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Creating a "High-Retention" Culture
by Bill Collier

We all know this old piece of wisdom: "It's easier and cheaper to keep an existing customer than it is to find a new one." Substitute the word "employee" for "customer" and it's just as true.

Employee turnover can be one of the worst plagues on a small business. Not only is continuity of knowledge a very important aspect to growth and success, the time and money spent on constant recruiting, hiring, and training can be a fatal burden. Plus, high turnover can have a profoundly negative impact on the morale and job performance of the remaining employees (and the owners!)

If you can find a way to keep turnover lower than the average for your industry, it equates to a significant competitive advantage for you.

So, how do you know when turnover is too high? I suggest both internal and external benchmarking.

Internally, track your voluntary turnover each year. Look for averages and trends. If it suddenly goes up, it should serve as a red flag. Strive for annual improvement.

Externally, compare your company to your peers in your industry. You can obtain reports on various financial and operational metrics from Dun and Bradstreet, on the web, and from trade associations in many industries.

Notice I used the phrase "voluntary turnover." That's a distinction worth noting and monitoring. Voluntary turnover refers to employees who resign of their own accord. Involuntary turnover would include terminations and layoffs. I recommend you keep an eye on both types of turnover. If your voluntary turnover is high (compared with your internal and external benchmarking), it might signal problems with your culture, management, or new hire orientation. If involuntary turnover is high, it might mean your hiring and screening process is not rigorous enough, or that you have a tendency to hire too quickly when busy and then have to let people go when things slow down.

While you can't jump to conclusions and it isn't always cut-and-dried, it's absolutely worth your time to analyze your turnover statistics so you can stop problems in their tracks and avoid the associated pain and suffering that goes with high turnover. 

Let's look at some of the components of a high-retention environment.

Pay and Benefits

Dozens of surveys have been published that illustrate how pay is not the most important factor in employee satisfaction. That may be true, but everyone is looking out for themselves and their families. At minimum, your employees need to feel that they are compensated fairly for the work they do, both in terms of salary and benefits. 

Just as with employee turnover statistics above, you can find out about competitive pay rates by job description, industry and geography from a variety of sources.

Management/Supervision

In the classic business book, First, Break all the Rules, co-authors Marcus Buckingham and Curt Coffman say: "It is better to work for a great manager in an old-fashioned company than for a terrible manager in a company offering an enlightened, employee-focused culture. It's not that these employee-focused initiatives are unimportant. It's just that your immediate manager is more important."

I agree 100%. You've probably heard the saying, "People don't leave companies; they leave supervisors." People want to be trusted, to be valued for their contribution, and to be respected both as employees and as people. They want feedback, encouragement and praise. All of these are available in abundance and are free. 

Checklist for Creating a High-Retention Culture

  • Provide competitive pay and benefits.
  • Provide clear expectations and directions.
  • Provide ongoing job skills training, starting with a thorough new-employee orientation.
  • Provide all the tools and resources needed to do the job.
  • Give frequent and honest feedback on job performance. Offer praise or constructive criticism whenever either is appropriate, but don't sugar-coat or nit-pick. Strive for even-handedness.
  • Squelch bureaucracy, red tape, and needless hassles.
  • Squelch office politics and the rumor mill.
  • Encourage, pay attention to, and actually use employee input and feedback. Bosses do not have a monopoly on good ideas.
  • Communicate in all directions: up, down and sideways. There's almost no such thing as too much communication.
  • Reward high performance.
  • Low performers need to be reassigned, coached to success, or in some cases, they need to be removed from the organization. Leaving low performers or disruptive employees in place is a sure way to hurt morale among the rest of the team.
  • Conduct annual Employee Satisfaction surveys. Allow anonymous responses to increase participation and candor.
  • Conduct exit interviews when employees quit. Use this feedback to improve your culture and retention.

Here's a 3-Step People Plan for your company:

  1. Implement a well-thought-out Hiring System
  2. Pay attention to all the areas covered by the High Retention Culture Checklist above, plus any others that you think apply to your company. Fix what's broken and fill gaps as needed.
  3. Monitor your employee turnover rate. Set goals and strive for continuous improvement versus both internal and external benchmarks.

It's simple, but not easy. This is hard work, and is an example of working on your business instead of in your business. I can think of few things capable of a more dramatic potential impact on your company's success. Roll up your sleeves and get started!

Bill Collier is a St. Louis-based business coach, consultant and speaker. He is the author of the book “How to Succeed as a Small Business Owner … and Still Have a Life.” His website is www.collierbiz.com, and his email is bill@collierbiz.com


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