Early last year, a client came to me with difficulty retaining talent, a high turnover rate, and overall a feeling of employee disengagement. They were not using tools to measure or collect data about engagement. Based on both intuition, turnover numbers, and an HR Audit (including interviews with employees) we had enough touchpoints to develop a strong understanding that the workforce was disengaged. Anytime a workforce is disengaged business leaders should be worried about employee retention and its opposite, employee turnover.

The cost of turnover

It might be important to note that turnover has enormous ripple effects on a business. It takes time to recruit new team members, train new hires, and get them to their most productive state. A business that has high turnover is almost never fully effective because they have too many team members who are not working at complete capacity. The toll turnover takes on existing staff can be suffocating in terms of the workload. 

You can quickly understand this if you imagine a restaurant; consider the plight of a micro restaurant that has a server, cook, and a dishwasher. What if their turnover rate is 33% and their dishwasher has quit. That leaves the cook and server to manage the entire restaurant until a new dishwasher can be hired and properly onboarded to full productivity. The cook and server might be able to manage this for a short time period however, it will take a toll, cause them to work more during their shift, not be as focused on their customers and they might even drop the ball more often. This results in long wait times, orders that are inaccurate, unhappy customers, and exhausted, overworked employees. This example translates to other businesses too but the chaos may not be as obvious to leaders or clients.

The national average for turnover in 2019 according to Salary.com was 19.3% across all industries. That means that 80.7% of the workforce remains in place over the period of time that is measured; a month, a quarter, a year. The opposite of turnover is retention, ideally, a business would have a retention rate of 80.7% or better (some turnover is healthy). If it’s lower than 80.7% it can cause issues with productivity and overall well-being of the workforce. Also, understand that turnover can vary by industry and it might be helpful to understand the turnover rate in your particular industry. 

Why is it important to measure turnover and retention?

If your small business is experiencing heavy workloads, unsatisfied employees, perhaps a lack of engagement, a good place to start is to examine your turnover and retention rates. Conversely, if things are going really well at your business it might be that your workforce is fully productive and your retention rate is excellent. A positive retention rate is an attractive number to share with potential new hires, investors, and business collaborators. This will give you the data to help understand the dynamics of your workforce as opposed to going off of intuition or a hunch. A good best practice for small businesses is to track this quarterly and annually. 

Taking action to overcome problems with your small business employee turnover

Last year my client implemented an employee engagement tool that measured both eNPS (employee net promoter score) and employee engagement. Having new knowledge of live data (it was a weekly tool) helped this business understand their areas of opportunity and slowly, over the next 12 months, they were able to deliberately make decisions, implement new tools, policies, and a mindset of employee value and development, that has changed their workforce. Employee retention is up by 34.3%, employee engagement has consistently shown improvement and is currently up by 10%, and the eNPS has improved by 46 points all in a 12 month period.  

“Employee retention improved by 34.3%, employee engagement improved by 10%, and the eNPS improved by 46 points. Employee engagement tools are a great resource to help impact employee retention for small businesses.”

The eNPS score has been the last target we have tried to impact and largely this is just getting started. However, by changing many of the other behaviors and tools it has had an impact on eNPS.

These improvements are not by accident or good fortune. Using tools to understand your workforce can help provide information and data so that you know exactly where to invest. In this situation, a combination of an HR Audit, utilizing an employee engagement tool*, and effective leadership had a profound change on the retention rate and overall employee engagement.

If retention and workforce uncertainty keep you up at night, let’s fix that. Contact Amy.

* Examples include; TinyPulse, Officevibe, 15Five, CultureAmp to give you a few examples. McGeachy Consulting has no affiliation with any of these companies.

Amy McGeachy, PHR, SHRM-CP

HR Consultant to small and medium sized businesses in Oregon and Washington.

Amy McGeachy is an HR Consultant and the Founder of The Exceptional Workplace, a newsletter to help small business leaders stay focus on proactive HR and People Practices. Never miss an issue - join HERE.