9 months ago by Mike Pye

Know Why Your Employees Are Leaving and Save Significant Cost

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What would your business do with £700,000? That’s the question one of our clients was left asking after we worked with them to reveal the true cost of their employee attrition problem.

If your business is struggling to retain enough of the right employees, there’s good news. 75% of employees who quit could be retained by their employers. With decades of experience in the recruitment industry, I share my pointers to head employee turnover off at the pass. Helping your business save a not so small fortune.

Retain Your People, Reduce Costs

At a time of high employment, attracting new hires can cost more in pay and benefits than you might want to spend. Which is why retaining your people is key to business success. And it’s not just about the cost of replacing. When employees leave, it often impacts morale triggering further exits and leaving you to find new people who are bought into your vision and ready to commit to building your business.  

If an employee voluntarily resigns or you terminate their contract, you’ve got to face the fact that you’re the person who hired them. Understanding what went wrong is half the battle. Taking preventative action is the other 50%.

So how can you identify the root causes of attrition? Here’s what I regularly see as the most common underlying sources of employee turnover.

Overly Rapid Recruitment Leads to Square Pegs in Round Holes

There are a number of reasons you can hire the wrong person for the wrong job:

●       A ‘bums on seats’ mentality caused by growing too rapidly

●      Taking your eye off the ball instead of trying to find the perfect fit

●      Poorly trained managers who don’t know what good looks like

These situations are almost guaranteed to deliver a square peg for a round hole, setting up the individual and your business for failure.

To avoid wasting time and money, you need to be clear about the role, skills, experience and capabilities required to do each job you’re hiring for. This will enable you to write excellent job descriptions and person specifications reducing the time needed to sift CVs, test and interview.  Get this right and you’ll secure someone who meets all your criteria - a round peg for a round hole.

That’s just one part of the hiring equation...

Finding the best person is more than a tick box exercise. Yes, skills and experience are important, but you also need to make sure the expectations you set about the role are accurate. And that new hires fit with your business’ culture.

That means individuals must demonstrate the right behaviours and be aligned with the mission and purpose of your organisation. When someone’s a square peg in a round hole they’ll likely carry out work in the wrong way and won’t demonstrate your company’s values to customers and colleagues.

At We Are Adam we developed our ‘Compass’, a tool created by our entire team to help everyone, at every level, understand the business’ purpose, values and ethos and the role they need to play to drive progress. Now every time we recruit, our team evaluates that potential hire against our agreed behaviours and values.

As any good leader knows, it’s much easier to teach someone the work than it is to get them to change the way they work. That’s why it’s a good idea to recruit for skills and experience but to also focus hard on behaviours and cultural fit.

Reward That Doesn’t Meet the Mark

Sometimes in business a problem isn’t as black and white as it may appear, especially when it comes to people management, the most complex area of any business. You may need to dig deeper into the commercial and cultural impact of any decision you make.

Imagine you’ve got an employee with an offer from a competitor for an extra £10,000 per year in salary. That might seem like a lot of money to part with, but what would be the cost of losing them: the rehiring costs, the damage to or loss of a project, the unsettlement it will cause? To put it in the context of the true cost of attrition (£700,000 for one of our clients) it could be a minuscule amount.

However, retaining one employee by bumping up their salary isn’t where the story ends. You need to do more to prevent others from looking elsewhere:


1. Review your market rates:

If you’re not paying enough, you’re at risk of losing more employees. Adjust your pay ranges and distribute and consider performance based pay increases. The best performers with salaries furthest from the market rate should get a much bigger increase than poor performers whose salaries are close to or above the market. Depending how competitive your salaries are, you might even need to make some mid-year pay increases rather than waiting for year end.

2. Consider total reward:

Before you hand out pay increases, consider the whole of your total reward package. If an employee has been offered a £10,000 pay increase but will receive less valuable benefits with their new employer (like no bonus, no private medical insurance or fewer holidays) work out how your total package compares. If your benefits are favourable you could offer a smaller salary increase explaining how the value of the benefits makes your counter offer competitive.

3. Decide who is worth what:

No two employees are worth exactly the same to your business. You might be happy to pay more to keep hold of a rising star or top performer and you might not want to retain certain people. Knowing the most valuable people to the business  and how much they’re worth will determine your actions when it comes to retention through reward.

Low Levels of Employee Engagement

Research has shown time and again that unhappy employees demonstrate their feelings through lateness, sickness, absence, poor performance and, of course, by leaving.

Keeping in touch with your employees’ feelings about the situation at work is critical to knowing when and how to keep engagement high.

Productivity levels can indicate when you’ve got an engagement problem as can more traditional methods like annual employee surveys. However, as the pace of change accelerates, organisations are turning to pulse surveys - quick, regular snapshots of specific issues to understand employee engagement levels.

The move towards ongoing performance discussions also gives managers the opportunity to gauge employee commitment. The insight from these sessions can be invaluable so create pathways for managers to feedback so you can build up a picture of engagement at an organisational level enabling you to act.

Business Culture That Doesn’t Work

When employee engagement feedback identifies recurring behavioural themes, you’ve got a culture problem. Perhaps you’re too slow to react to opportunities or threats. Maybe you don’t give employees the tools they need to perform work efficiently. Or perhaps communication is lacking.

Whatever the issues, it’s important to adapt or face losing your staff. Listen to employee feedback, set up consultation sessions, identify solutions and action them to improve the way you work as a business.

Any cultural change needs to be modelled by employees at all levels - that means everyone from the CEO down - for it to be effective. And it also needs to align with your business’ aims and ambitions to ensure everyone’s driving towards the same purpose.

Learning and Development is Lacking

Onboarding employees to your organisation and providing training both at the outset and throughout people’s time with your business is an important piece of the retention puzzle.

If you’re losing people in the first three months, you’ve likely got an onboarding problem. And it’s here that attrition is most costly as you’ve invested in recruitment, operational costs, onboarding and training but without the opportunity for employees to show what they can do and be productive enough to cover your costs and add to your profits.

Beyond onboarding, a lack of learning and development can also cause employee turnover. In fact, recent research shows 22% of people left their role due to a lack of career development.

A good way to determine whether lack of training and career potential is causing people to leave is to ask the question as part of your exit process. Or analyse your attrition data to see if people reach particular levels before leaving because it’s difficult to progress further within your organisation.

Making your business a learning organisation with clear career pathways linked to reward is a good way to remove another cause of employee turnover.

Bad Managers

Managers play a key role in communication, coaching, removing blockers and engaging employees. When employees feel their manager is poor in any of these areas, generally incompetent or that they treat their people unfairly, they often feel they have a solid reason for leaving.

If a specific team has high levels of turnover, it could well be a poor manager causing problems.

Promoting people because of strong technical skills doesn’t mean they will make good managers. Ensuring all new managers are appropriately trained will help leaders:

  • Build trust

  • Support employee development

  • Handle difficult conversations

  • Manage performance

  • Display appropriate emotions

  • Understand team dynamics

  • Behave ethically

  • Build relationships

Understanding which of these causes of employee turnover are impacting your business is vital to start the process of making your business an even better place to work. By supporting your people to give their best, your business will go from strength to strength. And you’ll also reduce employee attrition saving you huge sums of money into the bargain.

To discuss your recruitment and retention strategy, contact our team on 0161 359 3789 or drop us a line at hello@weareadam.com.