The most obvious way for employers to measure the full impact of employee turnover is to look at the corresponding loss of productivity when positions go unfilled. You’ll also need to look at the cost to find replacements. But that’s just the start. The rest of it is part of what can be called the snowball effect — that is, the tendency of things to go from bad to worse in a hurry. When employees see others leaving, many begin to suspect that they’re either on a sinking ship or that there might be better opportunities out there for them, too.

Collateral Damage

When departments are short-staffed due to unfilled positions, the remaining employees and their managers are left to pick up the slack. And that’s not good for morale. Simply throwing money at the problem by paying ever-higher wages to draw in replacement workers can be wasteful. Ultimately that could pressure you to increase wages of incumbent workers. Even in a climate of low unemployment, you might feel you should raise wages to a degree that’s not justified by the labor market. Instead, focus on reducing turnover by doing a comprehensive review of factors that cause people to leave your employ. With that information, you should be able to create a turnover reduction strategy. Compensation, while not the only motivator, certainly is an important reason why employees leave their current jobs. But when considering the competitiveness of your pay rates, think holistically about it, taking into account more than just compensation, but also the employee benefits you offer. These days, the cost of benefits can easily add up to 25% or more of employees’ total compensation. Yet, often when workers think of the cost of their health insurance, they focus on their deductibles and copays, without realizing that the cost their employer contributes is a great deal higher.

Communicating Benefits

If you have a generous benefit package, make employees aware of what benefits are offered. Some of that can be conveyed by information included on paycheck stubs. Does your company have an underlying philosophy associated with your employee benefit plans, for example, insuring that what you offer is competitive in your industry? If so, lay it out in your employee handbook as a preamble to the rundown on the actual benefit package. The same principle applies to your vacation and sick leave policies. Assure your employees that your benefit plan isn’t offered merely because it’s customary to offer benefits, but because your company believes that they add to employee well-being. According to the Society for Human Resource Management key intangible factors that motivate employees to stay, or leave if they are absent, include the following:

  • Employer commitment to job satisfaction. Even mundane jobs can be a source of satisfaction to most employees if you help them focus on the positive impact of their efforts. Also, having periodic conversations with employees as to how they feel about the work they do (apart from the annual performance review time), demonstrates your commitment.
  • Quality of employees’ relationship with their supervisor. Having a “bad boss” can drive employees out faster than uncompetitive compensation. Some employees dislike supervisors who hold them to high standards, while others are bothered when they aren’t held to any real standards at all. Conscientious employees who believe “slackers” in their department aren’t dealt with become demoralized. And sometimes an otherwise good supervisor overlooks other needs in their workers, such as the need to build rapport.
  • Role clarity. Even employees who get along well with the bosses can feel adrift or frustrated if there isn’t a clear articulation of all aspects of the jobs they do or if their roles seem to change without explanation.
  • Job design. This is a cousin of role clarity. If you haven’t put a lot of thought into how different job pieces should fit together in the larger puzzle of your company, you may have job design issues. A poorly conceived reorganization plan may land employees in jobs that don’t make sense to them.
  • Working group cohesion. “No man is an island,” as the 17th Century poet John Donne wrote, or at least, few are. That’s why good relationships within a team are vital to employees’ contentment with their jobs. While you can’t force people to get along, you can be attentive to how well teams are formed and functioning. Not all team cohesion issues can be immediately fixed, but when employees know you’re monitoring the issue, you can buy yourself crucial time.

Many more factors that speak for themselves can be added to the list, such as the perception of professional growth opportunities (as demonstrated by an employer’s commitment to training), and an overall understanding of the company’s direction. If the lines of communication with employees are wide open, you can discover what’s really on employees’ minds. That doesn’t necessarily mean you’ll be able to address all their concerns, and inevitably you will lose good employees. But building a retention strategy around a full understanding of all that motivates employees to stick with their jobs will go a long way toward keeping turnover to a minimum.


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