3 Ways to reduce employee turnover

Officevibe Content Team
Published on March 28, 2014 | Reading time: 7m

Employee turnover costs businesses a lot of money. Some estimates put it as high as double the employee’s salary, and while that might seem high, think about all the time wasted looking for new people, interviewing them, training them, onboarding them into the team.

You slowly start to realize that employee turnover is pretty dangerous for the business.

Some turnover is natural, people move on, want to explore other things, or sometimes it honestly isn’t a good cultural fit, no matter how hard you try and keep them, but ideally you should be doing everything in your power to reduce employee turnover.

A lot of people often forget about the emotional effect that high turnover has on other employees and the morale of the company in general.

At a previous company, it was pretty much a revolving door, and naturally everyone was on edge, worrying and wondering if they were next.

This destroys productivity and innovation, because no one’s thinking clearly.

Here are 3 ways that you can lower employee turnover at your company.

1. Hire slow, fire fast

The best way by far to reduce turnover, is to hire the right people from the start.

Of course that’s much easier said than done, but there are a few things you can do to ensure that you’re hiring properly.

The first idea comes from an article published in the Harvard Business Review by Matt Mullenweg, who is the founder of WordPress, the most popular content management system for managing your website and blog (the Officevibe blog is powered by WordPress).

In the article, Matt talks about how he recruits, and more and more people are starting to do this in the tech industry. It’s called hiring by auditions.

The way this works is the candidates go through a paid trial period, where they’re asked to do a simple project.

It’s important to note that it’s paid, and you pay them as if they were a freelancer, at a reasonable rate.

It’s truly a “try before you buy” type of approach with the candidate. As an employer, you really get to see how the employee works, how fast do they turn the project around, and how much help they need.

I was talking to a friend of mine from Wix, an incredibly popular website builder that lets anyone with no coding knowledge make their own website, and he was explaining to me that they do the same thing there.

When he first joined the company, for a marketing role, he was asked to produce a sample press release as his trial project.

What I found interesting was, he was explaining to me that he never received feedback on the press releases, meaning they didn’t really care about the content of the release, that’s not the point.

The point is to see how the employee works. Do they ask questions? Do they do enough research on their own before asking questions? This is what to look for in this situation.

The next part of the hiring process is vetting the candidates. You could potentially call their references on their resume, but those can be faked, so watch out.

I think a smarter idea is to use social networks. I bet you could find a connection on Linkedin that you two have in common, or if not, connect with someone from his past company.

Then, once you connect with them on Linkedin, send them a private message asking them to rate the candidate on 10. When they answer back with something besides ‘10’, follow up and ask them ‘why?’.

Setting up a competitive compensation package is also incredibly important to employee retention. You should be looking at industry wide data to help you find this information. A great resource for this is Payscale.

Also, get creative with benefits, and other perks that you think would attract current and new employees.

Most things that you can do to attract talent is free, but you need to remain competitive in your industry. Lots of companies are doing very cool things in terms of perks and benefits, and while they’re not the main driver of motivation, they’re important.

2. Respect your employees

Respecting your employees is the easiest way to keep employee retention high.

The biggest tip I could share is to be flexible. There are so many employers that don’t seem to understand this. It’s a pretty broad term, and somewhat vague, but that’s done on purpose.

Be flexible about how you manage employees time. Be flexible about how you manage their work.

It’s important to create a relaxed atmosphere that calms and destresses employees so that they can focus on work.

Once you establish a relaxed, flexible culture, the rest will fall into place.

You should also respect your employee’s time. Understand that they have stuff going on their lives the same way that you do. You should definitely be offering telecommuting as an option.

There have been so many advancements in technology, that it makes no sense why an employer wouldn’t be okay with this. Some of the tools available make it feel like the employee is literally there with you. Some of my favorites are:

All of these tools were built with remote collaboration in mind.

Another way you can show respect to your employees is by showing them that you want them to become better humans.

Show them that you’re willing to help them get better, and grow as a person. You should actively be encouraging them to take courses online, and to read books or blogs.

For example, we use Yammer internally to share articles, and using their groups feature, you can subscribe to topics that interest you.

So for example, in the marketing group, I try and post as much content as possible to help everyone that’s interested in learning about marketing, learn more about marketing.

Most millennials want their bosses to serve more as a coach or mentor. If you want to increase employee retention, you need to mentor employees, instead of barking orders at them.

No one responds well to being told what to do. People respond well when they’re taught, and shown properly, in detail how to do things.

3. Focus on intrinsic values

It’s been proven over and over again that what really motivates people is intrinsic rewards.

I was speaking to a friend of mine, who’s a leader in the employee engagement field, and he was telling me an interesting story about a rewards program that backfired.

What had happened was they implemented a rewards system for some internal software they were trying to launch, and they had gift cards as some of the rewards.

What happened was, when a user would go through all of the effort and time to earn a reward, and then was presented with a $50 gift card, they felt as if that’s all they were worth.

This obviously had a really demoralizing effect on their morale. While badges and trophies might seem trivial, there’s a lot of psychology behind why they work.

The three things to focus on and to keep reminding employees of are Autonomy, Mastery, and Purpose.

  • Autonomy – Even if you don’t actually give control to employees, give them the perception that you are. Remember, sometimes perception is reality. This is actually easier said than done, because you want to strike a balance between giving employees autonomy and coaching/mentoring. The best advice I can give is be open and transparent and talk with your employees. Ask them what they want to work on, if they have a project they’d like to tackle, etc..
  • Transparency – Be insanely transparent with your employees. Besides compensation, you should share literally everything with everyone in the company. What exactly do you have to hide? If you trusted them enough to hire them and deal with your customers, you can trust them with everything else in your company. Transparency also breeds innovation, because being able to see what’s going on from a high level, company wide, will make it easier to think about what needs to be improved.
  • Purpose – Put simply, it’s being able to answer the question “why am I here?”. Give your employees a reason for waking up in the morning. Instead of saying “we sell software”, say “we improve workplaces”. Sell the sizzle, not the steak. I guarantee your company has a mission or core values that they claim to live by, make sure you’re reinforcing that and communicating that with them all the time. Being reminded of why they work there in the first place is a great way to reduce employee turnover.

I’ll end this by showing you a report, done by the Center for American Progress about how significant the costs are to employee turnover.

What do you do to reduce employee turnover?

There are so many simple ways to reduce turnover and increase retention that will lead to happier, more productive employees.

Do you have any other tips to share? Let me know your thoughts on twitter @Officevibe.