The SME Toolkit: Reducing Staff Turnover

The SME Toolkit: Reducing Staff Turnover

Retaining talent is an ongoing challenge for all businesses, but among small organisations high staff turnover can harm productivity.

Small teams need nurturing to ensure that employees remain loyal. But this doesn’t mean simply offering extra money. While financial reward has its place, it is not the prime reason most people stay in a job.

Cathy Hayward, managing director of PR firm Magenta Associates, says it’s essential to keep people motivated and enthusiastic about their work.

She explains: “All 13 of us deal with clients every day, as PR is a people business. Clients buy into us as individuals as well as the wider company ethic and brand. If we weren’t enthusiastic to be working at Magenta, it would soon come across to clients and we would lose business. If our account managers were resigning every six months, our clients would become disillusioned and leave us very quickly.

“A committed, stable workforce provides certainty for clients and means that when personnel does change, it’s handled in a calm, professional way and they are introduced to their next long-term account manager.”

She adds that, as well as providing a flexible and fun working environment, private healthcare, decent holiday allowance and team-building opportunities, giving people autonomy is key.

“I’ve had some really good, but also some really bad, bosses in the past,” she reflects. “The bad ones were nearly all micro-managers who would ask you to do something and then watch you while you did it.”

Declan Fitzsimons, a leadership professor at Insead, echoes this. He believes that people feel motivated and loyal when they can bring their sense of fun, thoughts and feelings, and their passion to do something meaningful to the workplace.

“But often employees feel they can’t do this,” he says. “Why? Because of the way they experience their relationship with their manager. Research suggests that individuals join a company but leave a manager.”

The value of appreciation

In industries where skills are scarce, maintaining a stable workforce is critical. John McMahon, managing director of Tonbridge-based digital marketing agency MCM Net, stresses the importance of showing people that they are appreciated.

The business offers its staff health insurance, profit share, payday beers, a duvet day or birthday day and training vouchers. Also, there is a games room with a grass floor, pool table, air hockey, ping-pong, darts and a television to encourage the 20-strong workforce to escape their desks at lunchtime and take a break – and they leave at 4.30pm on Fridays.

“A stable workforce is hugely important to us, as training people about the way we work and like to treat our customers takes time and effort,” says McMahon. “People really do become part of our culture and adopt our ethos and customers can feel this when we work with them.

“We’re also in a highly competitive space when it comes to staff, as programmers can be lured to London for high salaries with banks and large institutions. Good quality digital marketers are still fairly thin on the ground as the profession is still relatively young and ever evolving.”

Beyond financial rewards

He adds that although salaries are important to staff, they are never the top-ranked item on the wish list during annual appraisals; training and career progression are most sought-after.

Fitzsimons warns that one of the great myths of employee motivation is that financial reward drives business performance and reduces staff turnover.

“It’s obviously a factor, but paradoxically when people look for more money it’s usually more to do with the absence of more important things,” he says. “Ultimately we seek, as human beings, meaning and purpose to our lives. And that means doing something that has meaning beyond ourselves. So the challenge for business owners and managers of SMEs is how to convey to employees a purpose for how their work contributes to a vision that has power and meaning.”

For companies that cannot offer high wages, focusing on the well-being of employees is particularly important. Jonathan Le Page, managing director of digital scanning bureau Microform Imaging, says that keeping staff informed helps them to feel a sense of belonging that boosts loyalty.

He says: “We get them involved in the decision-making process of what we are going to do with the company – [we ask] ‘how do you feel about the changes?’ We get input and they see changes being implemented and know they’ve had a part in that. They are not being overlooked and they are being listened to together as a team rather than the guys at the top making all the decisions and overlooking everyone else.”

Jeff Long, a director at SME consultancy Business Doctors, works with numerous companies to help them with issues such as staff turnover and engagement. As SMEs tend not to have human resources departments, huge budgets or the types of structure that enable huge career progression, they may need support to provide what employees want.

“By looking after staff and keeping them engaged, you actually cut down on the level of turnover and it’s a cost-saving exercise because the price of recruiting someone from scratch – assuming you can find the right person – is very high,” he says.

“What people want is just to be recognised, for someone to say, ‘Yes, you are doing a good job’, for someone to understand their role, to understand what the company hierarchy is, what opportunities there are. It’s much more than simply financial. Most of what I recommend either costs nothing or very little. Rewarding someone financially is a starting point but, in my experience, it’s not their first concern.”

Actions to take

  • Find out what motivates your employees. Ask them to produce a wish list.
  • Thank people for doing a good job. Staff will appreciate even small rewards, such as doughnuts in the staff room when things go well.
  • Share the company’s successes so that each employee knows – and feels – that they make a valuable contribution.
  • Remember to communicate. By keeping all employees fully informed and involved, you’ll build engagement and loyalty.




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