People Quit Bosses, Not Jobs

Think back to the last job you quit. Why did you leave? Now think about the one before that. Why did you leave that one? Finally, think about a job you stayed in for a long time. What made you stay?

Think about those answers and tell me this: could any of your answers have changed if you had a different manager? Unless you only ever left a job because you moved to a new place or stayed at a job long term that you hated for whatever reason, you likely said yes.

Bosses have a huge impact on what makes you love or hate a job. Did your last boss throw insults around like a parade float throws candy? Did your last boss provide opportunities to develop your professional skills? Did your last boss expect you to be available 24/7? Did your last boss send you a card while you were off work for a week on bereavement leave?

Whether you believe it or not, management has a direct impact on employee happiness and retention.

The point is not that every resignation is caused by one bad boss. The point is that leadership choices shape the daily experience employees are deciding whether to stay in or leave behind. That matters even more in industries where turnover is already treated as inevitable.

Industry Turnover

Have you ever found yourself saying “it is a high turnover business”, “we are always hiring because this industry has low employee retention”, or something similar?

It is not uncommon for companies, or even entire industries, to accept these statements as truth. Accepting high turnover as standard for your company is detrimental for two main reasons: 

1.      It is expensive. Statistically, replacing an employee costs roughly 16% of that employee’s annual salary. If you are consistently hiring for entry-level positions that pay about $12 an hour, or roughly $25,000 a year for full-time work, each replacement could cost around $4,000. That cost comes from advertising the opening, reviewing applications, conducting interviews, training the replacement, and covering the work while the position is empty, often through overtime or added strain on the remaining team.

2.      It lowers employee morale. When employees are constantly leaving and new ones are being hired, existing employee morale takes a hit. One of the things employees value most in a job is the people they work with. Watching their coworkers become unsatisfied with a job before leaving can influence the way the existing employee feels about the job. In turn, the next person to be hired will find a lack of satisfied coworkers enabling the cycle to continue further.

Breaking the low morale cycle and cutting down on turnover costs is not easy. In fact, it can eventually cause a business to fail. 

Because turnover rates and replacement costs vary by industry, company size, location, and methodology, leaders should compare these benchmarks with their own internal retention data before deciding where to invest first.

Let’s take a look at some of the industries with the worst turnover rates:

·        Retail turnover for entry-level employees can reach 81% annually. That means fewer than two out of every ten entry-level retail employees may still be with the company a year later. The result is a constant cycle of hiring and training new employees, paired with a low rate of employee satisfaction.

·        Hospitality. Coming in only slightly behind retail is hospitality with a turnover rate of 70%. Hospitality, like retail, offers many entry level positions but the cost of replacing entry level employees with such high turnover can easily eat away at the profits of hospitality focused organizations.

Aside from industries containing high levels of entry level employees, some of the highest turnover rates also occur in:

·        Technology. Specifically, software engineering. Technology turnover rates are one of the highest with rates of 23% annually. This is a highly skilled profession with a much higher annual salary than those positions we previously discussed, meaning the cost to replace an employee could be up to 5 figures. Not a fun budget to create for nearly a quarter of your engineering team.

·        Professional Services. Professional services include industries such as legal, financial, and consulting. They clock in with a turnover rate of about 12%. Like technology, these skilled professions cost an organization much more to replace as you burn through resources such as time spent finding a replacement and money spent paying others to do the extra work.

Whether you are in an industry with many entry-level jobs or one that depends on highly skilled employees, the problem often looks the same: people are not always leaving your company to pursue a completely different career. Many are leaving to do similar work somewhere else.

So how do you reduce your turnover rate when the statistics are against you? Let’s start by finding out why employees are leaving in the first place.

Why Employees Leave Jobs

Is your industry doomed to always deal with high turnover? Are you going to forever be in the process of filling an understaffed team? Maybe. But you do not have to be.

Employees leave jobs for a number of reasons, but some of the top reasons include:

·        Lack of appreciation

·        Lack of respect

·        Lack of trust

·        Lack of support

·        Lack of communication

·        Lack of work-life balance

·        Lack of advancement opportunity

·        Lack of connection with company values

·        Lack of connection with personal goals

·        Feeling underutilized

·        Feeling stressed and overworked

·        Unhealthy work environment

·        Watching coworkers leave

Hopefully you noticed the pattern. Employees often leave because the job is missing something they need to feel respected, supported, challenged, or connected. But underneath many of those reasons is the same root influence: management.

Nearly every item on this list is impacted by management. 

That may not be what you wanted to hear. It is easier to blame turnover on the industry, the labor market, or the type of work itself. But if management influences nearly every reason employees leave, then turnover is not completely outside your control.

If you are noticing that your turnover rates are at industry standard you may just shrug your shoulders and be happy with average. We say, why be happy with average when you could be extraordinary? Let’s take a look at a few companies who haven’t settled for average and what they do to become extraordinary.

Pal’s Sudden Service. Pal’s Sudden Service is a fast-food chain with 26 locations in Tennessee and Virginia. They have over 1,000 employees, most of them part-time, and nearly half of their employees are between 16 and 18 years old. Because Pal’s operates in hospitality and employs a young workforce, you might expect its turnover rate to resemble the industry standard of 70%. Instead, Pal’s turnover rate is nearly one-third of that number, and the main reason employees leave is to move away for college. Additionally, in their 33 years of operation, only seven managers have left the company. How do they do it?

They take time to find the right employees instead of just who is available to fill an empty role with a 60-point psychometric survey. They average 120 hours of training new employees so the employee can feel as if they will succeed and be a worthwhile member of the team. They have software that randomly selects employees during their shifts to complete new training to create advancement opportunities. They have their management spend 10% of their time on teaching employees new skills. Based on our list of reasons why employees leave jobs, Pal’s is addressing nearly every item. They’re promoting company values, offering room for growth, showing appreciation, and in doing so, employees aren’t having to watch their coworkers leave.

Costco. Costco is an industry leader in retail, where entry-level turnover can approach 80%. Costco’s turnover rate is only 17% for employees who have been with the company for less than one year. Wal-Mart, one of Costco’s closest competitors, has a turnover rate that is nearly half the industry standard, but still about twice as high as Costco’s. Why? Costco pays higher wages for entry-level work, with average pay around $20 an hour compared with about $11 an hour at Wal-Mart. Costco also provides benefits to over 80% of its employees and promotes from within.

Costco takes an “employee first” mentality. They provide higher than average wages, offer room for advancement, and have basically set themselves apart from other retailers. In doing so they have created a culture of loyal employees who value the benefits offered by the company. You may be wondering how they are able to spend so much on each employee. To start, they do not have a PR or marketing budget. With an already popular brand and loyal customer base, Costco is able to forgo marketing and instead return that budget to its employees. The CEO also takes a modest salary in comparison to other CEOs at this business level, which also provides more resources to be available to employees. 

These are just a couple of examples of organizations who weren’t willing to settle for average and instead aimed for extraordinary. While you do not have to do exactly what they did, hopefully hearing their stories has given you some ideas about ways in which you can also become extraordinary. So, take a long hard look at the list of reasons why employees leave companies and be brutally honest with yourself about where you could improve your management practices to better align with your company values. 

Reducing Turnover

There is no quick fix for reducing employee turnover. If there were, everyone would do it. But that does not mean you are powerless. Reducing turnover starts at the top, and leaders who want stronger retention need to ask themselves five uncomfortable questions:

1.      What do I offer to employees that my competitors do not?

2.      Are my employees happy to come to work? Why?

3.      Do I promote career advancement?

4.      What is it my employees are looking to get out of this job? How can I embrace that?

5.      Am I showing my employees just how valuable they are to the company?

Let’s take each of these one at a time. 

What you offer that your competitors do not. What do you offer that your competitors do not? Are you giving employees something meaningful that they would not get if they left for another company? Remember, employees are not usually leaving for an entirely new industry; they are often going to work for a competitor. If that competitor offers higher pay, stronger benefits, remote work options, better scheduling, or something else your employee wants, leaving becomes an easy decision. Providing only the bare minimum does not create a culture of retention. At the same time, perks only matter when they are aligned with what employees actually value.

Happy employees. Are your employees excited to come to work, or do they dread the alarm clock every morning? You may want to believe your employees are happy, but if your turnover rates are at or above the industry average, it is worth asking whether dissatisfaction is part of the problem. Unhappy employees influence the people around them, which can create a chain reaction in job satisfaction. Instead of brushing this aside, find out what is driving the unhappiness. Is it a long commute, which may be outside your control, or is it being micromanaged and scrutinized at work, which is absolutely within your control? Even a long commute can feel manageable when someone enjoys the job. Analyze what is driving employee unhappiness and address that problem head on.

Career advancement. Are you offering your employees the chance to advance their careers in your company? If you are not, you should be. It is incredibly rare for someone to find a job that they plan to stay in for the rest of their lives. The goal of any job should be to learn enough, prove your worth, and make a difference at a company so that they provide opportunity for promotion. Having career advancement tracks and professional development are absolutely essential to creating a culture of employee retention (and job satisfaction). If there is no opportunity to advance, receive a raise, or take on more responsibility, then where is the incentive to become a better employee or stick around once you have mastered the position? 

Employee goals. This one goes hand in hand with career advancement but deserves to be its own category. Your employees are people just like yourself. They have dreams, ambitions, and a desire to improve their own lives. The job they take with you is a stepping stone in their lives toward making those dreams their reality. Embrace that. Levi Lusko said it best, “Don’t ask, what if we train them and they leave? Ask, what if we do not train them and they stay?” If working for you is part of a 2-year plan for your employees to move to a new industry, position, or company, then make that the best 2 years of their career. If you show your value as a company and invest in your employee’s goal (whether they include you long term or not) you may just change the way the future plays out. Don’t create a culture of high employee turnover by falling for “… what if we train them and they leave?” 

Employee value. You likely hire employees because you cannot do all the work yourself, not because you just really wanted to manage a team of people. This means that each employee is critical to business success. Failing to show each employee how much of a difference they make for the company and why they are so valued leaves them believing that the company doesn’t care about them. There’s no right way to show value, just like there is no right way to make employees happy, but adopting a culture focused on employee value and implementing it from the top will get you on the right path.

Everything we have discussed starts with management. If you want retention to improve, you have to start at the top. A manager who does not share your business values or lacks the ability to build a culture of retention can quickly derail business success. Just as you invest in employees, invest in management as well.

If you are a business owner realizing that your managers are derailing your business and do not know how to fix this, we can help. If you are new to management and want to make sure you promote a culture of employee retention, we can help. If you are a solo business owner and do not want to make these mistakes when you are ready to hire, we can help.

If you are already in the high-turnover cycle and can see employees preparing to walk out the door, it is time to make serious changes. Breaking that cycle is difficult when you are unprepared, but coaches and consultants can support change management, team building, and HR improvements that create more engaged employees. Investing in better management can save money by building bosses who make employees want to stay.