What is Employee Engagement and Retention?

Across all industries, employee retention is a challenge facing organizations today. In a currently competitive job market with a talent shortage, it's more important than ever for businesses to adjust their retention strategies by prioritizing employee engagement, development, and growth.

However, only 26% of leaders report that employee engagement is an important part of what they think about, plan, and do every day. This is a shockingly low number, especially when 74% of employees don’t feel like they’re reaching their full potential at work — and are willing to leave because of it.

But what is employee engagement and retention, and what are the best practices organizations should embrace to support internal talent? In this article, we’ll explore why both are critical and how organizations can create a workplace that attracts and retains the best employees.

What is Employee Engagement in HR?

Employee engagement is the level of commitment and loyalty an individual has toward their job and the organization they work for, making it a critical aspect of employee satisfaction, productivity, and ultimately retention. It’s revealed through many factors, including the degree of enthusiasm employees show for their work; their feelings about their jobs, colleagues, managers, and the organization; and their physical and mental presence in the workplace. Employee engagement extends beyond job satisfaction, as engaged employees are invested in both their own goals and the success of the organization.

This dynamic benefits both employees and organizations by enhancing workplace culture, driving performance, and contributing to mutual growth. Many factors can impact employee engagement, including:

Opportunities for growth and development: Does the organization provide various ways for employees to chart their career paths and develop the skills needed to get there?
Leadership and management style: Are leaders understanding of, involved in, and committed to employee growth and engagement?
Company culture: Has the organization created a place where employees feel comfortable expressing themselves and participating in group or company activities without fear of retribution for their beliefs and/or personal backgrounds?
Work-life balance: Do employees feel like they can prioritize their personal life while still succeeding at work?
Communication and feedback: Do employees and managers engage in regular reviews and frequent 1:1 meetings to ensure both parties are satisfied with the work being produced?

Companies that consider the strategies above and implement them accordingly can see increased employee productivity, higher-quality work, a stable workforce, and reduced turnover — all of which ultimately lead to increased cost savings and ROI.

With 63% of employees reporting that they left a job due to inadequate growth opportunities and only 36% stating that they feel engaged in their work and workplace, it’s imperative that companies boost feelings of growth and belonging among their workers.

Why Is Employee Engagement Important?

High employee engagement is critical for maintaining an empowered workforce, a competitive edge, and a healthy bottom line. Some benefits organizations may achieve by implementing a successful employee engagement initiative include:

Higher employee retention: Employee engagement starts with the employee experience, so it’s no surprise that more than three-quarters of HR teams surveyed said focusing on the employee experience is key to their retention efforts. When employees have a positive experience with their employer, they’re more likely to be engaged with their work and committed to their jobs and the organization. In turn, management teams are likely to see a boost in employee retention.
Increased productivity: Research shows that engagement has a significant impact on employee productivity. In fact, employees who have consistently high levels of engagement perform better than those who don’t. This is because engaged employees put in more effort, leading to higher output and a better quality of work.
Higher customer loyalty: 85% of organizational leaders surveyed agreed that higher employee engagement leads to higher customer satisfaction and a better customer experience. Since engagement involves being enthusiastic about work and committed to performance, it makes sense that customers can recognize it in employees’ attitudes and the quality of service they provide.
Increased profitability: Engaged employees can significantly impact a company's bottom line. Increasing employee retention through engagement minimizes the need to hire new employees because of turnover, which costs an average of $4,683. By focusing on keeping their current employees, organizations can use the money they save on programs and resources for growth and expansion.
Lower absenteeism: Engaged employees are more likely to perform efficiently at work and less likely to be absent. This is great news for organizations with highly engaged employees, as absenteeism can cost around $226 billion every year. By preventing absenteeism through engagement, employers can maintain happier, more productive workforces and prevent revenue loss.
Fewer safety incidents: One report on employee engagement in healthcare — one of the two industries with the most non-fatal injuries that require days off work — confirms the positive correlation between engaged employees and reduced injuries. Facilities surveyed that ranked in the top 25% in safety culture rank an average of 68% higher in employee engagement than facilities in the bottom 25%. When employees are more attentive and committed to their jobs, they’re better prepared to keep themselves and those around them safe.
Increased employee growth and development: Employee learning and development (L&D) and employee engagement go hand-in-hand; employees who receive the L&D resources they need at work are 21% more likely to be engaged than those who don’t. That’s because employees who feel their employers care about their professional development are more motivated to improve their skills and contribute to organizational success. This drive for development benefits all talent stakeholders by fostering a culture of continuous improvement, innovation, and adaptability.
Improved employee morale: High levels of employee engagement are directly linked to improved morale within the workplace. Engaged employees feel valued and connected to their organization, which boosts their overall job satisfaction and well-being. One study found that employees have higher morale when they receive managerial recognition, and this boosts their levels of engagement with their work. That same study shows that about 50% of employees say they’re most engaged at work with more recognition from managers.

What is Employee Retention?

Employee retention is an organization's ability to keep employees for a prolonged period of time. However, employee retention is not just about keeping employees for a long time, but keeping the right employees for a long time.

It can cost a company anywhere from one half to two times the amount of an employee’s salary to replace them (think recruitment costs, training costs, and lost productivity). Retaining employees help maintain team morale and productivity, creates a sense of stability and continuity, and preserves valuable institutional knowledge and expertise.

Employee engagement is directly connected to employee retention. At Phenom, we believe one critical way employers can better engage and ultimately retain existing talent is by investing in their learning, development, and growth within the company.

To do so, organizations should consider implementing the following strategies and resources for their people:

Career pathing: Are employees empowered to envision their future career and know the steps required to get there?
Internal gigs: Does the organization provide short-term internal projects or gigs that promote on-the-job learning and upskilling?
Internal mobility: Are employees aware of open job opportunities throughout the company, and have the ability to easily apply?
Employee Resource Groups (ERGs): Does the organization promote community, engagement, and diversity through internal networks that employees can join?
Mentoring: Can employees easily be partnered with best-fit internal mentors that will help them grow and progress in their career paths?
Learning and Development: Can employees take courses that will help them grow the skills needed for future career advancements?

Discover 13 effective strategies you can use to promote employee retention at your organization >

How can organizations improve employee engagement and retention?

TImproving employee engagement requires a tailored approach to meet the needs of your organization. Below are strategies that can help enhance your employee engagement and retention efforts.

Provide Professional Development Opportunities

Offering professional development opportunities is key to keeping employees engaged and committed to staying long-term. These may include training initiatives, upskilling and reskilling courses, hands-on projects, and mentorship programs. Using specialized HR software — like a talent marketplace — that provides personalized, curated learning recommendations tied to clear career paths can significantly enhance this process.

Employees who see a future for themselves within an organization are far more likely to stay. By investing in your team's growth, you demonstrate a commitment not just to their current role, but to their future within your company — a critical factor in improving retention.

Involve Management in Employee Engagement and Retention Strategies

If you want to increase engagement and reduce turnover, it’s important to ensure managers are actively involved in developing and implementing strategies. Leaders should act as advocates for engagement initiatives, setting a positive tone for their teams and modeling the behaviors you want to cultivate. Training managers to recognize signs of disengagement and potential flight risks — and empowering them to take proactive, supportive steps — helps create a cohesive, motivated workforce that is less likely to seek opportunities elsewhere.

Listen to the Concerns of Your Team

Actively listening to your team's concerns shows that you value their input, well-being, and long-term satisfaction. Implement regular one-on-ones, feedback sessions, and anonymous surveys to gather genuine insights. Addressing concerns promptly not only boosts morale but can also help you identify early warning signs of disengagement and prevent turnover. Showing employees that their voices have real influence builds trust, loyalty, and a stronger emotional connection to your organization.

Offer Recognition for a Job Well Done

Recognition is a powerful tool for boosting employee engagement and loyalty. Simple, consistent acts of acknowledgment — whether public praise, awards, or personalized notes — can significantly impact morale and retention. Recognizing employees' efforts reinforces their sense of purpose and belonging. In fact, 50% of employees surveyed say they’re more engaged at work when they receive recognition from managers, and higher engagement is closely linked to lower turnover rates.

Foster Connections Through Networking

Encouraging networking within the organization helps employees build meaningful relationships, which can greatly impact their desire to stay. Leveraging HR technology to create a centralized location for career planning, open job postings, and events enhances transparency and communication, making professional development opportunities visible and accessible. It extends beyond career growth too — 57% of employees polled said having a best friend at work makes their experience more enjoyable, and strong workplace friendships are a proven factor in improving retention rates.

Use the Right Technology to Facilitate Engagement and Retention

Selecting the right technology is essential for facilitating both employee engagement and long-term retention. A holistic solution, such as a talent marketplace, that integrates professional development, feedback, networking, and recognition, ensures a seamless and personalized employee experience. A strong technology stack that supports career progression, celebrates achievements, and fosters connection will not only engage employees but also make them more likely to envision a lasting future with your organization.

Investing in Employee Experience to Boost Engagement and Retention

Employee engagement is critical to improving employee retention, and there’s a lot to consider when developing an effective strategy. It’s important to understand the factors that contribute to employee engagement, the steps you can take to improve it, and the tools you can use to develop the right approach. But even then, it can be challenging to know where to start — especially without a reliable way to collect, monitor, and leverage meaningful data.

Phenom Talent Marketplace software enhances how organizations engage and retain top talent by providing personalized development programs, pairing employees with internal projects and employment opportunities that align with their goals, and offering opportunities to connect, learn, and grow with peers and mentors.

With an intelligent talent marketplace, HR and talent management teams can gather real-time data about their employee experience, use it to create an employee engagement strategy, and establish a solid foundation for organizational and employee success.

Discover how you can transform your approach to employee engagement and retention by downloading our Talent Marketplace buyer’s guide.

Maggie Blehar

Maggie is a writer at Phenom, bringing you information on all things talent experience. In addition to writing, she enjoys traveling, painting, cooking, and spending time with her family and friends.