Effective Ways to Reduce Employee Turnover for Small Business

For small business owners employee turnover is a fact of life. One of our clients put it very well the other day when he said, “I am not in the restaurant business. I am running an employee training business because of the constant need to train stream of new employees that I have to hire because of turnover.”

High turnover raises number of issues for all businesses, ranging from having to spend money in hiring and training new employees to impact on business operations and customer service due to constant churn of new people. That’s why it is paramount for all businesses, and particularly for small business owners, to reduce the employee turnover.

There are steps you can take to deal with this issue and reduce the turnover. Here are our suggestions collected from personal experience and from talking to our business colleagues.

  • Give them what they want. My father, who owned a business all his life used to say – “Every person has needs and wants that, if you can identify and fulfill, will increase his loyalty to your business and make him stay with you for a long time.” Different people work for different reasons and want different rewards. Some of the examples are flexible hours, health insurance, time/ money to study further and so on. Your job is to find out what they are looking for and find ways to give it to them.
  • Share profit. Giving employees share of profit or sales gain will give them a sense of ownership and responsibility. Instead of giving them the share right away you should create an accrual plan such that the bonus is set aside for them over a period of time and they can collect it after a certain time period (6 months or 1 year).
  • Have a Great Team. One of the reasons employees stay at their current job is because of the work environment and the colleagues they are working with. Building a good team gives those employees reasons to actually enjoy their work and have fun. This will boost their chances of staying at the current job.
  • Create Fun Workplace. Those who know about perks available in Google offices know what I am talking about. While you may not be able to provide gourmet food and massage chairs to your employees you can still build a fun workplace on the cheap.  For example, you can bring donuts for the employees once in a while or have an outing in summer.

Do you have additional suggestions based on your experience? Please share in the comments.

Views: 144

Comment by Dina Eisenberg on June 8, 2012 at 6:51pm

Your father and you are both wise men.  Understanding someone's true interests or need is the first step towards finding many ways to satisfying that need. 

It isn't always money that works, either. I was surprised many times during my years as a corporate Ombudsman how often people hungered for recognition, appreciation and believe it or not, kindness.  Catching your employee doing a good job and saying so right then is priceless.

Comment by Harry Vaishnav on June 9, 2012 at 9:37pm

DIna - Couldn't agree more.

Comment by Nabeel Hussain on July 6, 2012 at 6:37am

Good article: basic principles most business owners and managers forget while chasing the targets.


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