How to Reduce Employee Turnover, by Ryan Mack

How much does it cost to train a new employee at your company when another employee leaves? Peoplekeep.com stated the average cost of training an hourly employee is $1,500. That equates to 100-150% of the salary for a technical position, and up to 213% of the salary for a C level position. Bottom line…employee turnover and subsequent training for a replacement employee impacts your bottom line - profit!

I’ve been teaching financial education for over 20 years. In that time I have talked with thousands of employees about their personal financial issues. Often times those discussions delve into unhappiness within their workplace. At the risk of oversimplifying a complex issue, I want to narrow the causes of their unhappiness into three categories of benefits offered to your employees. Based on my personal discussions with employees, these three types of benefits describe the primary reasons for employee dissatisfaction: 1) appreciation, 2) time, and 3) money. 

Appreciation/Value – This is a nonmonetary benefit. This can be done through an employer’s words or deeds and lets an employee know their efforts/contributions are not being taken for granted or are of value to the organization.

Time – In most cases the amount of time required of most full-time employees is at or not much above the traditional 40/hour work week. 

Money – The amount of monetary compensation an employee is given for their job.

Let’s take a look at examples involving the three categories:

APPRECIATION = LOW, TIME = LOW, MONEY = LOW

If you have an employee that gives low marks in all three areas, you are almost guaranteed to have a miserable/stressed employee who is constantly engaged in a job search elsewhere. This employee doesn’t feel appreciated, works long hours, and gets low compensation. Many teachers fall within this category. Many of the teachers I have worked with are also looking for higher paying positions in higher education or using their teaching position as a temporary bridge job to pay bills until they do what they “really want to do”.

APPRECIATION = HIGH, TIME = LOW, MONEY = LOW

You may have an employee that gives high marks in employer appreciation, but low marks in time and money. This means they feel appreciated for the effort they put in at the job, but have to work long hours for low compensation. I have worked with many workers in the nonprofit world who fit in this category. It makes sense because many times they are not in it for the money, but for the impact. The appreciation may come from the employer, but more often times it comes from the community and the people they serve. The turnover I’ve seen in this area comes from not being able to survive on the low salary. When this person leaves their job they do so with much regret, but out of financial necessity.

APPRECIATION = LOW, TIME = HIGH, MONEY = LOW

You may have an employee that gives high marks in time, but low marks in appreciation and money. This means they don’t have to work long hours, but they don’t get much appreciation for the job they are doing and they get very little money. I have worked with many government employees for local agencies that fit this description. Think of a clerk for a Secretary of State DMV office. They clock in at 9am and at 5:01 pm they are in the car headed home. If you have ever experienced poor customer service at the social security office or the DMV, it might be because the person has stable hours but low pay, and certainly not much appreciation from the employer. Many of these roles are being taken over by technology. 

APPRECIATION = LOW, TIME = LOW, MONEY = HIGH

This describes a workplace that I had as an Equities Trader on Wall Street. They could care less about how they talked to you or how you felt (appreciation); they make you work long hours doing trading and doing research (lots of time); but the pay was phenomenal. I have worked with many others who are in investment banking who also fit this description. If you remain in these roles for a long time God bless you, but often I’ve seen many pursue less stressful roles that allow for a more effective work-life balance.

In summary the higher the marks you get from an employee in each of the three areas, the longer an employee will want to remain at that position. If you look at the Forbes list of the best places to work in 2022 you will see that many of these have employees that give high marks in 2 or even all three categories. I personally know people who work at Amazon, J & J, Nike, Rolls-Royce, and a few others on that list. They would all say they are appreciated, paid well, and don’t have to work crazy, long hours. 

As an employer you may know that paying more money isn’t always an option that fits within your business budget. Cutting back on hours might not be feasible depending on your production schedule. However, you can always find “low hanging fruit” in assessing and then expressing the value of your employees; there are always cost-effective ways to show your employees that you appreciate them. Below are few cost efficient tips you can implement that help your employees feel valued and appreciated.

1.    Embrace new ideas/vision – Have you ever heard the saying, “You can’t teach an old dog new tricks”? This can be true in many businesses. Many times companies, especially large ones with a long history, will have systems or organizational structures that become so ingrained in routine procedures that you can’t see any other way of doing things. An easy way to make your employees feel valued is listening to their new ideas and actually consider implementing their ideas. A out-of-the-box idea shouldn’t be rejected simply because it’s “not the way we do things around here”. Rejecting fresh, new ideas from qualified employees is the fastest way to make them feel unvalued and stifle all creativity. An employee with vision who feels this vision is being limited or restricted will quickly find new organizations where his/her vision is appreciated and embraced.

2.    Limit micro-managing – If you hire quality people, you shouldn’t have to look over their shoulder at every project. Employees appreciate clear direction, but also appreciate your confidence in them to complete the task without being micro-managed. Plus, this is not an effective use of management. Projects that should take 4 weeks can end up taking 4 months because everyone feels they have to micromanage every step of the process. 

3.    Review hiring practices – The first step in reducing turnover starts in hiring the right person for the positions in your business. Skills matter, but does this person align with the culture and behavioral beliefs of your organization? If you find yourself interviewing skilled talent, but still can’t seem to find the right person, this could indicate a need to re-evaluate the culture and/or procedures within your business.

4.    Give public praise – You would be surprised at how far a “JOB WELL DONE JIM/SARAH!” goes at a business meeting. Good praise never gets old and doing it publicly also creates a positive/encouraging work environment.

5.    Give clear career paths – No employee likes to feel stagnate in their position. Schedule meetings with your employees to ask them about their goals and their vision for themselves within the company. Do they want advancement? Where do they see themselves in five years at your company? How can you support their future goals?

6.    Provide development and benefit programs – I can personally attest to the satisfaction employees have received from financial literacy programming. Programming like this and other development programs send a clear message that you are concerned for the issues going on in the lives of your employees.

Of course, you will always have turnover. Some employees will leave on their own, and some you will have to let go. Hopefully tips like these and more can reduce the turnover that eventually will hinder your bottom line. Your employees are your number one line of defense to your bottom line – achieving a desired profit.  They have agreed to spend the majority of their waking hours helping you to achieve success; treat them with respect and show them they are valued.