Employee turnover can be one of the highest costs of any business when you take into account the cost of separation, recruitment, training, loss of knowledge and experience, transitional loss of productivity, and reduced workplace morale.
For a small business, these real and hidden costs can be seriously multiplied. In a small workforce, any small business employer can testify to the fact of how disruptive it can be if a key employee leaves, and it is not false to say that often if they are a popular co-worker, it can lead to further resignations.
In different industries the average “poor” turnover rate can be anything from 13% to 30% – that’s 13 to 30 people out of a hundred who leave your employment every year!
In a small business with a workforce of an average of 9 people, that’s 1 to 3 people leaving the business every year!
On the other hand, a settled workforce brings many benefits including the retention of corporate knowledge – and the fun of going to work!
How do you turn this around?
First, we need to figure out why people are leaving at such a rate.
The top causes of a high employee turnover are:-
- Poor career opportunities – perceived or real (31%)
- Poor pay and benefits (22%)
- Bad fit whether through bad hiring decisions or poor vision – the employee doesn’t fit or can’t see how they fit in the business (20%)
- Poor management or supervision – research is showing employees don’t leave employers, they leave supervisors (16%)
- Lack of flexibility in work conditions (8%)
- Lack of job security (2%)
In reality, most small businesses invest very little in human resources activity.
It is not rare to find small businesses that don’t show a clear career path to their employees, don’t pay their employees anywhere close to top market rate, hurry their employment decisions or don’t check if the new recruit is the right fit, don’t spend a lot of time making sure the employee is receiving the right amount of management or supervision, don’t offer flexible hours or work conditions and can’t truly offer job security.
This means that, even as a small business, you do need to implement some basic tactics to either stem the flow or stop it before it even starts.
Here are some things you can do.
1 Write your Vision Statement
You know why you started your business, whether to provide a great service to your customers, make the best mousetrap, or whatever else.
You also have a picture in your mind of how you want your successful business to look and how everyone will benefit from it (spoiler alert: it’s not about making money, it’s about what feelings the money can get for you).
However, many of us don’t write this down, never mind telling our employees of the exciting place we want to go.
If they know why you are open for business and where you are striving to get to, they can see for themselves whether they have and like the career opportunities there. They can see your vision and see how they fit into it and be inspired by it.
Knowing and being excited by this can mean that they will let some “now” problems like poor benefits by in return for a better future.
2 Draw your “future” organisation chart
You may be a small business but you have big dreams.
What will your employee structure look like when you are successful? What departments or units will you have with employees specialising in different functions? Where do the managers sit and what are the pathways for junior employees to get there?
You should draw an organisation chart of the way you want your business to look.
This will inspire your employees to understand your succession plans and see their career path. Having a sense for the future can also give them a greater sense of job security and see how they fit into the business.
3 Implement “Duty Statements” and Annual Reviews
Once you have your organisation chart that you are working to populate, you can write up each position’s Position Description or description of what each position is responsible for, what each position does, and who that position reports to as well as who will rep[ort to that position.
This provides clarity for career decisions, on opportunities, about self-training decisions, and potential pay and benefits.
Once you have a Position Description for each position, you should also implement annual performance reviews. These show your employees that you mean what you say.
They don’t have to be the week-long performance reviews of a big organisation. You can be concise but to the point – discussing performance according to their defined responsibilities, areas for improvement in order to be promoted, training opportunities and pay rates.
4 Keep up to date with pay rates
Make sure that you are paying your employees a fair going rate for their work.
Market rates change quite rapidly depending on the industry and competition for good employees, so make sure you keep up to date with changes.
Various government agencies and employment search firms publish annual pay scales for different industries and roles – subscribe to them or search for them regularly (at least once a year).
However, it’s not the end of the world if you cannot match market rates. You can compensate your employees through a package of pay and benefits. For example, you can offer flexible work hours that your competitors don’t. You can provide in-house career training. You can ensure you regularly recognise good performance (a public pat on the back or company award) and reward them with small gifts like dinner for two or tickets to a show of their choice.
You want to encourage engagement and employee happiness by connecting with generosity and gratitude. Money is only one aspect.
5 Implement procedures and systems
These will help employees to understand the roles and duties, and in many ways can reduce the need for supervision.
Procedures and systems are consistent step-by-step methods of how tasks are to be completed. They will make it easier to train new recruits, they will ensure the consistency of output and predictable results.
Following a set of prescribed steps to do their jobs can provide them with confidence and a self-managing sense of achievement.
6 Implement a consistent recruitment system
This tactic is a procedure (above) on “how to recruit” from identifying the position required, to spelling out the experience, skills and “fit” required, to interview questionnaires, to a final decision on set criteria.
If you have a consistent recruitment system, you remove the instances when you make “from the gut” decisions based on just a feeling – that can lead you to some poor choices.
In implementing a recruitment system you will be on the lookout for “fit” – not only in terms of the right skills and experience but also in attitude, personal values, and their subscription to your vision.
7 Ensure you are delegating correctly
Poor management is a leading cause of employee turnover. Recent research is showing that employees don’t leave an employer, they leave what they perceive as a bad supervisor.
Employees want to be shown what to do properly, and they want to know they are on track while doing it, and they want to be acknowledged when they have done the job well, or be corrected on how to do it better next time.
If they are left in a void they can’t see a way to grow and develop which all human beings want.
From management’s point of view, they want a job well done, but delegation is often a case of brief explanation and then angry words when the output is not as expected.
You should learn how to delegate properly by giving the right level of instruction and supervision to the person at hand. An experienced person does not need as much instruction but may need more encouragement. A beginner will not need encouragement – what they need is very detailed instruction.
Use these simple tactics, even in a very small business, and you will find that your employee loyalty improves considerably and your employee turnover correspondingly reduces dramatically.
I have embedded links above in each tactic that you can follow to read more about the specific tools.
Build the practice and culture in your business that values employees and your best employees will stay on board and be productive and effective.
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