Reduce Turnover Without Breaking the Bank

It’s the worst kept secret of the business world—turnover is expensive. Estimates of the cost range from 20% to 213% of the employee’s salary, which adds up to hundreds of thousands, if not millions, of lost dollars sickeningly fast.

But what can you do? Turnover is a fact of life and while we can track it, we can’t impact it.

Well… That’s not entirely true.

While you can’t duct tape your employees to their chairs, studies show that there are ways to lower your turnover. Currently, most companies are experience turnover rates of 57.3% in 2021. Turnover is higher than normal due to a parched job market and increased unemployment benefits. That means that an average small business with 25 employees, will lose roughly 14 people this year. If those people are primarily entry level workers making $45,000 per year and you were lucky enough to be on the low end of cost, 20%, that’s an average of $9,000 lost per employee plus the amount you’d already paid them before they left. That would be a total of $126,000 in cost plus their salaries. If you are on the high end of cost, 213%, your total loss is closer to $1,341,900 plus salaries.

We bet you had other plans for that money, so let’s talk about how you can save more of it.

Most business owners see high turnover rates and start sweating because they think they need to increase salaries and offer bonuses to stop losing people. In reality, 88% of people cite a reason other than salary when looking for new employment. Here are the real top five reasons your employees leave:

  1. Poor relationship between management and employees
  2. Employees don’t trust or believe in your organization and culture
  3. Lack of growth opportunities or murky growth paths
  4. Unclear or inaccurate job description vs. expectations
  5. Incentives are for managers only

What if I told you there is a simple solution to all five of these problems?

Training is your golden key. It won’t stop turnover dead in its tracks, but it can significantly decrease turnover in keys areas and save you a good chunk of the money you are losing. Let’s break down the training solution for each of the above problems.

Poor relationship between management and employees

This generally occurs when your managers have been promoted from within the company. On paper, it seems like a great idea to make your top performer in any given area the manager. Unfortunately, a lot of new managers, who were promoted because of job success, struggle to assume the managerial aspects of their new position. While they were great in their former position, they don’t have the necessary skills to be a good manager. Don’t worry, this problem is easily solved, and you can still have an amazing manager who knows their stuff and gets along with their team. They just need a little help to find their footing.

That help is leadership development training. This training teaches specific managerial skills such as time management, delegation, and how to motivate and communicate with a team. So, your new manager can take all their industry and company knowledge and communicate it effectively to their team.

Employees don’t trust or believe in your organization and culture

Sometimes, as a CEO, you may have a crystalline vision of who your company is and where it is going only to come to the sudden realization that your employees don’t even know your mission statement. You don’t want your employees to feel like they are in an episode of the twilight zone, going to work every day without actually accomplishing anything.

Employees need to know what they are working for and toward. That comes from culture and mission training, or mission critical training as we like to call it. This should be developed and integrated into your onboarding to help new employees understand what you are working for and why they should care about it. But don’t stop there. You need to weave your mission critical training into meetings, check-ins, and everyday life so they never lose sight of what you all are collectively accomplishing. Your culture should become a lifeline that every employee in every position can impact and participate in. This ties them to the company and to each other, and those ties are much harder for your competitors to cut.

Lack of growth opportunities or mucky growth path

Today, many companies promote based on merit instead of seniority. As a practice, this is an excellent idea. Why not promote the hardest, best workers? The only issue is when employees can no longer understand why you chose to promote certain people over others, and merit quickly begins to feel like favoritism.

To avoid the favoritism debate, you need to create a growth path through training. This is a program where top performers can be nominated or request access to participate in. It creates a qualification and evaluation process for merit-based promotions and allows you to fill any knowledge or experience gaps in employees moving up in your company. It also allows you to build an in-the-wings bank of top performers who are ready to take on more, A.K.A a pre-built leadership structure that you can activate as you scale. Employees will be happier with the recognition and your company will be more stable.

Unclear or inaccurate job description vs. expectations

We have all had that nightmare where you show up to school only to realize there is a test that you forgot about or didn’t study for. Unfortunately, this is a reality in the workplace more often than we would like to admit. Many small businesses have little or no onboarding which leaves employees feeling unprepared for their job.

Most onboarding consists of new employees sitting through a couple hours of HR-based training that reviews healthcare, benefits, and disciplinary measures. Then, if they are lucky, they shadow someone in their new department for a few days before they are released into the wild to sink or swim. This method of shoulder-to-shoulder, or tribal training, is both inefficient and frustrating for employees and employers.

Not only does tribal training pass down bad habits and inefficient practices through your organization, but it also sets your employees up to fail. Think about it, most people can’t remember the name of someone they met a week ago, much less your entire payroll process or how your CRM works. New employees inevitably get overwhelmed by too much information in their first few days and then forget everything a week later. This pattern leaves you frustrated with their poor performance and them feeling defeated after trying so hard only to fail. That is why role specific training is so important.

Role-specific training does more than guide new employees through onboarding. It also serves as a reference material for employees who need to brush up on processes or refer back to their job expectations in their first few months. Having written training means bad habits aren’t passed down, and managers can spend less time training on basic systems and more time coaching their teams. And if that employee doesn’t work out, written role expectations also provide a minimum standard for you to evaluate new hires. That way, if your employee is truly not a good fit, you can both see where and why they fell short and make a better decision next time. Everyone benefits.

Incentives are for managers only

It is easy to reward managers and those who are moving into managerial roles with raises and promotions, but many consistently strong workers get overlooked if they don’t move up, and overlooking employees is a slippery slope to high turnover. Patrick Lencioni explains why in his description of the Three Signs of a Miserable Job:

  • Immeasurment—Employees are unable to gauge their own progress or the impact of their contribution to the organization.
  • Anonymity—Employees feel that their manager doesn’t know what they do.
  • Irrelevance—Employees feel that their job doesn’t matter to their organization.

Incentives don’t have to be financial. They can be as simply as applauding an employee in front of their peers or recommending someone for more responsibility. Before you get too wrapped up in how to tackle all three of these signs for every position in your organization, take a look at your training. The solutions we have mentioned in this article can solve all three miserable job issues.

For example, employees with mission critical training clearly understand the company’s goals, and their role-specific training helps them see how they contribute to those goals, avoiding immeasurment. Role-specific training and leadership development ensure that managers understand their employee’s roles, at least at a surface level, and are able to properly communicate their understanding, solving anonymity. Established growth paths and recognition opportunities give employees a sense of accomplishment, overcoming irrelevance.

So next time someone brings up the issue of turnover, you are now prepared with an action plan on how to overcome it. And this plan puts your funds back into the business and not just the individual, whether you try all our suggestions at once or tackle them one at a time. Training is a highly valued asset to employees, and it allows you to strengthen your company at the same time. After all “74% of employees feel they aren’t reaching their full potential due to a lack of development opportunities.” Help them reach their goals while you reach yours. It’s a win-win-win.

Sources:

https://www.hrexchangenetwork.com/learning/columns/engagement-matters-the-impact-of-training-on-emplo

https://www.cashort.com/blog/top-5-reasons-for-high-turnover

https://www.joinassembly.com/blog/employee-turnover-costs-are-more-expensive-than-you-think-do-something-about-it

https://hsdmetrics.com/the-cost-of-employee-turnover-calculator?utm_source=google&utm_medium=search&utm_campaign=exitright-top-of-funnel-phase2&utm_term=employee-turnover-cost&utm_content=calculator&utm_campaign=ExitRight%20-%20Top-of-funnel%20-%20Phase%202%20-%20Turnover%20Cost&utm_source=google&utm_medium=cpc&utm_content=ExitRight%20-%20Top-funnel%20-%20Phase%202%3A%20Turnover%20Cost&utm_term=turnover%20cost%20calculator&gclid=Cj0KCQjwjo2JBhCRARIsAFG667VlRuunNKHd3kldOlQK9ATZ2G_uf6K7Mq4V-EL6_Oedu6wHJv5dzWYaAsaNEALw_wcB

https://hbr.org/2007/08/the-three-signs-of-a-miserable