Reducing employee turnover should be a key goal of every founder, CEO and human resource manager. Whether you’re a startup or a long-established company, employees are among the most important assets a business has. A great team can make a mediocre product or service a tremendous success but a weak team can make even the most amazing product or service a financial disaster.
Once you’ve assembled a strong, talented team, how do you retain them and keep them from leaving? From front line workers to upper management, employee turnover is costly across many levels: financial; productivity; customer relations; corporate culture; employee morale, and more. Studies on the financial costs of employee turnover have produced varying results but most show that the cost of losing and replacing an employee ranges from 16 percent of annual salary (for lower level employees) to 213 percent of annual salary (for senior-level executives).
It’s no wonder that businesses are very interested in reducing employee turnover. An exploration of employee retention showed the following as some of the key costs associated with employee turnover:
- The cost of hiring a new employee including the advertising, interviewing, screening, and hiring.
- Cost of onboarding a new person, including training and management time.
- Lost productivity—it may take a new employee one to two years to reach the productivity of an existing person.
- Lost engagement—other employees who see high turnover tend to disengage and lose productivity.
- Customer service and errors—for example new employees take longer and are often less adept at solving problems.
- Training cost—for example, over two to three years, a business likely invests 10 to 20 percent of an employee’s salary or more in training
- Cultural impact—whenever someone leaves, others take time to ask why.
Now that you know the impact of losing good employees, let’s look at five best practices for reducing employee turnover.
- Lay down the foundation and culture from the beginning. It’s always best to start laying the groundwork for company culture. Start by hiring the right people from the beginning. Select the best candidates that will fit your company culture. To do that you need a good human resource department. Give your human resources personnel clear guidelines and let them do the work. If you’re a startup, strategies for reducing employee turnover should be integral to your launch and growth plans. Build the right foundation in the beginning and you’ll be well on your way to reducing employee turnover later one.
- Hire the best talent you can find even if he/she doesn’t fit initially. There is a yearly draft in American football that infuses new blood into the NFL. If a team doesn’t have the highest draft pick and they specifically need a linebacker (for example), then they won’t necessarily get the best linebacker in the draft class. The next best thing for them to do is to hire the best talent even if it’s not the position they want. This can be an effective strategy for securing the best talent and reducing employee turnover. In a company, it’s better to hire skillful people (with character) even if they are not the best fit. Hire smart people and you’ll reduce employee turnover.
- Respect your employees. Don’t treat them like friends or your equal. But always treat them with respect. One of the biggest reasons why employees quit is directly proportional to how they are treated by their bosses. Investing in your communication and leadership can put you on the right path to reducing employee turnover.
- Recognize effort and celebrate milestones. Recognition is important to for employee retention. Celebrating milestones is a great way to show appreciation for hard work done. It’s human nature to respond positively when our efforts are recognized and appreciated.
- Develop a great benefits package and provide opportunities for advancement. Having great benefits package is really a great way to retain employees. Psychologically, it’s something they can look forward to when they retire and helps them plan for the future. Research shows that offering comprehensive benefits packages is an effective approach towards reducing employee turnover.
Deploying effective strategies for reducing employee turnover is a key element of success for businesses of all sizes and at every stage of growth. Overall, businesses that can retain employees are more successful and profitable than those that experience high turnover. Follow these five best practices and you’ll be well on your way to reducing employee turnover in your business. If you are looking for strategies for hiring great staff for your startup, check out this article here.