It’s a fact of life when you run a small business: Your limited resources make everything you have critical to survival. And when unemployment remains significantly low, small businesses and startups alike face the reality of increased employee turnover while big business budgets and benefits lure away the best talent.
That makes the cost of turnover even higher for small businesses — both physically and fiscally.
It turns out that money isn’t everything when it comes to employee turnover. Companies that retain top talent traditionally take a more holistic approach to the problem and build programs that work for all employees. Done right, your retention plan can keep costs in check far better than a reactive program of counteroffers and short-term departures. Here’s how:
Step 1: Calculate Turnover Rate.
Turnover is a ratio of the number of employees who left during a specific time period and the average number of employees your company had during that same time period. The formula:
Number of departed employees/Average number of employees X 100 = Turnover rate
Time period: The specific date range you want to review to determine turnover rate.
Number of employees who left: How many employees left during the designated date range, excluding those who retired.
Average number of employees: This is the number of employees per day during the time period divided by the number of days in that time period.
If a workplace had 100 employees from April 1 through April 25 and then dropped to 80 employees on April 26, the “average number of employees” calculation would look like this: (100x25) + (80x5) / 30 days = 96.7
Actual turnover rate calculated. Once you have all of your data available, apply it to the formula to find your turnover rate. The following would be the April turnover rate: 20/96.7x100= 20.68 percent turnover rate.
Step 2: Create Turnover Goals
What does your 20 percent turnover rate really mean? It means that one-fifth of your workforce is on their way out. If that seems like a lot to lose, you’re right. It’s time to set a goal.
Start by setting long-term reduction goals. When it comes to turnover, be reasonable. If you’re at 20 percent today, don’t try to be at 5 percent by next Monday. You’ll either be cheating with the numbers or setting yourself up for failure. Instead, target an industry average or a few points below average, at first, or try reducing turnover by a specific percentage over the course of a year.
What’s right for you? It’s not practical to go from 25 percent turnover to 5 percent in a single month. But you may be able to reduce your annual turnover from 25 percent to 15 percent. Try setting a small goal this year and see if the plan is making a difference, then set a bigger goal next year.
Target a short-term win. You want to see results ASAP, but it could take longer to see the effect on your turnover rate. Include short-term wins to keep momentum high.
Add a tactical target of getting feedback. You may already conduct exit interviews with departing employees, but are you getting true answers about why people are leaving? Employees often fudge answers for leaving for fear of retaliation or future ineligibility for rehire. Address those concerns with smart solutions:
• Explain why exit interviews help. Their responses will be used to improve the workplace.
• Set up anonymous surveys for departing employees. Emphasize that the information will not be linked to them.
• Have an anonymous third party conduct exit interviews instead of an internal team.
Use survey responses to help create short-term milestones, like the development of management trainings and the implementation of “stay interviews” designed to curb turnover before it starts.
Set Milestones
Review your data. You may be able to spot trends in departures by looking at monthly turnover year-over-year. Are employees more likely to leave during specific months or seasons? Are there business activities that trigger departures, like a big sales season or an event that has everyone on high alert?
Independent studies indicate that non-workplace events, including personal activities, can trigger employee departures. A 2016 Harvard Business Review study showed an increased likelihood of turnover following these events:
• Work anniversary of joining the company (6 percent increase).
• Work anniversary of starting current role (9 percent increase).
• “Big” birthdays, like 40th or 50th (12 percent increase).
• Attendance at gatherings like family or class reunions (16 percent increase).
You can’t stop an employee from going to a family reunion, but you can take preemptive measures to help keep employees happy. Consider setting a goal of meeting with at least 75 percent of your employees shortly before their work anniversary each year to create a growth plan for the next year and help them implement it. While it’s simple, just having something to strive for can make a huge difference in employee retention.
Step 3: Develop Your Retention Roadmap
Creating retention techniques that help increase job satisfaction should be an employer’s No. 1 goal in reducing turnover. Start with the following:
Education. Do your employees know all of the benefits your organization offers? Internal PR-style campaigns can draw attention to benefit plans and employee perks, which may make employees think twice before nibbling at jobs offering similar packages.
Stay interviews. Don’t wait until employees are on their way out to get their opinions. Conduct “stay interviews” to learn what keeps your key employees in your workforce and how they feel their talents and skills could be used more effectively.
Interpersonal relationships. A 2014 jobseeker.com survey found that 52.6 percent of employees admitted that they “did not trust their boss.” Encourage managers to get to know their employees and vice versa. Try one-on-one lunch meetings or be completely informal with conversations throughout the week about non-work-related topics.
Step 4: Implement Your Strategy
Get off to a good start by getting buy-in early. Share ideas with key stakeholders and include them in discussions about the data and details. This is doubly important for plans that require a budget.
Be prepared. Ensure you have the research to justify your plan. Gather detailed reports with your turnover rate and other metrics to help sell your ideas.
Review your progress. Remember to review your progress against the milestones you identified and look at stats month-over-month. Your first few months may not reflect an immediate turnover reduction, but that’s to be expected. An employee who leaves during Month Two of your retention plan may have already had plans to leave even before you started your retention program.
Adapt and grow. If your plan isn’t working as well as planned, find out why. Use surveys and your HR data to understand more about why employees might be leaving. Talk to your HR provider to ensure your goals were realistic. Then modify your plans where needed.
Be sure to review and modify your retention plan on a regular basis. As the market and your workforce change, you’ll need a plan that keeps in step with both.
Colin Thompson is the director of human resources at stratus.hr, a Sandy company that provides HR services in lieu of an in-house HR department.