High Return Rate: Avoiding the Most Common Mistakes that Cause Employees to Leave

By: Multi-Unit Franchisee
Published: July 30th, 2014

Employment rates in the United States are steadily increasing, meaning businesses are growing and, as a result, seeking the right talent to fit their teams. With all the positive growth, one thing business owners have to be cognizant of is the danger of employee turnover.

Terry Powell, founder of AdviCoach, a national provider of business coaching and advisory services customized for small- to mid-size businesses, says that "identifying the type of employee you want and how to reach that talent may be one of the hardest parts of the hiring process. However, once you know who you want to hire, it's important to have the systems in place to keep that employee happy to avoid costly 'repairs' down the line."

On average, turnover costs U.S. businesses an estimated $300 billion each year, according to the U.S. Bureau of Labor Statistics. What's more, a study by the Opinion Research Group found that 80 percent of employees would leave their current position if presented with other opportunities.

To help small business owners retain employees long-term, Powell addresses and provides solutions for the top mistakes that cause employees to leave:

• Mismanagement of Human Capital - Human capital in the Information Age is the equivalent to natural resources in the Industrial Age. How well do you manage and measure your greatest resource? Once an employee is in the door, it's up to the company to identify the individual's talents, assign an appropriate work load, and provide measurable goals for that person to work toward.
• Lack of Opportunities for Professional Development - Employees who become stifled, stunted, or stuck in their jobs are more likely to find work elsewhere. A four-year study by the American Society of Training and Development showed that firms who invest $1,500 per employee in training compared to those that spend $125, experienced on average 24 percent higher gross profit margins and 218 percent higher income per employee.
• Talent Acquisition - Bridging the talent gap can create a significant headache for a small business owner. Larger organizations have greater name recognition and potentially a greater pool of incentives to pull from to gain the attention of top talent. However, working for a small business appeals to a lot of professionals, if the organizations are able to tailor compensation and benefits to meet the needs of their workers.
• Bad Hiring Decisions - The staggering costs associated with employee turnover can be viewed as the price of doing business in the modern age. It's not that simple, a business owner or manager does have some control over how many employees leave each year. The most common reasons employees give for voluntary separation include boredom, weak or toxic supervisor relationship, wrong cultural fit, and job descriptions that don't match the reality of the position. A recent white paper cited that other costs associated with a bad hire may include:
  • The cost to replace an employee, which can range from two to seven times their salary;
  • Hiring and training a replacement employee can vary from 25 to 200 percent of annual compensation associated with the position; and
  • The more an employee earns, the more difficult and costly they are to replace.

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