One in three New Zealand workers is currently thinking about quitting.
Turnover is a significant issue for NZ businesses, not least because of the price: as of 2022 the average cost of hiring a new employee - taking into account recruitment expenses, onboarding and training, and the loss of knowledge and productivity - was $23,860.
The good news? Leaders are in a uniquely powerful position to reduce employee turnover rates and improve employee engagement and loyalty.
By being a better leader, you can make your employees feel valued and motivated, making them more likely to stay.
In this guide we'll drill down on the link between leadership and team member retention, to understand how you can boost your ability to retain your best employees, and empower those workers to be more productive and effective than ever before.
The link between leadership and employee retention
Leadership and employee retention share a deep connection - one that is well-documented:
Companies with effective leadership retain 50% more employees compared to those with poor leadership practices.
94% of employees say they would stay longer at a company with strong leadership.
Leadership development programs reduce turnover by 32% and increase productivity by 10%.
These stats make intuitive sense. Leaders have control over the work environment, and set the tone for the organisation at large. When the workplace is a nice place to be, workers will naturally want to hang around longer.
Employees don't want to feel like numbers or cogs in the machine. In order to invest in an employer long-term, they first need to feel as though the employer is investing in them.
By training and coaching workers, by prioritising work-life balance, and by encouraging open communication within the team, leaders can boost morale, show employees that they are valued, and ultimately improve their ability to retain the best.
Key leadership qualities that enhance retention
Leaders who retain their employees tend to have a few things in common. Here are four qualities that separate the best leaders from the rest.
1. A focus on employee wellbeing
Leaders who prioritise employee wellbeing create a more supportive work environment. A focus on work-life balance - through initiatives like flexible work arrangements, one-on-one check-ins, and mental and physical health programs - can help to reduce burnout and improve employee morale.
Less than 20% of NZ businesses say that they intentionally avoid overburdening employees to create retention amongst staff, so this is an area of opportunity for any employer looking to attract and retain the best talent.
2. Commitment to career development
Employees value leaders who invest in their professional development and provide clear paths to career success. Most NZ companies recognise this fact, with around 83% of local employers offering some form of training, coaching or development to their workers.
These programs can take the form of free or subsidised education, mentorship programs, or hiring internally to show workers the rewards for sticking around.
3. Recognition and feedback
Everyone likes to be recognised for a job well done. And it doesn't really matter what form the appreciation takes - formal recognition in an email or at a meeting, rewards and prizes for a job well done, even a simple pat on the back - the point is that the worker feels seen and appreciated.
A long-term study of 3500 workers found that in NZ, well-recognised employees are 45% less likely to have turned over after two years. Great leaders intuitively know this, and don't hold back in recognising great work.
4. Open and honest communication
When a leader demonstrates openness, honesty and transparency in their communication, they create an environment where employees feel valued and heard, where everyone enjoys more empathy and support, and where disruptive rumours never spread.
Pay is an interesting transparency topic. While leaders are naturally inclined to keep salaries and wages under wraps, the data tells a different story: employees who work for the most transparent organisations regarding pay are 65% less likely to leave than employees of the least transparent organisations.
Leadership styles that improve retention
Every leader will bring their own unique style to the table. But if you're not sure exactly what yours is, or if you want to enhance or add dimensions to the way you lead, inspiration can be taken from the following styles:
Transformational leadership: Transformational leaders inspire employees with a clear vision of the future, and how both individuals and the team will get there. This type of leadership encourages personal growth and creates a sense of purpose, helping to make workers feel valued and motivated.
Servant leadership: This leadership style puts the focus on the wellbeing of employees. Their needs are prioritised, which helps to build a foundation of trust and loyalty while reducing instances of burnout.
Coaching/supportive leadership: Coaching leadership demonstrates your commitment to the skills improvement and career development of your workers. These leaders will spend a lot of time mentoring their team, and will promote internally wherever possible, to show employees that they can turn a job into a career if they hang around.
Consultative leadership: A consultative leader actively seeks input from employees on key decisions. While the leader retains the ultimate authority and makes the final call after considering the input, this leadership style strikes a balance between collaboration and decisive control, often used to encourage engagement while ensuring clear direction.
Authentic leadership: Authentic leaders work to build strong relationships through transparency, integrity and consistency. They lead by example, they do what they say they will do, and they honestly answer any question that is put to them.
These different leadership styles don't exist in their own siloes. The most effective leaders will maximise employee retention by mixing and matching a number of different styles based on the needs of their team.
Practical steps to foster strong leadership
You understand the role of leadership in employee engagement and retention, so you've decided to become a better leader. That's a great start, but actually achieving that goal will require the investment of time, effort and resources. You'll need to work with HR and other stakeholders to develop a strategy that will impact your team in all the ways you need it to.
Here are a few practical ways you can improve your leadership skills:
Leadership training: Undertake formal programs to develop core skills like communication, decision-making and emotional intelligence.
Mentorship and coaching: Just as you plan to mentor and coach your employees, find a veteran leader who can do the same for you. Tap other leaders within your organisation or professional network for advice on how to better engage and retain your workers.
Feedback: Solicit feedback from your workers on how you can improve your leadership. Anonymous employee surveys are an effective option, as they allow your team to speak openly and honestly about your performance.
Model proper work-life balance: Show employees that it's OK to maintain a healthy work-life balance by capitalising on flexible work arrangements yourself, or setting healthy guidelines on communication outside of work hours.
Case studies and success stories
A mixture of poor management and staffing retention issues had led Scafit, a scaffolding business operating out of Palmerston North, to the brink of collapse. But having recognised these issues, they went about rectifying them:
They implemented leadership development programs to upskill managers and identify future leaders.
They created an in-house training program that was available to any employee who wanted to upskill.
They established a comprehensive wellbeing program, including health insurance, mental health support and career development opportunities.
As a result, Scafit saw significant improvement in employee absenteeism, satisfaction and retention, and internal promotions only strengthened this culture change over time.
At Waste Management Hutt Valley, meanwhile, management saw an opportunity to give workers more ownership and agency over workplace health and safety. Doing so transformed the company culture - where staff were once hesitant to raise health and safety issues with leaders, they now feel completely comfortable, as they're treated as the stakeholders they are.
The result: a business that once struggled to retain staff has had zero employee turnover for the last four years.
Leadership: the key to employee retention
It's simple: great leaders attract and retain great talent. If your best workers are feeling unsupported, unrecognised or unfulfilled, you'll soon lose them to an employer who ticks those boxes.
An investment in yourself as a leader is an investment in your team and organisation at large. And there's no better time to invest than right now.
1Team can help too. We give you the power to deliver a range of perks, such as savings from New Zealand's leading retailers, to your high performing team members, through an app that has been tailored and branded specifically for your business.
Ready to become a better leader, and reward and retain your best workers? Get started today.
