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Unemployment is at historic lows – which is great for the economy. However, small businesses are having a difficult time finding candidates with the skill set needed for the job.
When you are lucky enough to find that perfect employee you need to do all that you can to keep them from jumping ship.
Organizations today understand the importance of hanging on to good talent and look for ways to improve the worker experience.
This is done by developing and fostering an engaged workforce which contributes to increased employee performance and overall employee satisfaction.
Why do employees quit their jobs?
There is a lot of research that suggests that employees don’t leave organizations. They leave supervisors.
People who manage people need to develop skills in supervision and leadership.
For this reason, developing managers is an important part of a structured leadership development process.
Well trained managers can be the catalyst for employee development and be an integral part of organizational succession planning.
It is important for managers to have the skills to identify potential in employees and a structured process to develop the people who work for them.
Employee Turnover Rates
One of the many measures of organizational success is employee turnover.
Organizations that fail to track and pay attention to the number of employees that leave in a year, may be neglecting the very data that can help them succeed as an organization.
Knowing the employee turnover rate is critical to identifying organizational improvement opportunities.
How does an organization calculate its employee turnover rate?
Calculating employee turnover can be a very complex science, but a simple formula for calculating employee turnover is taking the number of employees who resign in a year and dividing it by the total number of employees.
For example, an organization that employs 100 employees and 10 of those employees quit has a turnover rate of 10% or 10 ÷ 100 = 10%.
When using this formula, make sure you use the same period of time (12-month period) and that the numbers include only employees who were employed during the entire measurement period.
Replacing employees is expensive, so retaining employees is a cost savings strategy. There is an expense associated with recruiting, training, and developing new employees.
There is also expense associated with helping new employees get up to speed with a team-based workgroup because integrating new people into the process can slow it down – resulting in delayed objective attainment.
What is the cost of employee turnover?
Anyone who thinks there is no cost when an employee leaves is misguided.
There are significant costs to recruiting and replacing an employee.
The standard measure for the cost of replacing an employee is between 90 percent and 200 percent of an employee’s annual salary. So for an employee that makes $40,000 per year, that cost could be between $36,000 and $80,000!
While that may seem like an unbelievably high number, you need to consider the time and cost of recruiting, interviewing, training, onboarding, and unproductive work time during the transition.
5 Ways To Reduce Employee Turnover
1. Measure Employee Satisfaction
It is simple but true – employees who are satisfied at work are less likely to leave the organization.
To retain employees it is important to understand their work experience and to measure employee satisfaction.
To do this, create a process to solicit feedback from employees and find out what they like, what they struggle with, and what they think the organization can do to help them.
Employees often struggle will barriers to getting the job done (broken equipment, politics, conflict with other employees) and simply want management to remove those barriers for them.
To learn what these barriers are you need to ask the question.
There are lots of survey software available. A quick, free way to do this is simply creating a google form. You can email the survey to employees, and then you can access the results in your google drive.
Once you learn what is working and what is not working, you can create a plan to fix what’s broken for employees.
2. Solicit Feedback On Managers
We know that one of the primary reasons employees seek out other employment is because of their immediate supervisor.
Resolving issues between managers and employees can be one way to improve the employee experience and lower employee turnover.
Understanding how managers interact with employees is an important way to identify manager development opportunities that may impact their influence on employees.
3. Create a Culture of Engaged Employees
Statistics show that employees who are engaged not only perform better but are less likely to leave the organization.
Find out what is important to your employees (satisfaction survey) and create systems and processes to improve their satisfaction.
For instance, if work-life balance is important to your employee demographic, create policies to encourage a healthy work-life balance.
Develop a process to get employees engaged so you will be able to retain your top employees.
4. Benchmark Salary And Benefits
It is important to keep pace with competing organizations to ensure your organization remains competitive with pay and benefits.
This can be done by benchmarking other organizations and can be achieved by having a structured compensation strategy to ensure you can compete for talent.
Create pay grades that are competitive and maintain those pay scales by increasing them with annual COLA raises and updating benchmark comparisons every few years.
5. Conduct Employee Exit Interviews
Most employees will provide honest feedback when they are leaving an organization.
It is important to take advantage of this opportunity by performing structured exit interviews.
Ask employees why they are leaving. Is it because of pay, benefits, conflict with others, a better opportunity, or their supervisor?
Any of these stated reasons can be fixed, so take what is learned and create a plan to improve how your organization deals with each of those topics.
Finally, successful organizations understand that having the right employees is critical to meeting corporate objectives.
However, retaining the right employees is the secret to developing a strong culture that performs at a high level.
Taking the time to measure employee turnover can help businesses maintain a productive workforce – which is imperative to a healthy bottom line.