You have two or three people your business would struggle without. They know the customers, the systems and the shortcuts. If one of them handed in their notice tomorrow, you would lose more than a pair of hands: you could lose clients, momentum and a good chunk of your own time.
Working out how to retain key staff is not about throwing money at people. Losing them costs you money too, and if you handle retention badly it shows up in your profits. The good news is that most of what keeps good people is within your control.
1. Decide who your key staff are and why they matter
Staff retention simply means keeping the people who are most valuable to your business. Before you can do that, you need to be clear what "valuable" means for you. Is it knowledge, experience, high performance, loyalty, innovation, qualifications or technical competence? Set your own criteria.
Then ask yourself some honest questions:
- What makes your business special, and why would anyone want to work in it?
- Which of your people are most valuable, and which are most vulnerable to head-hunters or competitors?
- What is your reputation as an employer: good, bad or indifferent?
Retention starts before you recruit. Your job adverts, how you handle enquiries and the quality of your selection process all tell candidates what kind of place you are. If it is not a great place to work, the best candidates will look elsewhere.
To succeed in business, you need to know everything you can about that business.
Graham Jarvis
2. Understand the pressures on your business
Change is constant when you run your own business. Use PESTLE (Political, Economic, Social, Technological, Legal and Environmental) to think about the outside forces that affect your ability to keep people, such as skills shortages, local demographics and competition.
The economy matters. In hard times, unhappy staff often stay put; when the job market picks up, they leave. Cutting training in a downturn can leave you unable to compete when things improve. If skills are scarce, consider building links with local schools or colleges. The guide describes a hotel that partnered with a catering college, giving students work experience and giving the hotel a pipeline for key kitchen roles.
Protect knowledge, too. One specialist manufacturer offered voluntary redundancy without first auditing skills. Its most experienced people took the package, were snapped up by competitors, and the business never filled the gap. A skills audit and a simple knowledge transfer plan would have helped.
3. Measure your staff turnover and stability
In a small team you notice when people leave. As you grow, the early warning signs get missed. Take a PAUSE: Problem identification, Analysis, Understand the reasons, Solutions and Evaluate how well they work.
- Staff turnover rate: leavers over the period divided by the average number employed, times 100. Twelve leavers from an average of 60 staff gives 20%.
- Stability index: staff with a year or more of service divided by the number in post a year ago, times 100. Fifty-five out of 60 gives 91.7%.
Break the figures down by role, hours, length of service and so on. Not all turnover is bad; replacing a poor performer can help. To find out why people go, use employee opinion surveys, absence monitoring and return-to-work interviews, appraisals, exit interviews, benchmarking and risk analysis. The guide cites research suggesting it costs, on average, 3.5 times the job's salary to recruit into a role. For each key person, ask what the impact would be if they left, how likely it is, and how easily you could replace them.
4. Find out why people leave: push and pull factors
Focus on voluntary turnover. Push factors come from inside your business: work pressure, poor management, lack of career opportunities. Pull factors are attractions elsewhere: better pay, hours, prospects or benefits.
Usually several reasons combine. Common ones are inconsistent people policies, poor communication, a weak induction, little training or career progression, and pay that lags competitors. Beware hiring "a bum on a seat" during a skills shortage; those hires tend to leave quickly and damage your credibility with the staff who see them. Money is rarely the only reason someone goes, and offering more of it seldom keeps them.
5. Make your managers responsible for retention
The guide's central message is blunt: employees join a business but they leave a manager. Whoever is responsible for other people, whether a supervisor, shift foreman or you, has the greatest influence on whether someone stays.
Policies on pay, development and promotion matter, but they are only half the story. The other half is what managers say and do every day. Ask your people what they need more of and less of, then follow through. Encourage managers to:
- Be approachable, meet as a team regularly and communicate through several channels
- Recognise effort and results, and give credit where it is due
- Allow people to make mistakes and learn
- Be flexible about work-life demands and share their knowledge
6. Look after motivation and job satisfaction
Satisfaction drops when a job is boring or badly designed, when there is too much or too little work, when skills go unused, or when people lack autonomy or security. Watch for warning signs: rising casual absence, poor time-keeping, strained relationships, slipping standards, irritability and low morale. People are motivated by different things, so a one-size-fits-all approach will not work.
7. Act early when someone wants to leave
Once someone has resigned, it is usually too late, but if they are worth keeping, try. Use what they tell you to shape an improved offer, which may or may not involve pay, and an extended notice period can give them time to reflect. If they still go, keep it professional and say you would welcome them back; a call two or three months later costs nothing. Learn the signs that someone is about to leave: reluctance to commit to long-term projects, odd days off, short-notice holiday requests and secretive phone calls.
8. Staff retention strategies for the short term
- Recruitment: describe roles accurately, pay realistically, check why candidates left previous jobs and find out early what they expect.
- Induction: give it proper time and check how new starters feel after their first day, week and month.
- Training and development: plan it, let experienced staff train others, and involve people in their own development plans.
- Feedback: praise in public, reprimand in private.
- Performance: deal with poor performers quickly; good staff resent carrying them.
- Rewards: not all need to cost much; autonomy and involvement count too.
9. Build long-term ways to keep good people
Use job enlargement, enrichment and rotation to add variety, and consider job sharing or flexible, annualised or compressed hours. Take work-life balance and stress seriously; pressure should only ever be short-term. Where promotion is limited, offer new projects or sideways moves, promote from within where you can and keep promotion criteria fair. Communicate frequently and honestly, including the bad news, and involve people in decisions that affect them.
10. Review your retention strategies regularly
Note the plural. No single approach suits every person, and individual needs change with life events such as marriage or the birth of a child. Know the normal turnover rate in your sector, re-measure regularly and check the quality of your exit interviews. Effective retention reduces recruitment and training costs, keeps knowledge in the business and improves customer loyalty and profitability.
Where to start
This week, write down the names of the three people you could least afford to lose. For each, ask how likely they are to leave, what it would cost you and how easily you could replace them.
Then sit down with each of them and ask what they need more of, less of, and what would make them stay. Listen properly, and act on at least one thing they tell you.