leaders need to look at situations from different perspectives.
  3. Respond to feelings. Never let your team feel that you don’t understand how they feel. If you ask one of your team members to stay late, and they agree without sounding too happy, you shouldn’t ignore that disappointment. Tell them you are very happy to see their willingness to work extra hours. Also, if it was a last-minute call, make sure that you inform them at least a day in advance so that they are well-prepared.

D. Motivation:

Self-motivated leaders don’t need outside help perform consistently at the highest levels. They set high standards of quality and commitment for their teams. Here is what you can do to improve motivation:

  1. Find out why you are doing what you are doing. With all the demands of corporate life, you might end up forgetting what you love about your career and how excited you were about this job. If you are struggling to find out why you got into this job and why you should continue, try and get to the root of the problem to start seeing your situation in a completely new light. Make sure you keep motivating yourself by refreshing your goal statements.
  2. Find out where you currently stand. Are you motivated enough to lead a group of people? Look for resources that can help you increase your motivation. Look for things you can do to start afresh – Things that have worked wonders in the past too.
  3. Hope is the key. If you lose optimism, nothing in this world can help you find solutions to your problems. Motivated leaders never lose hope and are always prepared for the worst. They also know what they need to do to get out of that muddle. Every failure or challenge brings with itself the opportunity to look at the positive side of things. You just need to be optimistic enough to look the way that no one else is.

E. Social skills:

Leaders, who are good in social skills are often great communicators. Good news or bad news doesn’t matter to them. All they care about is getting their team ready and excited about working on a new project or achieving objectives. Leaders with these qualities are also very good at resolving conflicts and getting their team to come to terms with changes. How do you improve your social skills?

  1. Improve your communication skills. You will be able to resolve 90 percent of the issues in your team if you are an excellent communicator. Work on your communication if you want to be a good leader.
  2. Learn to resolve conflicts. If you want to be a successful leader, you need to know how you can resolve conflicts between your team members, vendors, customers, and other stakeholders.
  3. Learn to praise people. Praise people, who you think, deserve mention. There is no wrong in appreciating people’s efforts. This also makes your team loyal to you.
Should you hire for a cultural fit

Should you hire for a cultural fit

Cultural fit is quite popular in today’s date in the HR industry, not only in conversations among the human resources team but is also being used as a replacement for what was known as the gut feeling factor in the old hiring process. Many times we miss out on a key individual who could have been an asset if we had hired them.The job market is becoming increasingly competitive, and the job cultures are turning diverse. At this time, hiring the right people is more important than ever before, because, a candidate once rejected will not turn back to you.

 

What is Cultural Fit?

Google defines cultural fit as when the core values, beliefs, and personality of the candidates match those of the company.

However, it is believed that cultural fit is a ‘myth.’ When hiring a candidate, the most important thing to check is his or her knowledge and exposure. A candidate lacking from a western country with expertise in the same domain will fit better in your company rather than a native guy with poor skills.

“Culture fit” as a term is defined as how well someone “fits in” to the organization by hiring managers and firms. Moreover, when you talk about “fitting in,” it is easy to relate that term the same way we think about “fitting in” socially—hence many companies think the best way they can do is hire candidates they can chill around with. This definition of “culture fit” is mostly flawed and can lead to bad hiring practices.

“Culture fit” is just about one thing and one thing that should only matter to you is- how well the individual will do their job within your specific organization. Furthermore, your organization is much more than just happy hours and social gatherings.

However, It is important to make cultural fit checks in the candidature before you hire them and invest your time in them. It is more relevant for the employee and the employer if their values, beliefs and personality match. However, basing your decision wholly on it will be a bad idea. In this piece, we will analyze both sides of the coin and will leave it on you to take a call.

Employee wellness

A positive environment in the workplace helps retaining employees for a more extended period and improves employee self-esteem, which results in high production and decreasing recruitment cost. The healthy environment in the office improves employee’s confidence in employers and creates healthy competition among employees. Well, all of that is possible only if you have a ‘cultural fit’ candidate, and there are no inner conflicts of interest between the employees.

“We have clients that range from 40 people to 70,000 +. They vary wildly between business type, industry, and technology. The one unifying factor is the need for a unified culture. I have seen a lot of unique hiring processes, but companies mainly focus on culture. In the recruiting role I get to speak with dozens of individuals every day and hear about their job search and experiences,” said Andrew Rangel, an IOS developer trainer, who deals with new candidates all the time.

“We specialize in IT recruiting, so skill is very important to the role. We have several individuals that fit the skill set and the job description to the “T”. They were perfect fits for the opportunity. They went through the rigorous three + stages of interviews but were not given offers. Why? They simply were not good fits for the culture. Even though IT is in high demand and currently their unemployment is in the low 4%, companies are still willing to turn down individuals that do not fit the culture,” he added, explaining how sometimes cultural fit can be so important.

False pretention

When the market is largely down, and the country is dealing with a high unemployment rate. It usually happens that the candidates end up faking and making things up, which does not go with their personalities during an interview. However, you think it’s a match based on their views and values they told you about them in a 30 or maybe 40 minutes interview, and you end up believing in that.

Fake pretending ‘cultural fit’ can end up causing extra harm to your organization than you expected from the team of cultural fit employees. It is a fact that employees whose ideologies do not match with what of their employer, usually end up leaving the job, which directly and indirectly affects both the parties. The fewer similarities between employee and employers in what drives them

Monotonous Work life

Diversity at a workplace is essential. People from different backgrounds and age groups bring variety to the work, and each serves a new dish on the table with their diversified perspective. Hiring people with the same mindset, values and work ethics is similar to employing one person, over and over again. This not only brings monotonous rhythm in the work environment but also affect employee engagement. The main problem with hiring for cultural fit is, people tend only to hire people who look and sound alike. Instead, a team should be of differing perspectives but shared values.

Hire and exchange value

No one is born with cultural values. We adapt it from the environment we live in, and we shape ourselves that way. An employer when hiring an employee should be open to change in order to add assets to its team instead of bringing in a ‘cultural fit’ liability.
The culture in business changes depending on the need of people in the business at any time — it is not static. Instead of matching candidature to an existing employee, HR should look more closely at the communication style, values, and interests that might contribute to an organization.

Hire based on their academic credentials, professional experiences and references, or maybe technical skillset? Those certainly offer a great starting point rather than ‘cultural fit’.

Slow growth

According to Forbes, focusing on cultural fit leads you to hire in a bunch of candidates who think in a similar way as your existing staff. Reports have proven that once a company goes public, employers that hire on cultural fit actually grow slower than others because they struggle to bring innovative ideas on the table. The company, instead of hiring for people who fit the culture, should rather ask themselves what is missing from their plate, and select people who can bring that in the team. Also cannot ignore the impact on team morale and loss of productivity.

However, one can smartly think about cultural fit when hiring, but that does not mean you should be hiring clones of your current team or one “type” of a candidate. Diversity is necessary, and your culture can include lots of different personality types.

‘Team fit’ not ‘Cultural fit’

The candidate should be a team player. Moreover, when I say team player, it does not mean he should have told you that in his biography, instead of test it by various examine skills. Wether be Start-ups or a Full-grown firm it becomes impossible if you do not work well with the teammates.

Instead of being in trouble by hiring “fit”, companies looking to make more teams with diverse background are better off thinking about “culture add”. What can a person bring to the table that will add to your company culture and help you make a right move in the right direction?

This paves the way for organizations to engage with candidates from diverse backgrounds and demographics and lets them think outside the box when they are building out various teams.

Culture Fit Matter?

Yes, it does matter, but we believe your decision should be partly based on it because you hire someone for working and really not for dating. Now, why is it essential- An employee spends a substantial portion of their lives dedicated to the workplace. If they do not love the work they are doing and the environment, people they are working with, that can quickly spiral into an undesirable work environment.

If you are looking to build, it should be done with intention and your current culture in mind. Otherwise, you might take the risk of a bad investment and hire someone who would be a liability.

Points to keep in mind when hiring ‘Cultural fit’

  • Hiring someone is a significant investment; make sure you get it right for the first time. Run through rigorous training and test the skills using different tests instead of relying on words.
  • No hurry! A lousy fit can ruin your current employee morale and team momentum. Make sure you do all the check before letting someone in your company.
  • Try to talk more about their experiences rather than sticking to formal questions. Make them comfortable so they can talk their heart out.
  • Explain to them your company work culture, do not hide anything- at the end of the process, you gonna be in the same building you cannot escape.
  • Look for a counterpart, look for something that is missing in the team. Just like all the spices make a perfect curry, your team needs to be diverse but united when putting together.
  • Do not hire a clone of your current employee. If you eat the same food daily, you will end up hating that food for the rest of your life. Everyone is different, try new stuff, bring on creativity.
  • Ensure you have set your values and the candidates meet the maximum of it, if not all.
  • Ensure to have a solid one to one induction process where the employee can understand the company, instead of sending them to a random table with computer and unknown people around them.
  • Everyone appreciates a followup- once an employee joins, try taking feedback on how they are settling in.
  • Feedback just not from the new joinee, but your current team is equally important- their views definitely matters, keep them in a loop like a team.

It is very important to hire candidates you think will be happy working at your organization, and whom your current employees will enjoy working alongside- in the end they are equally responsible for your success. However, it is easier said than done. It seems that a fool-proof approach does not exist- what does exist, is good advice from experienced people in the field. Hopefully, the insights in this article have given you a clarification on whom to hire and what to take care of.

We are always open to feedbacks and queries, would be happy to help if we can, in any way. Please comment or reach out to us via the contact section on this site. Share within your HR network and let everyone know what to hire?