Small Business Turnover
Posted by Maisey Short
2 September, 2016
Running your own small business is exciting but often leads to some challenges. In fact, employee turnover is a common but expensive problem that many small businesses face. If your small business is looking to prevent high turnover rates then read the causes, costs and ways of reducing employee turnover below:
Causes of Turnover
There are many possible, unrelated, reasons as to why employees are leaving your business in pursuits of other opportunities, such as life changes or career moves. However, the most realistic causes for employee turnover are likely those that relate to your business and the way it's organized or managed, which are listed below:
- Owner has no vision for the future of the company or employees.
- Poor management leaves staff searching for guidance and structure.
- Little to no flexibility in employee schedules.
- Limited promotion opportunities result in unmotivated employees.
- Low wages and few rewards/incentives drive employees away for lack of commitment.
Costs of Turnover
Small businesses have a much smaller budget compared to their counterparties which make losing employee after employee a financial nightmare. The cost of losing an employee ranges from a few thousand, up to hundreds of thousands of dollars. The estimated actual cost to replace an employee is 50% of the new hire’s salary, or an average of $15,000. The breakdown of monetary costs isn’t the only factor to consider; it is important to contemplate these costs as well:
- Value of the past employees’ knowledge is forfeited.
- Overload of work is now on the other employees' to-do lists.
- Lower morale within business.
- Productivity and expertise of that position is lost.
- Recruiting and onboarding/training costs of hiring new employee are time-consuming.
Now that you have an idea of what causes turnover and how much it can cost your small business, let’s look at three ways of reducing it:
- Hiring the right person for the particular job position will do more good than hiring the first person who applies. You want to spend time developing a job description that highlights exactly what is expected of your employee, along with salary requirements and perks. An excellent resource for finding the best candidates can be through social media sites like LinkedIn, even word of mouth marketing works well. Another aspect to consider when hiring your future employee is the cultural fit of that individual. Be sure to introduce the employee to everyone and evaluate their compatibility or you’ll be searching for another new hire in a few months.
- Training the new employee correctly will ensure they feel comfortable in the position and it shows that you are committed to your employees. Since there are many different types of training out there, make sure you pick the appropriate version, such as hands on or shadowing another employee for a few days. Proper employee training should be thorough and diligent if you are hoping for less turnover in the future.
- Continuous feedback to the new hire will also help to reduce turnover, especially within the first few months of working. It can be a good idea to connect with your new employees and build positive relationships to show you recognize their value to your small business.