Having a small team means that every abled body counts. But there’s actually more to it than that. Small to medium-sized businesses often overlook the importance of keeping the employee turnover rates as low as possible. After all, it’s cheaper to hire a temporary WFH freelancer than a full-fledged employee with benefits, right? Or so we thought..

Today we’re going to discuss why having a high employee churn rate can disrupt an SMB’s growth and budget.

1. The Onboarding Cost

Hiring a new employee will cost you $4,000 USD on average. And it’s not surprising why. There are a lot of things to consider when trying to find a replacement worker. But the most notable effect for SMBs would be “time”. Time to find an employee, time for training, time for them to adjust to a new workplace, and much more. This takes the focus away from growing the business. In addition to that, recruitment also costs money, whether it’s through recruitment platform fees, marketing, or referral rewards.

In short - Onboarding costs time and money. Moreso for small to medium-sized businesses that need to maximize employee quality.

2. The Productivity

This one’s pretty obvious. Long-term employees will naturally have better productivity since they have grown accustomed to the inner workings of the company. That being said, when a business keeps replacing employees, you’ll have to start the “getting the hang of it” process all over again. Mistakes will be more frequent, but you can’t really pin them on it because of the new work environment.

In short - Employee productivity is tied to length of employment. New employees also make more mistakes.

3. The Communication

Not just for the business owner, but for everyone else on the team. Communication is built over time. Co-workers develop their own system for relaying messages more efficiently. Losing staff also loses morale in the workplace. A high churn rate may communicate to employees that they can also be easily replaced.

In short - Short-term employees do not have enough time to establish a proper communication system with their co-workers.

4. The Product / Service Quality

As mentioned a while ago, newbies will make a lot of mistakes. And business owners can’t really pin them on it. Combining all these mistakes can lead to low-quality output and perception in the eyes of clients or customers. Aside from that, subpar quality would also hinder business growth either through reduced sales, slow deliverables, or bad imagery on investors.

In short - Short-lived employees will incur mistakes, and these mistakes might be interpreted as low quality by clients or customers.

Quick Solutions to Reduce Employee Churn Rate

Be Robust in Your Hiring Process

All good things come to those who prepare. In this case, the right person for the job. Hiring a professional is most of the time not enough. It’s best to consider their personality, strengths, and weaknesses. But more importantly, if they fit the culture and beliefs of your business. Choosing someone who has a strong affinity for saving the environment, for example, would stay much longer for a company that actively reduces waste in their products.

In short - Consider more factors when hiring. Personality, strengths, and weaknesses are a good start for measurement.

Give Positive Feedback Whenever Possible

Employees like to be recognized and appreciated. It can be the smallest of gestures, but those who experience these positive feedback from their superiors often stay longer in the business. 

Reprimanding them for mistakes is normal. But doing it through positive reinforcement naturally leads to higher retention rates. Plus, studies have shown that happy employees are 31% more productive than those who aren’t. 

In short - Positive reinforcement works well on employees. Use this strategy to increase their happiness at work.

Use Team-Friendly Business Tools

Finding the ‘right’ business tool is often a tricky task. Popular apps often have dozens of features, but fail to consider employee happiness in the process. A controversial tool with this issue are time trackers. While they help in monitoring an employee’s work done, they come with heavy consequences.

The most common being:

1. Low Team Morale

2. The Feeling of Being Micromanaged

3. Prioritizes Hourly Rates rather than Quality Output

Find a tool that can benefit both the owner and its team members.

Smartoo is a resource scheduling and project planning tool that helps employers view and create work schedules with ease. This helps businesses from 3 angles:

The Employer - Create, manage, and oversee everyone’s work schedules

The Business - Keeps projects organized and teams aligned with their work

The Employees - Avoid burnouts from project & task overlaps

In short - Use business tools that benefit both the employer and the employee. Tools that only focus on the employer can heavily affect your employee turnover rate. Tools like Smartoo are built to reward both the owners and the workforce.