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Combat the High Cost of Employee Turnover

Posted On
3/23/2020
By
Denise Stern

Tiny blocks with green smiley faces on most of the blocks to represent happy employees, and one block with a red angry face to represent an unhappy employee.

According to the Bureau of Labor Statistics, the number of employees leaving their jobs in 2019 averaged about 5.5 million nationwide. For small business owners, who sometimes struggle with hiring employees to begin with, high turnover can turn into negative business outcomes. If employee turnover rates are running high at your small business, it’s time to take a closer look at your business practices to understand why employees leave and become disengaged and reduce employee turnover rates.

Costs of Employee Turnover

Employee turnover often leads to higher costs in business operations. In such cases, small business owners must take extra time spent searching for a new employee and with interviewing training, and orientation processes. In addition to the loss of an employee, remaining staff members are placed under additional stress due to overwork and reduced productivity.

For a period of time, the strain on the remaining staff members to fill the place of the lost employee increases stress and creates a chaotic work environment. Over time, remaining employees feel and experience a lack of morale and frustration. These feelings of disengagement can prompt additional employees to quit.

In addition to the employee side of the equation, customer service also suffers. Loyal customers may grow frustrated themselves in decreased attention, longer wait times, and short-tempered staff.

Following the loss of an employee, all small business owners should have strategies in place to enhance employee retention and improve employee morale. Boosting employee engagement is challenging but should also be high on any business owner’s list of priorities. That means hiring the right people for the job, preserving your financial stability and investments, and ensure that customers and employees receive the benefits.

Why Do Employees Quit?

Employees quit for a number of reasons, with the most common including:

  • low wages
  • scheduling conflicts
  • being unappreciated
  • lack of advancement opportunities
  • poor relationships with co-workers or bosses/managers
  • poor management practices or leadership
  • inadequate work-life balance
  • poor company culture environment

Several polls have resulted in alarming statistics, one of which claims 79% of employees who have quit their jobs state that the reason was lack of appreciation that prompted the decision. Employees want to feel valued and that the work they do matters. When they frequently don’t receive that appreciation, it can lead to feelings of disengagement.

Similarly, employees who feel they work in an unsafe or hostile environment also causes feelings of disengagement and a desire to quit. Whether it’s management that makes things stressful and hostile or disputes between employees, work should be handled in a way where all employees feel safe and comfortable doing their jobs.

Dealing With High-Turnover Industries

While turnover can happen in any industry, some face increased turnover rates. Retail trade, leisure, and hospitality and foodservice industries have and continue to experience a relatively high rate of “separations” - categorized as either those who quit, are laid off, or discharged (involuntary turnover) for a variety of reasons.

According to statistics, fast food chains experience turnover rates of 130% to 150%. As a result, more industry managers and business owners are taking into consideration the true cost of turnovers and expense, such as:

  • Time needed to train a new worker
  • Time needed for that new employee to become proficient in his/her job (within 1 to 2 months in the fast food industry)
  • Based on the above two points, roughly half the wages of that employee are deemed a loss by a business owner

Retaining employees is challenging in the foodservice industry, whether dealing with voluntary and involuntary turnover situations. High turnover rates are due to typically lower pay, few employee benefits and the often stressful demands of shift scheduling. In such industries, employers continue to strive to find retention strategies while at the same time seeking high-performing, dependable, and reliable staff.

Identifying Employee Dissatisfaction

Employee dissatisfaction is one of those things that can build slowly, and therefore spiral out of control before you catch them. Pay attention to your employees to identify signs of employee dissatisfaction by keeping track of moods and behaviors. You may also consider distributing a survey once a quarter to check in and see how employees are feeling. In many cases, red flags crop up that indicate an employee is dissatisfied and is making plans to quit. For example, in any industry, some of the more common signs include:

  • “Detaching” from the work environment, ‘going through the motions’ without any enthusiasm or energy. This leads to decreased performance and increased dissatisfaction.
  • Watching the clock, punching in and out at exactly starting or quitting time, and an unwillingness to stay late, work overtime, or pull extra hours is another indication that an employee is not committed to the business.
  • Major life events such as a death in the family, an illness, a new baby, or even a marriage can affect the life of an employee and create added pressure and stress.

Be aware of your employees and how they work. Catch such signs early and take opportunities to sit down with them and discuss their issues.

Employee Retention Strategies

Employee retention strategies might prove beneficial in reducing employee turnover rates for small business owners. The following are a few tips to improve employee retention.

  1. Don’t ignore the importance of the interview processes. Couple that with job-related skills queries and ‘tests’ - but also pay attention to attitudes, behaviors, and people skills. These are good indicators to help predict how a potential employee candidate might handle the job
  2. Take the time to set your employees for success from the start. On-board/orient them thoroughly. Assign a mentor to new employees in order to fully immerse them into their work environment and be clear as to expectations. This can take as little as a week or a month or two, depending on industry and job demands.
  3. Avoid micromanaging and empower your team. Business outcomes improve when employees are properly trained and supported. Training and orientation, accompanied by guidance, helps the new employee overcome stress and anxiety. Such tactics also eliminate frustrations and provide them with more confidence. Train them in customer service and how to deal with customer complaints to enhance employee retention. If you train your employees well and give them the freedom to do their job, you don’t have to micromanage, and they’ll show improved morale because you trust them. Get your employees off to a good start and reduce the risk of voluntary turnover.
  4. Provide flexible work schedules when possible. High turnover rates are often blamed on shift work. Providing flexible work schedules and exploring the possibility of remote work opportunities might also reduce the number of employees leaving their jobs. Flexibility in scheduling is one of the most sought after work-life balance needs of employees today.
  5. Improve employee retention by accommodating individual needs and schedules as much as possible. Establishing a system for exchanging shifts may also improve employee satisfaction and loyalty. Increase business employee retention includes more opportunities for promotion within the workplace environment and supporting autonomy among staff.
  6. Talk to your employees. Take the time to check in with them on a regular basis to discuss any problems, encourage their work, and even to discuss future advancement potential. Such ‘talks’ can take as little as 10 minutes – and go a long way toward encouraging loyalty to you and your brand.

Bottom Line

The high cost of employee turnover can hobble your small business. Therefore, the establishment of a positive, rewarding, and supportive work or company culture can reduce employee turnover rates and improve employee attitudes, behaviors, and loyalty.

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This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.