One of the biggest challenges for small businesses is attracting and retaining skilled talent. Most successful businesses are aware of the value of a trained workforce and are on the lookout for strategies that can help them hold onto efficient performers.
This is becoming increasing important in the light of rising labour expenses and lowering economic performance. Employee turnovers also factor into reducing the profitability of any business. If such trends continue, business profitability can be impacted to a significant level.
Employee turnover measures how often employees leave a business. Turnover rates include both voluntary and involuntary turnover.
Voluntary turnover consists of employees who leave the company for other jobs or study, for other personal reasons, or retire. Involuntary turnover consists of those employees that the company terminates for poor performance, behaviour violations or as part of broader layoffs.
There will always be a level of turnover since people retire and leave for better jobs. This can vary from industry to industry. The overall rate will depend on various factors, like the company’s position in its market, the economic situation and the age groups of employees it hires. Replacing any single employee can cost anywhere from one and a half to two times the person’s annual salary.
Causes of Employee Turnover
The multiple reasons for employee turnover stem from the exact causes, even if there is variation. Many employees leave for better pay, better benefits, career progression, better work-life balance, poor work culture, and bad managers.
Most of these reasons can be grouped under company culture. Culture includes business values, career planning, compensation and benefits, work-life balance, and the effectiveness of senior leadership. Retention can be gauged by culture, pay and career planning for employees.
How to Reduce Employee Turnover
What can HR managers do to retain high performers and contributors? A large portion of employee turnover is preventable. Making small changes in career development, work-life balance, manager relationships, compensation, and overall employee well being can make a difference.
1. Hire the right people.
Recruiters should be clear about the organization’s culture, telling the candidate facts about the company and not what they want to hear. This requires appropriate job descriptions to reflect what the employee will be expected to do and not what would sell in the job market.
2. Market Competitive Salaries/Compensation Packages.
Pay and benefits are primary motivators for jobs. They are also a top reason for professionals changing jobs. Better pay is at the top of what makes employees stay, followed by time off and benefits.
Businesses should offer an appropriate starting salary to attract qualified candidates. This should be coupled with regular raises and market monitoring to see what other companies pay for similar roles, especially hard-to-fill jobs.
3. Closely monitor toxicity in employees.
Toxic workers are critical, gossip around, undermine others’ achievements, resist team building and look out for just themselves. Such employees can drive high achievers away from the organization. There is a direct link between relationships and turnover.
Identifying toxic employees is tricky but essential. Look for the characteristics described and then initiate conversations with those employees to see if it’s possible to change their behaviour. Check with teammembers to see if they have issues with their toxic colleagues to address the problem before it’s too late.
4. Reward and recognize employees.
This is an easy strategy to reduce turnover. Just simple “thank yous” and notes of appreciation for employees can be effective. Giving employees new opportunities is another great way to recognize them.
Managers play a crucial role here. Workers that get positive manager feedback are significantly more engaged. Colleagues also play a role in peer-based recognition programs that are very effective.
5. Offer flexibility
Post pandemic, this is a growing concern for employees. Giving them flexibility here is a great way to improve retention. Flexible work isn’t remote work alone, and it can be known as flexitime. Employees need to work a standard number of hours but can decide when they do so. It could comprise a shorter work week with longer hours, part-time schedules or a worker rotating their days working from the office.
While remote and flexible work will have its challenges, it is excellent for employee morale and retention.
6. Prioritize work-life balance.
Work-life balance is a struggle for most people in traditional employment and can cause burnout. Many workers say employers encourage them to work after hours. This problem is more severe for older workers, married, and those with young children.
Flexible scheduling and remote work are two ways employers are trying to help workers achieve a better work-life balance, increasing retention. The number of workers who said they left a job because of the commute is rising.
7. Increase Employee Engagement.
This is crucial as higher employee engagement is directly linked to lower turnover rates. Many efforts businesses make to improve engagement are designed to satisfy social and emotional needs.
This can manifest in several ways, engaging, attractive physical spaces, free food, company trips, etc. But these things do not affect employee engagement on their own. Engagement is influenced by multiple things, the most important of which is the relationship with their immediate manager.
8. Standardize Performance Reviews
A direct predictor of turnover is unproductive or infrequent performance reviews. The formal performance review is not strictly inspirational with a static, annual, or biannual event reviewing a form with static goals. It can do more harm than good. About 80% of employees who felt criticized or unmotivated after a performance review start to look for new jobs
Making performance reviews a dynamic and continuous process designed to improve communication and relationships between an employee and a manager is the way to go. Linking goals to actionable metrics and viewing them through performance management dashboards helps managers easily automatically update goals in real-time without demotivating employees.
9. Be transparent.
Better communication with employees is essential to support retention plans. Communication could be group sessions, one-on-one meetings, and employee engagement surveys.
True transparency requires that people say what they think and believe in a meritocracy. Employees are more invested in a company when they feel like they have a voice and accurately understand what’s going on with the business.