Employee turnover is a lot like death and taxes. If you own a business, you can count on it. The only question is how frequently you turnover staff members. Known as churn, the amount of turnover your company experiences has a direct impact on the bottom line. The goal of every business owner should be one of reducing churn in order to save money.
Hiring Costs More Than Retention
This post will focus mainly on how to retain employees so as to avoid churn. But before we get to that, a discussion of the cost of churn is necessary. According to Lattice CEO and Huffington Post contributor Jack Altman, there are three ways to look at the financial consequences of churn.
In a 2017 piece, Altman cited a case study that proved retaining sales professionals for one year longer through better training and onboarding increased the value of the company in question by $1.3 million over three years.
He cited another study suggesting that the cost of hiring a new employee is anywhere one-and-a-half to two times more expensive than retaining a current staff member. Finally, Altman studied a white paper citing data that shows companies can spend upwards of 200% of a given job's annual compensation to replace a lost employee.
No matter how you look at it, replacing employees costs more than retaining them. So how do you retain employees?
1. Hire People, Not Skills
Far too many employers make the mistake of hiring based only on knowledge and skills. Yet no college degree or commensurate experience is worth anything if a new hire does not fit company culture. So focus less on knowledge and skills and more on what makes a person who he or she is. Knowledge and skills can be achieved through training. Personality is what it is.
2. Compete on Pay and Benefits
Just like the value of your products and services is determined by market forces, so is employee compensation. So offer pay and benefits commensurate with what the market currently stipulates. Compete for the best and brightest in your industry. A failure to compete invites churn.
3. Recognize Productivity
One of the things that makes for unhappy employees is the perception that their work doesn't really matter at the end of the day. The solution is as simple as recognizing productivity. Give praise when employees do good work. When a team completes an especially difficult project, let the entire company know with a congratulatory announcement. Recognizing productivity lets staff members know that their contributions really do matter.
4. Offer Career Paths, Not Jobs
It is human nature to continually want to progress along a path that gradually improves. This is just as true in the workplace as it is anywhere else. So rather than offering jobs, offer workers career paths. A career path with short- and long-term goals gives workers something to strive for. It gives them direction and purpose. Most importantly, a career path gives every worker a reason to stick around.
5. Embrace Flexibility
Finally, embracing flexibility in everything from work schedules to how tasks are actually completed goes a long way to building loyalty among team members. Unless there is something inherently critical to your business that prevents flexibility, you should be giving staff members the freedom to do their jobs in the way they see as best. That freedom will make them want to stay with your company.
Data shows that it is cheaper to retain employees than replace them. So doing what you can to reduce churn will ultimately save your company money.