Article of the week 12 – 2023

Does employee retention make sense in an employee market?

There is ubiquitous talk of a shortage of skilled workers and an employee market. But what is the significance of an employee market for companies and particularly for employee retention in a personnel-intensive area such as customer service?

What does „employee market“ mean?

Like other economic markets, the labor market is defined by supply and demand. A worker market is said to exist when there are not enough suitable applicants for employers‘ current job openings. This means that workers have a greater choice of suitable jobs, and thus have a stronger bargaining position with their current or potential employer.

The main reason for this trend is primarily the demographic development of the countries. In Germany alone, a total of 8.7 million more people will leave the labor market than enter it by 2040. This means that fewer and fewer people will be available for the jobs on offer. 

However, many companies are already looking for suitable specialists and managers and are trying to use all possible channels to find the right candidates. In addition to the search for suitable new candidates, however, it should not be forgotten that sustainable employee retention is a more than suitable measure to counter this employee market. 

In general, all companies know that acquiring new customers is more expensive than retaining existing ones, and in customer service organizations it has long been known in the retention area – and also substantiated by several independent studies – that it is five times more expensive to acquire a new customer than to look after / retain an existing customer.

Employee turnover and retention

In terms of employee retention in companies, it can be said that the cost of replacing an employee is twice as high as retaining an employee. Knowing these facts, every company should therefore place a significant focus on employee retention in addition to active recruitment. Recent studies by SAP and Oxford Economics have also found that less than half of top performers are satisfied with their jobs, and one in five say they may quit in the next six months. Costs can thus quickly skyrocket for companies that do not actively invest in their workforce. We also currently see this risk particularly in service organizations, which are trying to address existing attrition primarily with new hires, rather than also looking at why employees are leaving.

But employee turnover is expensive and costly because it results in: 

  • Recruiting new employees
  • Personnel selection process
  • Induction 
  • Loss of productivity, quality, experience, etc.

Companies that are perceived by employees as an attractive place to work also prevail in an employee market. At the same time, pay is only one factor among many. Especially on the topic of employee engagement, there are many other drivers, such as team cohesion, vision, the opportunity for self-development and self-leadership, personal development opportunities and much more. The customer NPS (Net Promoter Score), which is generally collected by companies and often also in customer service after customer contact and which has become established in the meantime, could also be a suitable instrument – in the form of an eNPS (Employee Net Promoter Score) – for the topic of employee engagement. The eNPS value allows you to quickly see whether your employees would recommend your company to others.

Visualized example of a company:

The challenges associated with an employee market thus force companies to work on their „employee experience“. The employee experience is the sum of all the parts that lead to an overall experience or an overall evaluation of employees for their workplace. This also includes, and in particular, the performance of managers, to which I will devote exclusive attention in a forthcoming article.


Investments in employee retention thus pay off on various levels. They retain and motivate valuable employees and at the same time pay off for the employer brand. Retention management is therefore an essential part of the employer branding strategy. Satisfied employees who feel they are an integral part of the company and are rooted in the company network are also much more likely to act as positive multipliers and automatically recruit new specialists and managers in their own network. In this way, they become a valuable long-term resource and, at the same time, a high-profile testimonial for your company.

We would be happy to tell you how you can establish these special employee retention measures in your customer service organizations as well. Contact us!

Markus Müller – Senior Consultant


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