Small business turnover: putting a wedge in the revolving door

Small business turnover causes a big drain on resources. Learn why it happens and the best strategy to get employees committed to your company long term.

Revolving door for small business turnover

If you run a business, you expect to experience some employee turnover and to spend money on finding, hiring and training new employees. However, it’s worth noting that it takes:

  • Six months to develop new employees to the point of proficiency
  • Eighteen months to integrate them into your culture
  • Two years until the strategy and mission of the business ‘clicks’

Because of this, it can be easy to fall into the trap of filling the vacant position as quickly as possible in the name of maintaining productivity and say ‘well, they work or they don’t-we’ve got to get someone up to speed.’

Stopwatch for small business turnover

In your effort to get back to work, however, you might not be taking the time to hire the right fit and get them engaged in your business. This creates a catch-22: take the wrong shortcuts to save time on hiring and you might lose more time when you have to restart the hiring process a month or two down the line.

Cause and effect

All companies experience turnover, but in a small business, one employee leaving can make a big difference in the day-to-day. In order to address small business turnover, you have to start with understanding what causes it. Mostly it’s down to:

  • Low-skill positions. Low-skill roles usually correspond to a low level of loyalty. Turnover in these types of roles is typical in any size business.
  • No ladder to climb. A career-minded individual might not see a way to advance within your company and decide to leave as a career move.
  • Limited resources. In some cases, you may not be able to compete with the salary the super-qualified project manager was getting at his last job or the clock-in, clock-out pace of a larger company.
  • Environmental issues. We’re not talking about going green. A small business is tight quarters and the environment, however hostile or friendly, will affect your ability to retain employees.
  • Personal circumstances. An employee could leave for entirely personal reasons which have nothing to do with you or your business.

Notice that a number of these causes are things you have no control over, but, in some cases, you might have to take responsibility for who walks in – and out – of your door.

I’ve witnessed a small business under pressure, with a heavy workload in a fast-paced industry. They threw people into positions after a brief and superficial first impression and a lot of those hasty hires left, or were asked to leave, within a couple of weeks. Other hires lasted longer, but still eventually left due to a tense, sometimes hostile, environment. That company was in a perpetual state of hiring.

There’s no magical cure for employee turnover, but there are practices you can implement – specifically in a small business – to ensure you are doing what you can to hire well and retain those employees you want as part of your team long term.

5 areas to focus your time and energy to reduce small business turnover

Efficiency is important to any small business, but being efficient does not mean burning through time at a rapid rate, but, rather, using it wisely for the best results.

1. Incentivize your business

In a 2011 Harvard Business Review survey, 60 percent of HR leaders said an attractive benefits package is important to recruit and retain quality employees. In a small business, this requires research and creativity to create an attractive combination of:

The benefits of working at a small business will, without a doubt, look different from those of a large company, but that’s no reason they can’t be attractive and competitive to help you retain the employees you want to keep around.

2. Worry about competency and fit

Puzzle pieces for small business turnover

If you want to retain your employees, you have to consider both their qualifications and how they will fit into your business. Look at:

  • Competency. Start with a lists of non-negotiable skills required for each vacant position. If you know what skill you are looking for, it’s easier to focus on fit.
  • Culture. You need to understand and be able to convey your culture – how you work, the pace, personalities and work style in your office. During the interview process, you need to decide if a candidate will thrive in that culture and allow them to assess the same.
  • Potential. Hiring is also a gut decision. You need to gauge a candidate’s potential to not just accomplish tasks and fit into the culture, but also grow with your business.

Josh Bersin recommends you apply the adage ‘measure twice, cut once’ saying ‘there is no more important thing you do than bring great people into your organisation.’

3. Make a good first impression

An employee could decide how committed they are to your business in the first day, week or month of their employment, so it’s vital to create an on-boarding plan which affirms their decision to accept your job offer and builds loyalty to your business from the start.

  • Prepare them. Once they accept your offer, send a personable email about what to bring their first day, typical dress, where to park, how lunches work and what their first day will entail.
  • Be ready for them. Have their work station, programs and email accounts, legal forms and security passes ready when they arrive.
  • Give them guidance. Show them around the office, how equipment works and who they’ll be working with so they don’t waste their first week fumbling through silly things.
  • Tell them the rules. The worst way for an employee to find out about a rule is after they’ve broken it, so try to avoid embarrassing them by being forthcoming about any do’s and don’ts.

If it takes six months for a new hire to become proficient, use this time wisely to engage them in your business.

4. Build in opportunities for advancement and growth

If you want an employee to invest in the goals of your startup or small business, you need to acknowledge that they have professional goals also and give them the opportunity to advance their career without leaving your business.

  • Increase role responsibilities. As a new hire becomes proficient, be willing to assign more, even diverse, responsibilities to their role. It’s important to help them develop professionally even if their job title hasn’t altered.
  • Forge an upward path. When considering an employee’s potential to fit into your business, also consider how an employee could advance as your business grows. Could they manage others one day? Could they oversee projects? Talk to them about that potential.

Your small business has a unique advantage over large companies: flexibility. Advancement in your business may be unorthodox in the beginning stages, but that’s what your ideal hires will be excited about.

5. Monitor the environment

HR and small business articles alike talk about hiring for fit, but you also have to create a company culture that’s fit to hire and retain your ideal candidates.

Company culture occurs whether you are intentional about it or not. Your culture will either attract and retain good employees or have them looking for another job. Learn what it means to be intentional about your company culture and to refactor it until it’s exactly what you want it to be.

Not every hire will be a success, so some turnovers are good for your business. However, if a high performing employee decides to leave, ask them to have a conversation with you either in person or via email. recommends starting with ‘What made you start looking?’. The goal is to determine whether it’s you, your business or factors beyond your control. You can then either adjust accordingly or carry on.

Slowing down the clock

All the strategy in the world won’t make your small business impervious to turnover, but you can adopt a mentality where you take your time to find the right fit and also spend time engaging them in your business.

You’ll not only have a greater chance of retaining high performing employees, but, with that, you also better the chances that you retain the time, resources, knowledge and expertise you invest into each hire.

(Hat tip to Karen, Julian Lim and Mike Kniec for the photos)

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