Ask Us How: Coping with Staff Turnover

Posted by Michael Derin

Published on October 16, 2013 under NSW Business Chamber Partnership

The latest outlook indicates that salaries are set to rise, particularly in specialist industries where there is a skills shortage, such as financial services and resources.

Experts predict that there will be an increase in employees particularly in industries where the labour market is tight, being head hunted by competitors. This signals a big challenge for small business trying to retain their key staff and compete with larger companies that are better able to offer bigger salaries.

High staff turnover can be detrimental to small businesses, and it’s important to retain key staff members and know some strategies on how to go about it.


Businesses need to be responding to the increasing salaries, and the tight employee market.

Business need to start planning ahead. It is likely your key team members will be approached by competitors with offers of higher salaries. You need to make sure that they don’t entertain these offers by ensuring they are satisfied in their role. An employee is less likely to leave their current role if they are satisfied, regardless of an offer of higher salary.

Businesses need to look at their finances to see how they can manage a higher wage expense but more importantly they should put in place a retention strategy to keep key team members engaged in the business and to reduce overall staff turnover.


While losing employees that are poor performers or negative influences on workplace morale can have positive effects, unplanned and frequent employee turnover is generally regarded as bad for business. High turnover rates typically mean companies are doing a poor job selecting the right employees, failing to provide a motivating work environment or losing out to employers that offer better pay and benefits.

Some of the negative effects include:

Decreased performance - One of the simplest but highly impacting negative effects of turnover is decreased performance in the workplace.

Unfulfilled daily functions - Many of the negative effects of turnover relate to performance quality, but but companies with higher turnover may struggle to complete all necessary or important daily functions.

Costs - High costs are one of the more discussed negatives of high turnover. Every time an employee leaves and is replaced, there are costs associated with the process of losing the first employee and hiring and training the new one. Replacing a technically skilled employee or a high level manager can cost as much as three to five times the annual salary. Training costs are commonly discussed, but many people forget costs to complete exit interviews, market new openings and complete necessary background and reference checks.

Lower knowledge base - In organisations with high turnover, constant change in employee ranks means average years of experience and background of employees are low. This means employees are generally less familiar with work tasks they complete and working effectively with customers.


There are a few reasons why businesses suffer from high employee turnover. They include:

Weak team leadership - If the team is without strong leadership it will not function well, which will lead to disagreements and relationship breakdown.

Unreasonable expectations – There are some organisations or managers who seem to think that their staff should be doing more than they are paid to do. They expect that their employees will work for longer hours and give up their breaks to get the job done, usually without any form of reward or positive feedback.

A culture of high turnover - This is normally a result of one of the previous issues. An organisation learns to live with high turnover because it has become 'normal' for them. New employees pick up on this soon after they arrive and learn that they can expect to be moving on perhaps sooner than they thought, and so it becomes self-perpetuating.

Lack of HR policies and strategies in place – No strategies to ensure key staff members are retained and overall staff turnover is low is also a key factor in businesses that have high turnover.

Many business owners who expect staff to think and act like a business owner have unrealistic expectations of their team and therefore are not satisfied with what their staff deliver. This mindset results in a negative culture where both parties, owners and employees, cannot meet the expectations of the other, leading to dissatisfaction and ultimately a high staff turnover and an under-performing business.

The lack of HR policies and strategies in place to ensure key staff members are retained and overall staff turnover is low is also a key factor in businesses that have high turnover.


Important strategies for every small business include:

  • Hiring the right people from the start, most experts agree, is the single best way to reduce employee turnover. Interview and investigate candidates carefully, not just to ensure they have the right skills but also that they fit well with the company culture, managers and co-workers.
  • Setting the right compensation and benefits is important too. Work with human resources to get current data on industry pay packages, and get creative when necessary with benefits, flexible work schedules and bonus structures.
  • Review compensation and benefits packages at least annually. Pay attention to trends in the marketplace and have HR update you.
  • Pay attention to employees’ personal needs and offer more flexibility where you can.
  • Boost employees’ engagement. Employees need social interaction and a rewarding work environment. They need respect and recognition from managers, and a challenging position with room to learn and move up.
  • Managers often overlook how important a positive work environment is for staff, and how far meaningful recognition and praise from managers can go to achieve that. Awards, recognition and praise might just be the single most cost-effective way to maintain a happy, productive work force.
  • Simple emails of praise at the completion of a project, monthly memos outlining achievements of your team to the wider division, and peer-recognition programs are all ways to inject some positive feedback into a workforce. Also, consider reporting accomplishments up the chain. A thank you note to the employee is good. Copying higher-ups makes that note even more effective.
  • To make it easier to identify accomplishments, ask your team for weekly or monthly updates of their achievements. Ask for specific numbers, examples or emails of praise from co-workers or customers.

Outline challenging, clear career paths. Employees want to know where they could be headed and how they can get there. Annual reviews or midyear reviews are one obvious venue for these discussions, but you should also encourage workers to come to you with career questions and wishes throughout the year.

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