Every business will experience some degree of employee turnover. We don’t know of any company that’s made all the right hires and has been able to perfectly incentivize employees to never leave. However, the best companies have found proven ways to prevent or dramatically reduce employee turnover by focusing on strategies that employees care about. Efforts in these areas can go a long way in keeping employees happy and motivated for years to come.
Why Employee Turnover Matters
Excessive employee turnover can be devastating for a business. When your office becomes a rotating door of unfamiliar faces, it’s hard to build momentum, create a winning culture, and make progress towards your goals. After all, it’s the people in the company who will contribute more to the company’s success than the business strategy you implement. A great strategy without the right people is hollow.
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Employee Turnover Is Expensive
Another reason to actively prevent employee turnover is the cost. High turnover companies spend thousands of dollars a year hiring and training new employees. In fact, the Society for Human Resource Management (SHRM) recently estimated that a company will spend between 3-9 months of an employee’s salary in order to find and train a replacement. This means that each time an employee making $60,000/year leaves your organization, you’ll spend between $15,000-$45,000 to hire and properly train their replacement. This is a massive financial burden and one that can only be avoided by reducing employee turnover.
Not All Turnover is Bad
While the focus of this article is on preventing and reducing employee turnover, we admit that not all turnover is bad. There is such a thing as “healthy” turnover. For example, if one of your employees has worked in your company for years and has no further growth opportunities but gets a job offer elsewhere that will allow them to continue their career progression, you can celebrate that employee’s move. You may also be grateful to rid yourself of employees who do poor work, sink company morale, or unfavorably represent your company to prospective customers.
In these situations, turnover might just be inevitable and may even be necessary. This is normal and to be expected in any business or industry. The turnover we’re trying to prevent happens for different reasons that are often within the company’s control.
Two Kinds of Employee Turnover
Employee turnover can be classified into two categories:
Voluntary turnover: An employee leaving your company voluntarily (usually to the regret or dismay of the business).
Involuntary turnover: An employee being terminated by the company because of poor performance, breaking company rules, or any number of other reasons.
In this article, we will focus on what can be done to prevent voluntary employee turnover. Businesses should go to great lengths so that their good, hard-working employees don’t leave their company. Reducing voluntary turnover will not always be in direct control of the company (sometimes an employee must relocate, retire, or change jobs for specific, personal reasons) but much of it can be eliminated by strengthening a few policies and reinforcing certain aspects of the business.
11 Ways to Prevent Employee Turnover
Hire People That Fit
It may sound counterintuitive, but reducing employee turnover begins before you ever hire an employee. The best and most reliable way to reduce or prevent employee turnover is by hiring the right people who will want to stay with you (and perhaps more importantly, who you’ll want to stay with you).
When hiring, there are many tips and tricks to finding the right person. At Eddy, we recommend hiring people “that fit.” What do we mean by fit? Well, we believe that employee needs to fit into your organization in a few different ways.
- Does the employee’s skill set fit the job they’re being hired for?
- Will the employee’s previous experience fit the role they’ll be asked to play in your company?
- Will the employee’s personality, work-style, and attitude fit the culture and environment you’ve created?
- Does the employee’s belief and vision for the future of the company fit into what you believe and envision?
- Does the employee fit and agree with the values your company promotes?
Eddy’s intuitive software makes hiring great employees easy.
Onboard and Train New Employees
After making a decision to hire an employee, the next step is to make sure they are onboarded and trained. Unfortunately, many companies think of onboarding as nothing more than document signing. While paperwork and employment docs are a big part of the onboarding process, the training aspect is equally important.
20% of employee turnover happens within the first 45 days of employment. If employees aren’t properly trained during the onboarding process they feel uncomfortable in their new position and many of them leave. To prevent this, it’s important that you create processes to get employees trained.
Not only will training employees help prevent turnover, but it will also help employees succeed in their job. If an employee feels successful, they’re more likely to stick around, further preventing turnover down the road.
If you feel like you have a good training and onboarding process in place, you may want to survey your employees and ask them how they feel. We find that company management often thinks their training is adequate or even substantial but employees typically feel like they haven’t received enough instruction. In these situations, it’s best to talk to employees and ask them for tips and suggestions on how to improve the experience.
Offer Competitive Compensation
When it comes to employment, we all speak one universal language: money. As the saying goes, money talks, and it can often talk employees into staying at your company. When an employee is fairly compensated, they’re more likely to feel higher levels of job satisfaction and be happier at work. Add that to a substantial benefits package that covers things like health insurance and you’ll make it difficult for an employee to want to leave.
Of course, there is a point where you may over-compensate employees and not get an equivalent level of productivity. However, it’s definitely rarer to see over-compensated employees than under-compensated employees. For the most part, employees who leave their jobs voluntarily often feel under-compensated and do not have the financial incentive to stay around.
If you’re worried that you cannot afford the same type of salaries as competitors in your area, you may choose to get creative with your compensation and offer performance-based bonuses. A great bonus plan can galvanize employees to work hard and be productive because they know there are financial incentives tied to their performance.
Demonstrate a Career Path
When an employee joins your organization, they join with the idea that they’ll be able to use this job as a stepping stone to further their career. This career progression can take place within their current company, or it can be found by bouncing to other jobs that give them better pay or title changes. Knowing this, it’s important that you demonstrate to employees that there is a career path within the company that will help them achieve their goals.
We recommend speaking to employees about their career ambitions early and often. You may even choose to do this during the onboarding and training phase. Help employees see themselves in your company long-term. Create for them a future in which they have more responsibility, better pay, and a more prestigious title. Then, lay out the path they need to follow in order to reach such achievements.
Of course, you cannot do this unless you follow through on your promises. Do not tell an employee there is a career path for them when there really isn’t. Do not promise a new pay rate if an employee hits certain performance milestones and then not deliver on the promise when the milestones are achieved. If you demonstrate a career path to an employee, make good on your promises, and do what you can to ensure the career path you outlined is obtainable.
Clearly Communicate Goals and Expectations
This step goes hand-in-hand with the previous one. Not only do employees want to know how they’ll fit into your company long-term, but they’ll also be curious as to what you expect them to achieve in the short and medium-term. To help them, you’ll need to sit down regularly and discuss goals and expectations.
Employee turnover often happens when a manager and an employee are not on the same page. The employee operates on one set of expectations while the manager operates on another. Eventually, the manager becomes dissatisfied with the employee and the employee feels frustrated because they don’t know what more they can do to please their manager. Ultimately, voluntary or involuntary turnover occurs.
This outcome can be avoided if goals and expectations are communicated clearly and regularly. Employees should not only be aware of what their manager expects of them, but they should also know what their team, department, and company goals are. The employees’ personal goals and objectives should contribute to each of these higher-level goals. When the employee understands how they’re contributing to the overall growth and success of the organization, they’ll be much less likely to leave.
You can now run your entire HR department with a single piece of software. Welcome to the revolution that is Eddy.
Encourage Team Building
It’s important for employees to not only get to know the people they work with, but enjoy working with those people. Doing team-building activities is a great way to have employees socialize, form friendships, and develop trust. These team-building activities can pay huge dividends when it comes to employee turnover.
A Gallup study recently revealed that having a “best friend at work” is directly linked to how much effort an employee puts into their job. Gallup says that “those who [have a best friend at work] are seven times as likely to be engaged in their jobs, are better at engaging customers, produce higher quality work, have higher well-being, and are less likely to get injured on the job.
Why does this matter? Because employee engagement and employee turnover are highly correlated. A separate Gallup study that surveyed more than 23,000 companies found that businesses with engagement scores in the bottom quartile averaged 31-51% more employee turnover than those in the top quartile.
To reduce and prevent employee turnover, employee engagement is important. To get employees engaged at work, they need to develop real friendships with their co-workers. To get employees to develop friendships, team building needs to be a top priority.
It’s human nature to crave flexibility. Each of us likes to feel that we are in control of our own lives, our own decisions. Of course, when we work for a company, we choose to give up some of that flexibility. We agree to work on assignments or projects that are given to us. We agree to general working hours and conditions. We agree to work within a certain team and report to a certain boss. All the while, we still want flexibility.
Employers who recognize this can reduce employee turnover by giving their employees some freedom to choose. For example, many jobs can be done remotely as effectively as they can be done in the office. Allowing an employee to choose whether or not they’d like to work at home or in the office gives employees the flexibility they crave. Additionally, allowing employees to leave work early for family events, kids’ soccer games, or just a fun night out with friends humanizes an employees’ experience and helps them feel like they’re in control.
Being flexible with employee schedules, work locations, and even work hours is a great way to show employees that you care about them, that you view them as responsible adults, and that you want them to belong to your company. This naturally increases an employee’s loyalty, boosts morale, and raises satisfaction levels, thus resulting in the reduction or prevention of employee turnover.
Employees want feedback. Over 65% of employees say that they want more feedback than they’re already receiving. Why? Because that’s how employees are able to gauge whether or not they’re doing a good job. Training employees, laying out their career path, and setting expectations is a great way to start, but without the follow-up and regular check-ins, you’re missing the mark.
There are many ways to check-in. A common, popular check-in method is a one-on-one meeting. These meetings are typically held on a regular cadence (once a week is recommended), and give employees and managers an opportunity to connect, get on the same page, and review progress. These meetings can be extremely valuable because they provide insight and real-time feedback to employees on how their work is being perceived.
These regular one-on-one check-ins can be a great way to keep employees engaged, help them build relationships with their managers, and keep them on track for their next raise or promotion. Consistent feedback and frequent check-ins can also help employees feel more loyal toward their company and their manager. All of these things contribute directly to lowering employee turnover.
Did you know that more than 50% of employees decide to leave their company because of a bad boss or manager? Seriously, when it comes to employee retention, getting rid of bad bosses is as important (or perhaps even more important) than doing anything else on this list. A bad boss makes work-life miserable. A bad boss refuses to implement many of the strategies and tactics we’ve written about here that help prevent employee turnover. A bad boss gives employees that “sick-to-your-stomach” feeling on Sunday night, knowing that you have to go back to work the next day.
So what can you do? Review your managers and bosses regularly. Survey your employees and ask them specific questions about the person they report to. Conduct exit interviews with outgoing employees and ask them about how their manager influenced their decision to leave. Talk with current employees about who they believe should be a manager. Never assume that your current managers are the right people for the job. Management positions should always be evaluated and re-evaluated to ensure that great employees aren’t leaving your company simply because they have a bad boss.
Praise and Recognition
Recognizing the great work done by employees is a surefire way to reduce turnover. A recent study that surveyed more than 1,500 workers found that 63% of employees who were “always” or “usually” recognized at work said they’d be “very unlikely” to hunt for jobs in the next 3-6 months. A separate study found that 40% of employees would be more likely to put more effort into their work if they knew they’d be recognized for it. And if those staggering numbers aren’t doing it for you, LinkedIn conducted a research study and found that employees are 70% more likely to stay at their company if they receive a promotion.
In summary, employee recognition works. When employees are recognized at work they feel happier, more confident, more engaged, and more loyal. Their productivity goes up and their attitude and morale go up with it. All of this translates to lowering or preventing employee turnover.
Some companies struggle to know how to recognize employees, but it doesn’t have to be complicated. There are dozens of great ways to reward and praise employees, many of which are inexpensive and do not necessitate promotions or pay increases. The most important thing is that employees feel like the company has a system in place where employee recognition is more than just an afterthought. Be generous with your praise and employees will be loyal to your business.
Fire Toxic Employees
Toxic employees can cause innumerable problems throughout your organization. They hamper morale, interact poorly with customers, over promise and under deliver, and push good employees out of the company. A few bad hires can absolutely devastate a business.
When good employees see their company promote or even tolerate bad employees, it rubs them the wrong way. A good employee will never understand how bad behavior is rewarded, and rather than stick around to find out, they’ll leave your company as fast as they can.
For this reason, it’s important that you act quickly to fire toxic employees. By allowing them to stay around you essentially send a message to the rest of your workers that their performance or behavior is acceptable. Some employees will take this as a sign that they can act poorly as well, while the best employees will see this as a sign to leave the company.
Of course, we want you to terminate employees the right way. We believe in giving every employee a fair chance to succeed. But there should be a limit to what you tolerate. If you continue to tolerate bad behavior or poor performance, your highest value employees will lose respect for you and your organization. This will result in employee turnover.
Preventing employee turnover should be a priority for any serious people leader or business owner. The benefits of preventing unnecessary turnover are vast. Not only will your company save money and valuable resources (like the time spent training new employees) but you’ll also build a better culture, be able to rely on more experienced employees, and build team camaraderie.
Reducing employee turnover cannot and should not seem like an impossible task. The 11 steps we’ve outlined in this article have research and data to back up each claim. Implementing these strategies will make a big difference in the turnover rate at your company.