Avoiding Employee Turnover: Long-Term Benefits of a Happy Workforce

Any business leader understands the importance of retaining top talent. So, when employees are leaving the organisation in droves, it becomes a major cause for concern.

A high employee turnover can impact your company’s overall performance and productivity, as well as its bottom line.

That’s not all. A high turnover rate is costly since you’ll have to replace employees who have quit the company. The good news is, you can implement strategies to reduce staff turnover.

One such strategy is to keep your employees happy. As Richard Branson, founder of the Virgin Group puts it: “Take care of your employees and they’ll take care of your business.” In other words, prioritising the welfare of your workforce is vital to your company’s success.

But how do you keep your best workers from leaving? To truly get to the bottom of reducing staff turnover, it’s essential to identify what drives them to leave and address those issues. In this blog post, we help you identify those drivers and tell you how you can improve employee retention.

We also share some valuable tips to keep your employees happy and engaged.

What is employee turnover?

Employee turnover, also known as staff turnover, is a measure of how frequently employees are leaving your organisation. It’s a key metric used to indicate the effectiveness of your organisation’s overall management.

Employee turnover can either be voluntary (like when an employee resigns, retires, or transfers) or involuntary (like terminating an employee due to poor performance or as part of company wide layoffs).

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Some level of employee departure is expected. In fact, a survey by the Society for Human Resource Management (SHRM) found, on average, companies lose 13 percent of their workers annually due to voluntary turnover.

However, if the employee turnover rate is high, it means something you or your managers are doing isn’t right. For instance, the human resource department could be making bad hiring decisions and end up bringing on board the wrong people.

What is a good staff turnover rate?

The average turnover rate varies by industry, role, or geography. The SHRM study suggests a good employee turnover is around 18 percent. However, it’s prudent to look at turnover trends affecting your industry to gauge where you stand. The U.S. Department of Labour tracks labour turnover as well as job openings regularly, making it a great resource to check out.

That being said, even a modest turnover rate can hugely impact your business. According to Gallup, a 100-person organisation that pays an average of $50,000, turnover and replacement costs could be as high as $2.6 million per year.

Why is reducing employee turnover important?

In any company, employees form the lifeblood that drives the business forward. They are the ones who keep the company running, and losing your best people means losing what matters most to your business.

This can negatively impact the quality of service delivery, customer relationships, your company brand, and reputation.

In addition, reducing employee turnover is essential considering replacing an employee costs up to one-half to two times the employee’s annual salary.

The benefits of having a happy workforce

Every business leader should focus on employee experience and job satisfaction to increase retention. High employee satisfaction rates lead to high employee engagement, morale, and productivity – all of which contribute to your company’s overall financial performance.

Having said that, here are some of the benefits of having happy employees:

  • Happy employees are more creative;
  • Happy employees handle adversity better than others;
  • Happy employees are more productive;
  • Happy employees won’t leave for greener pastures;
  • Happy employees are brand ambassadors;
  • Happy employees are better team players;
  • Happy employees reduce labour costs;
  • Happy employees relate better with customers and clients, and;
  • Happy employees are more engaged and hence more profitable.

What causes employee turnover?

There are internal and external factors that may contribute to staff turnover. Understanding these factors can help the human resource (HR) department develop initiatives to reduce the turnover rate and make the company a place people want to work.

Some of the top causes of employee turnover include:

Lack of job satisfaction

Do you speak to your employees about their job satisfaction? According to Gallup Workplace research, 51 percent of employees stated that in the three months before they left, nobody asked them about their job satisfaction or their future with the company.

Evidently, many employers overlook this critical aspect of employee retention.

One effective way to know if your employees are satisfied is to use employee satisfaction surveys to gather anonymous data and honest feedback from your workforce. The responses you get bring pressing issues to the surface, so you know what to prioritise.

Poor management

Managers and leaders have a direct influence on employee turnover. Toxic managers – those who take credit for team members’ ideas or efforts or even abuse employee reports – play a part in this.

Sometimes, a manager could be bad at their jobs or have leadership weaknesses, such as poor communication skills. In addition, some of the top reasons for high employee turnover, including poor compensation or work-life balance and limited training, hinge on the manager.

Good managers view themselves as career developers. They understand the skills, motivators, and strengths of each employee and assign roles and tasks based on these qualities. They also understand the unique traits and abilities of team members and know how to best integrate these characteristics into their work schedules.

Inadequate compensation

Inadequate compensation – pay bonuses and commission – and benefits like healthcare, dental, pension, and profit sharing can drive employees away.

Money is a key motivator in job performance. For starters, paying your people well shows you appreciate and value their contributions. In addition, it makes it less likely for a competitor to poach and lure your high performing employees with purely financial incentives.

Limited opportunities for growth and development

Employees are more likely to quit if a company doesn’t offer them opportunities for career development and advancement. In other words, employees don’t see a future for themselves where there’s a lack of learning opportunities.

Employees want to advance in their chosen career paths, and knowing they don’t have this opportunity in your organisation gives them no reason to stay.

Strategies to reduce employee turnover

The job market has changed in favour of employees and job seekers, prompting them to hunt for alternative employers and career avenues. Here are the most effective strategies to keep your top talent from exiting.

Careful consideration of the hiring process

If you notice a drop in short-term retention rates, start to review your hiring procedures. You don’t want people to leave within the first six months, considering the high cost of hiring.

Finding the right person to fill a role takes a lot of time and effort, especially for small and mid-sized companies. Furthermore, hiring the wrong person will potentially result in a negative impact on the team’s and company’s productivity.

Therefore, refine your hiring process to ensure you hire only the right people. Be honest about the company’s culture, job roles and responsibilities. More importantly, while you’re looking for people with the expertise and skills suited for the job, make sure they share company values and match your organisation’s culture.

In addition, invest in an effective onboarding experience to ensure that new hires get all the support they need right from the start.

Keeping compensation and benefits current

Do you keep track of your employees’ performance and development? Do you regularly review their pay and benefits to keep up with the market rate? If not, don’t be surprised when they ditch you for a company that offers competitive salaries and compensation packages.

Keep in mind, the longer an employee works for you, the more they hone their expertise and skills in their specific roles – and they deserve to be rewarded for their rising worth. Offering your staff competitive pay makes them feel valued and appreciated, and the more likely they are to develop loyalty toward your organisation.

So, how can you ensure you keep your employees’ benefits and compensation current?

  • By monitoring what competitors are paying their employees;
  • By implementing talent management processes that identify high performers, and;
  • By performing racial and gender pay equity analysis and correcting pay imbalances.

Encouraging generosity and gratitude

Teamwork and good working relationships are essential for cohesion between team members. If they can relate well, they will respect one another, appreciate their peers, and be happy to collaborate on projects.

Encouraging a positive work environment fosters healthier work relationships and contributes to higher quality work and better productivity.

Offering a flexible, healthy work-life balance

Flexible work arrangement is the new norm, and the trend will continue for the foreseeable future. According to a 2019 Flexjobs survey, 80 percent of employees said they’d be more loyal to their employer if allowed flexible work.

Implementing flexible work schedules allows employees to develop a healthier work-life balance. This could range from allowing staff flexible start and finishing times or letting them work from home part- or full-time. Ultimately, flexibility will increase employee retention and productivity.

You can leverage technology, like a time tracker or project management software, to optimise scheduling, manage absences, automate time-off requests, and monitor work performance to avoid overworking your team.

Paying frequent attention to employee engagement

Employee engagement plays a crucial role in employee retention. Companies with higher engagement levels experience lower annual turnover rates than those with lower engagement levels.

An effective way to increase employee engagement is to establish a formal employee engagement program. This can include various initiatives, such as volunteer events to build rapport among team members. You can also create a matching gifts program where you match any donation your employees make to a charity.

We suggest using employee pulse surveys to accurately measure employee sentiments and understand their various needs. These insights can act as benchmarks when developing a culture of engagement in your organisation.

Prioritising employee happiness

In today’s fast-paced work environment, employees stay at a company, on average, for one to two years before hunting for another opportunity that offers a better work culture. It means employee happiness is important now more than ever, and leaders should do everything they can to keep their teams happy.

Happier employees are less stressed, meaning less absenteeism, which in turn leads to higher work output.

You can invest in the happiness of your employees in various ways, such as by allowing flexible work schedules and implementing well-being initiatives.

Additionally, consider offering employees opportunities to refresh and re-engage by encouraging virtual team-building activities.

Creating opportunities for development and growth

Providing your workforce with learning and development programs not only boosts morale but also benefits the company. Employees will be more willing to stick with a company that offers them plenty of personal and professional growth and development options.

Employers can offer a learning budget to invest in courses that employees are interested in. Companies can also facilitate access to external training to help employees gain new skills.

Consider using performance reviews and monthly or quarterly check-ins to find out individual career paths, as well as identify common career advancement paths in the organisation.

Make performance reviews a continuous process

The long-term benefit of providing timely and accurate performance reviews is increased employee retention. These evaluations are significant in retaining a productive and satisfied workforce.

Performance appraisal can be used to identify your best talents and reward them properly. Plus, it helps you spot employees at risk of quitting and whether more retention motivations are needed.

Consider a top-down and bottom-up communication approach when offering performance feedback. This method allows managers to provide direction on areas of performance that need improvement and also empowers employees to share aspects of their work that might be affecting their performance, such as leadership or teamwork.

Providing an inclusive vision

Employees draw motivation from the importance of their work, and if they lack purpose, it can lead to low engagement. They want to work in a role and company they can be proud of.

Therefore, strive to provide your workforce with a sense of purpose in their work. Once they establish a strong vision and know their goals, they will feel included in the organisation. This can help improve their loyalty and retention.

Nurture respect in the workplace

There’s a direct link between the relationship among team members and the turnover rate. Toxic coworkers who constantly undermine colleagues can drive high achievers out of the company.

That’s why it’s crucial to cultivate a culture of respect in your organisation to improve employee retention. Keep doors of communication open and be ready to listen and act on issues raised by your employees.

Make it clear in your company policies that certain toxic behaviours like lack of respect won’t be tolerated, and stern action will be taken against perpetrators.

The importance of employee recognition

Most companies, even those with well-established company cultures, struggle with developing and implementing employee recognition policies. The thing is, everyone expects their good work to be applauded. When it doesn’t happen, it impacts their morale and motivation.

When employees are rewarded for their performance and contributions to a company, they feel pride and ownership and are willing to put in more effort on their next project. Employee recognition helps connect employees to their organisations and increases the retention rate.

It makes employees feel special and individually valued. It also cultivates a positive environment of trust and respect. And, where there’s trust, employees tend to thrive better and be more productive.

Apart from being among the most effective non-financial employee retention strategies, employee recognition creates a psychologically safe, connected work environment. “Safe” teams believe they can take risks to express their ideas and concerns or admit mistakes without fear of negative consequences.

As a result, such teams experience a much lower turnover rate and much higher productivity.

Employee wellness ideas and activities for the workplace

When considering the happiness of your workforce, not only should you think about their job satisfaction but also their wellness. Workplace wellness goes beyond providing employees with a great health insurance plan.

You should implement a holistic wellness approach – one that takes into account the physical, mental, and spiritual health of your workers.

When done correctly, wellness programs can reduce absenteeism, boost productivity, and increase psychological safety and trust.

Here are some ideas for employee wellness activities:

Encourage physical activity

You could inspire employees to take on a digital steps challenge where you set a goal (say 6,000 steps a day) and then ask employees to step up to the challenge. Make it more fun by awarding those who attain a specific number of steps.

Another idea is to institute a virtual fitness challenge and incentivise participants by awarding gift cards to everyone who completes the challenge.

Provide access to mental health resources

You don’t have to pay for therapy for all of your workers. You can take advantage of meditation apps like Calm and Headspace, which can help improve your employee’s mental and emotional wellness.

Or, you can employ a “Happiness Coordinator” whom your staff can talk to one-on-one. In addition, you can provide resource groups facilitated by external experts or online platforms like Lynda that have emotional intelligence coaches and trainers.

Allow flexible work arrangements

Sticking to the traditional 9-5 work schedule might not work for everyone on your team. And with the rise of remote work, allowing flexible work hours shows that you trust your team to manage their own schedule.

Teams will work more productively since they can create schedules that fit them better.

Here are more wellness ideas to consider:

  • Host zoom yoga or stretch sessions;
  • Sponsor wellness retreats;
  • Encourage online group workouts;
  • Provide employees ample sick time;
  • Offer team members adjustable standing desks, and;
  • Encourage healthy eating habits.

Employee development and engagement strategies

Employee engagement is the commitment and emotional connection an individual has with their company and its goals. Engaged employees aren’t driven by financial rewards but care about their work and organisation.

Their ultimate goal is to see the company succeed and will do all they can to make the most significant contributions to their organisation’s bottom line. If you want to reduce the turnover rate and boost employee performance, here are development and engagement strategies you can employ:

Provide clear expectations and goals

As an employer or manager, it’s essential to let your employees know your expectations of them. You can do so by setting clear individual and team expectations, as well as performance expectations.

This could include:

  • Working safely together;
  • Accountability;
  • Sharing ideas for improvement, and;
  • Displaying positive work behaviour and respectful attitude.

Make sure to get the expectations in writing and agree on what success looks like. Doing so enables employees to know where they stand and will help reduce surprises when it comes to performance reviews and bonuses.

Foster a positive work environment

Setting your team up for success goes beyond a well-structured onboarding process. Employees yearn for emotional, intellectual, and physical support from leadership. They want to feel a sense of belonging, and you can achieve this by cultivating a positive work environment.

In turn, employee happiness and creativity will increase, and you’ll see a reduction in turnover and absenteeism.

Some of the ways you can explore to create a positive work environment include:

  • Prioritising employee health and well-being;
  • Developing a strong workplace culture;
  • Offering workplace flexibility;
  • Conducting regular check-ins;
  • Showing appreciation, and;
  • Celebrating wins.

Encourage collaboration and teamwork

The team synergy in collaborative teams has been shown to improve performance by up to five times higher. Team collaboration is fundamental to the success of any business as it facilitates smooth workflows.

But good collaboration calls for effective communication. As a leader, you should set clear communication channels and establish a psychologically safe environment. By promoting teamwork and collaboration in the workplace, your company will experience a boost in productivity and efficiency.

In addition, it will encourage learning and boost innovation.

Provide regular feedback

Regular feedback on employee performance lets them know what they are excelling in and which areas need improvement. Managers who provide regular feedback experience a boost in engagement, greater profitability, and improved connection with team members.

For managers, feedback enables you to know your team inside out. Armed with this information, you can better prepare for potential issues and develop solutions quickly. For example, if an urgent project comes in, you’ll already know who can work best under pressure or handle a big project.

In Summary

A high employee turnover can stunt your company’s growth and leave a big dent in your finances. In addition, you risk losing your best people to competitors, which can kill employee morale and impact your company’s reputation.

As an employer, you need to pay attention to employee experience and job satisfaction, as it’s the key to employee happiness. Happy employees are:

  • More productive;
  • More creative;
  • More loyal;
  • More engaged; and
  • Better team players.

That’s why you should monitor turnover rates in your company and identify why employees are leaving. Once you do, you can implement these strategies to mitigate the issue:

  • Review and amend your hiring process;
  • Keep track of compensation and benefits in the market;
  • Allow flexible work arrangements;
  • Prioritise employee happiness and engagement;
  • Create a culture of respect; and
  • Provide employees with a clear purpose.

Ultimately, you want to focus on improving employee satisfaction in your company, which will result in increased employee retention. You can achieve this by fostering a positive work environment, promoting a psychologically safe work environment, and creating a culture of recognition.


About the Author

Peter is passionate about writing engaging content on time management, productivity, and remote work. He believes in self-improvement and is always researching ways to effectively manage time and improve self-discipline while working from home.

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