5 Steps to Decrease Employee Turnover
Reducing employee turnover and increasing employee retention are top priorities for every business owner. While some turnover is natural and healthy, the last several years have seen concerning trends in employee turnover. Employees are leaving their jobs in droves in a season many are calling The Great Resignation.
According to Gallup, millennials, who now comprise the largest percentage of the workforce, are more likely to change jobs than any previous generation. Voluntary turnover is costly. Research conducted by The Work Institute suggests replacing an employee will conservatively cost up to two times the employee’s annual salary. And businesses rarely have succession plans established for unexpected vacancies. So beyond the financial costs, the lack of employee continuity can frustrate co-workers, dampen morale, and bring productivity to a near halt.
As Christian CEOs, we care about the well-being of our employees, and at the same time, we need to be wise stewards of our businesses. So what can we do in this season to increase employee retention and overcome unhealthy turnover?
While some employee turnover factors are out of our control, there are proactive things business owners can do to address the retention challenge—even in a tough labor market.
Follow these five research-based steps to overcome unhealthy turnover in your business.
Step 1: Calculate Your Employee Turnover Number
While healthy turnover looks different by industry, ten percent is generally a good benchmark for small- to medium-sized businesses. Most organizations, however, report unhealthy turnover percentages at nearly double that number. In 2021, the Bureau of Labor Statistics reported voluntary turnover in the United States at a staggering 25%.
Turnover measures all terminations, including those by employees whose spots are refilled. It is calculated as follows:
- Identify the average number of employees you have during a particular time period. This is done by taking the (# of employees at the beginning of the time period) plus the (# of employees at the end of the time period) and dividing that total by two.
- Identify the (# of employees who separated from the company during that time period).
- Divide step B (# of employees who separated from the company during that time period) by step A (average number of employees during the same time period)
- Multiply the number in step C by 100.
This resulting number is your turnover percentage rate. It’s a number that all employers should know because it is an indicator of the health of your business on a human scale.
Once you’ve calculated your company’s turnover rate, convert the data into useful information by processing the following questions.
- Is your number lower or higher than the 10% benchmark?
- What does that number tell you about your employees’ experience?
- What might be the reason(s) for your turnover rate?
- What are some ways your business can elevate your retention rate above that of your competitors?
Step 2: Learn Why Employees Are Resigning
The results of our turnover assessments may be a tough truth to receive but confronting this reality helps us to ask important questions. When we know why employees leave, we can address root causes rather than self-diagnosing or mistakenly treating the wrong problems.
One way to understand what employees are looking for in the workplace is to do a little reverse engineering, looking at the top reasons for turnover. While some turnover factors are out of an employer’s control, the 2020 Retention Report by Work Institute revealed that seven out of the ten most common reasons employees resign are preventable by employers.
This study identified the ten most common reasons for turnover:
- Personal circumstances (medical, relocation, family need)
- Involuntary/employee performance
- Employee dissatisfaction with role/function evolution
- Lack of career development/advancement opportunities
- Negative culture/work environment
- Stress and well-being
- Work-life balance
- Compensation and benefits
- Poor management
This is good news for employers! The majority of these turnover factors lie within the employer’s control. If you find your turnover rate hovering above the 10% benchmark, there are a number of things you can do to bring the number down. And the majority of these interventions have very little to do with compensation.
Step 3: Hire Great Managers
A closer look at the data suggests that poor managers may be one of the most significant factors for unhealthy turnover—and one most overlooked by employers. Our managers play a pivotal role in overcoming unhealthy turnover in our businesses. So we need to hire great managers.
A 2018 Udemy study found nearly half of employees had quit a job due to a bad manager.
Leadership researcher and author, Marcus Buckingham, has famously said, “Employees join companies but leave managers.” In his book, 9 Lies About Work: A Free-Thinking Leader’s Guide to the Real World, he contends that even in companies with high employee engagement scores and meaningful missions, a bad relationship with a manager can sour an employee’s enthusiasm to stay.
Summarizing the findings of Gallup’s ongoing State of the American Workplace Study, Gallup CEO Jim Clifton said:
“The single biggest decision you make in your job—bigger than all the rest—is who you name manager. When you name the wrong person manager, nothing fixes that bad decision. Not compensation, not benefits—nothing.”
Poor management skills can undermine whatever gains we make in culture, compensation, and benefits. Throughout Proverbs, the Bible teaches that employers are stewards of people. We can’t allow mediocre managers to obstruct employee flourishing and retention.
Step 4: Understand New Employee Priorities
Companies who want to survive this season and excel into the future should learn how to become employers of choice. And given the key role that managers play, we must ensure our managers receive training on how to address the changing employee retention landscape.
The tangibles and intangibles for attracting and retaining high-performing talent have changed.
The shift is observed particularly among millennials as outlined in a recent Gallup poll. Gallup identified six functional shifts that millennials value in an employer—shifts that could impact our turnover rates and ability to retain these workers.
These findings present a unique opportunity for Christian employers during this era of job-hopping and labor shortages. In addition to profits, we believe in helping people know God and flourish in their identity in Him. As our purpose for business extends beyond the bottom line, we have the advantage to satisfy people’s intrinsic hunger for meaningful work.
Step 5: Conduct Stay Interviews
The transitory nature of the employer-employee relationship in the contemporary workforce empowers employees to regularly change jobs in search of workplace environments that support their preferences, expectations, and intentions. The table above reinforces this reality.
If the root of employee retention is focusing on those six factors, we must invest in strategies to understand employees better. Human resource professionals refer to this approach as an employee listening strategy.
Performing exit interviews is a fairly standard method in a listening strategy. However, employers who want to get ahead on retention issues may want to try a more proactive approach that SHRM calls the Stay Interview, or less formally, a “periodic check-in.” Stay Interviews allow employers to learn about their employees’ well-being and needs before they decide to leave.
At C12, we suggest managers consider regularly asking employees questions like these:
- What do you enjoy most about working here?
- What adjustments would make you feel more valued, supported, or fulfilled?
- What about our management approach helps you thrive? What inhibits your effectiveness?
Conducted effectively, employees feel heard and valued, and we gain alignment on goals and expectations.
But don’t be misled by the term “listening” in an employee listening strategy. The work doesn’t stop there. For best results in retention, listening only precedes the critical step of acting. If we act on what employees share, we improve the employee experience, foster trust, and reinforce that employee feedback is welcomed.
Beating Industry Standards: A Case Study
Stephen and Ken Reyes are C12 members in Mission Viejo, California, and the father and son Christian business owners at Strategic Sanitation Services. Turnover in their industry averages 200% annually! This astonishing turnover number is largely due to the low pay and lack of career growth opportunities.
Given these realities, how might a Christian CEO set out to overcome unhealthy turnover and lead differently? Stephen and Ken share how they have achieved a turnover rate far below the industry rate at 60%—and still believe they can push that number even lower.
In their story, we hear the application of the steps listed above. Stephen notes that as Christian business leaders, they’ve learned that putting people first makes all the difference. “God has taught us that the more we focus on people and their needs, and less so on what the company needs, that our business can grow and flourish. [Our approach] makes people feel valued. It feels like we’re looking for someone like them to fill a role that is valued and appreciated. That’s when they decide this is a place to stay.”
Bringing it all Together
We reduce our risks for unhealthy turnover by creating safe places to engage in meaningful dialogue, adapting to what employees need and desire to thrive in their work, and developing exceptional managers.
For Christian CEOs, ongoing relationships with employees mean ongoing opportunities to impact their lives. We get to show them the love of Christ, develop them professionally and personally, and serve their families. And, together, we partner with them to build great businesses with a greater purpose.
At C12, we provide Christian CEOs and business owners with the business tools, peer advisory groups, and executive coaching they need to thrive in business and life. To learn more about C12’s approach to Christ-centered business leadership, find a C12 Business Forum near you.
March 9, 2022