Posted April 25, 2024

Employee retention is a critical issue for small businesses. High turnover can be disruptive, costly, and can affect the overall productivity and morale of your workforce. If you’re struggling to keep your employees, you're not alone. According to a report by the Work Institute, it costs an average of 33% of an employee’s annual salary to replace them , making it vital for small businesses to understand why employees leave and how to improve retention.

1. Lack of Career Growth Opportunities

One of the top reasons employees leave is the absence of growth opportunities. A LinkedIn study found that 94% of employees would stay longer if their company invested in their career development . Small businesses, especially, may struggle with providing clear paths for advancement, but failing to address this need can lead to frequent turnover.

Employees want to feel like they’re progressing and gaining new skills. Without proper training, mentorship, and internal growth opportunities, they may start looking elsewhere for a company that can offer those advantages.

2. Burnout is Real

Burnout is one of the biggest reasons for employee attrition, and it's more prevalent than ever. A study by Gallup revealed that 76% of employees experience burnout on the job at least sometimes, with 28% reporting burnout very often . Employees are feeling overworked, overwhelmed, and unsupported—particularly in small businesses where they may be wearing multiple hats.

Failing to recognize burnout can lead to not only turnover but also lower productivity and engagement. Addressing this issue by improving work-life balance and reducing unreasonable workloads can go a long way in retaining your team.

3. Poor Management and Leadership

Employees don’t just leave jobs; they leave managers. The Society for Human Resource Management (SHRM) found that 58% of employees have quit a job because of a bad manager . Leadership quality directly impacts employee satisfaction, engagement, and performance.

Managers often lack the necessary skills to handle diverse teams, resolve conflicts, and provide constructive feedback, especially in small businesses where managerial training might not be a priority. Investing in management development and leadership programs can significantly reduce employee turnover.

4. Inadequate Compensation and Benefits

While salary isn’t always the top reason people leave, inadequate compensation can be a major factor, especially in small businesses that struggle to stay competitive with larger firms. According to the U.S. Bureau of Labor Statistics, 17% of workers who quit their jobs cite compensation as their main reason for leaving .

Small businesses must find ways to offer more than just a paycheck, whether that’s through flexible work schedules, health benefits, or career development opportunities.

5. Lack of Workplace Flexibility

Flexibility is no longer a luxury—it’s an expectation. A report by Owl Labs found that 62% of workers want to work remotely at least part-time, and businesses that don’t offer flexibility are likely to see employees leave for those that do .

Especially in a post-pandemic world, offering flexibility—whether in terms of remote work, flexible hours, or compressed workweeks—can be a game-changer in keeping your employees happy and engaged.

6. Toxic Work Environment

A toxic workplace can have severe implications for employee retention. Harvard Business Review found that a toxic culture is 10.4 times more likely to contribute to employee turnover than compensation issues . Employees want to feel valued and respected, and when they experience discrimination, harassment, or poor treatment, they’ll often leave.

For small businesses, addressing workplace culture is essential. It involves promoting inclusivity, offering clear communication, and ensuring that employee concerns are taken seriously.

7. Lack of Recognition

Employees who feel underappreciated are more likely to leave. A Gallup study reported that only one in three workers in the U.S. strongly agree that they have received recognition or praise for doing good work in the last seven days .

Small businesses need to make recognition a part of their culture. Celebrating wins—both big and small—helps employees feel valued and seen, and reduces the likelihood of them seeking out a more appreciative environment.

Conclusion

If your business is experiencing high turnover, it’s essential to assess these key areas. Lack of growth opportunities, poor management, burnout, and inadequate recognition are just some of the reasons employees are leaving small businesses. With proper attention to employee needs, investment in management training, and cultivating a positive work culture, you can improve retention and build a more stable, engaged workforce.

High turnover is costly, but by understanding and addressing these common issues, small businesses can create a more supportive and effective work environment.

References:

1. Work Institute. (2020). 2020 Retention Report: Trends, Reasons & Recommendations.
2. LinkedIn. (2019). 2019 Workforce Learning Report.
3. Gallup. (2020). Employee Burnout: Causes and Cures.
4. SHRM. (2019). The High Cost of a Toxic Workplace Culture.
5. U.S. Bureau of Labor Statistics. (2021). Job Openings and Labor Turnover Survey.
6. Owl Labs. (2020). State of Remote Work.
7. Harvard Business Review. (2021). Toxic Culture Is Driving the Great Resignation.
8. Gallup. (2018). The Impact of Recognition on Employee Retention.

Lettice Mayfield
Senior HR Consultant
Resourceology360, LLC