Most businesses know the importance of making good hiring decisions, however it is unfortunate that not as many are aware of the importance of maintaining high staff retention rates, as well as the true costs of a high turnover rate.
Staff retention is the ability of the business to keep its employees, while a high turnover rate indicates that the business is losing employees at a high rate.
Businesses in Australia are particularly vulnerable in light of skill shortages in many industries which look set to worsen as the population ages and the baby boomer generation moves towards retirement. Having a high turnover rate carries many hidden costs. Expenses are directly incurred in hiring and training new staff, as well as indirectly through decreased productivity and low employee morale.
Common reasons employees resign
- Management: This might be surprising to many business owners, but salary is not the biggest reason people leave their jobs. Management is, overwhelmingly, the main reason people leave a job, not least because a business’s management also has a direct effect on many of the other factors that can cause an employee to jump ship.
- Career prospects and development: Employees usually seek out jobs that not only compensate them for their time and skills but also enable them to develop their potential. Businesses need to put in place a system that deliberately develops employees’ potential.
- Work/life balance: Leaving for positions that pay less but demand shorter working hours and offer more flexibility is becoming increasingly common.
- Micromanagement / inadequate management: Micromanaging employees is a sure fire way to increase your turnover rate, while not providing sufficient guidance will cause employees to feel lost.
- Unrealistic targets: If you set targets that employees cannot realistically achieve considering the current economic climate, demographics, competition and available infrastructure, they will leave in droves. Provide support that enables employees to achieve their targets.
- Feeling unappreciated: Employees who feel that a company does not value them or their contributions are unlikely to show loyalty. Small rewards, recognition and even just a word of thanks for a job well done can go a long way.
- Lack of induction and training: Just because a new employee seems competent enough doesn’t mean you do not need to give him or her proper induction and training. Leaving employees to find their own way in the dark will make them feel you can’t be bothered to invest in them.
Steps to take to lower staff turnover rate
While raising salaries across the board can be a short-term remedy to a high turnover rate, in the long run you’ll find that in a surprising number of cases, money is not an employee’s chief reason for quitting. Too little compensation will most definitely result in a high turnover rate, however merely increasing it will not encourage employees to stay in what they perceive to be a poor work environment.
Finding employees with the right qualifications and experience is just one part of the battle. Employees must also feel they are a good fit for the job. Being honest about the pros and cons of the job rather than trying to hard sell the job during an interview ensures that your candidates understand the true nature of the job. Younger employees are focused on mobility and seek opportunities for growth.
They are also much more motivated to find jobs they deem meaningful, and a negative company culture can detract from that. Research has shown that while work-life balance and benefits are just as important to younger employees as older workers, younger employees also value a fun working environment, opportunities for collaboration and interaction.
Businesses need to pay meticulous attention to the quality of the working environment with which they provide employees. Years of research on employee recognition, employee engagement, leadership and management styles have revealed that employees’ needs are schematically aligned with Maslow’s Hierarchy of Needs.
Once they are able to earn an adequate salary, their attention turns to deriving more meaning at work. The employee will often need to feel appreciated and recognised for their contributions and may even need to feel a sense of belonging in the working environment.
Pressure is mounting on businesses who are finding that compensation and stability have a weaker role to play in retaining employees. By paying attention to such variables and creating a positive working environment, turnover rate can be reduced. Employees are assets that grow in value and productivity the longer they stay with an organisation, it is in every business’s best interests to try to retain their employees to the best of their ability.
