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
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.
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
- Provide competitive pay and
- Provide clear expectations and
- 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
- Squelch bureaucracy, red tape, and
- Squelch office politics and the
- 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
- 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
- Conduct annual Employee Satisfaction
surveys. Allow anonymous responses to increase participation and
- Conduct exit interviews when
employees quit. Use this feedback to improve your culture and
Here's a 3-Step People Plan for your
- Implement a well-thought-out Hiring
- 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.
- 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 email@example.com
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