How Employee Turnover Can Hurt Your Company

October 1, 2020


You spend months sorting through resumes, conducting interviews, and negotiating contracts to find the right employees. However, even the most experienced professionals need time to adjust. Mentoring and training new workers often takes dedication, diverts resources from essential personnel, and necessitates revealing client lists, trade secrets, and confidential business strategies. Small business owners sometimes forget that investing in employees involves similar risks to investing in the business itself. At-will employment means that companies cannot force a return on their employee investments.

Without proper legal safeguards, dissatisfied employees may take their training to a competitor, leave sudden gaps in the corporate structure, and ultimately set your business back. You cannot prevent employee turnover completely, but you can minimize the risks associated with hiring new employees and create a corporate environment that maximizes retention. The dedicated small business lawyers at McClanahan Powers, PLLC, might help your company avoid common mistakes associated with hiring and implement best practices for employee retention. Call our experienced Virginia and D.C. corporate attorneys today at (703) 520-1326 or connect with our virtual office online.

The Negative Effects of Employee Turnover

Every business owner understands the general frustrations associated when new employees suddenly leave. Studies indicate it can cost double an employee’s annual salary to replace key personnel. In addition to direct losses such as compensation paid and resources dedicated to hiring and training new employees, businesses often suffer from significant indirect consequences associated with prolonged and systematic hiring difficulties. The cumulative impact of employee turnover on managers, mentors, and overworked personnel often results in additional turnover.

Forcing dedicated staffers to continuously hire and train new employees often causes internal frustrations, negligent hiring, and inadequate training. In turn, subpar training and rushed hiring results in more mistakes, employee difficulties, and client complaints. Senior staff members must also generally work overtime to compensate for the sudden loss of necessary personnel. These factors create a challenging work environment that discourages both old and new employees from remaining with the company.

Best Practices on Employee Retention

Dedicated business owners can minimize employee turnover by considering and implementing the following strategies for retaining essential personnel:

Investing in Managers – Experts opine that bad mangers influence nearly 75% of employee turnover decisions. Industry experience does not equate to good management skills. Business owners should look for personable staff members with leadership skills to manage and train new employees. Investing in the right managers – and removing the wrong ones – may prevent continued employee turnover.

Flexibility & Understanding – No one dedicates themselves to a business more than its founders. As such, small business owners should not expect employees to elevate their duties above their families, education, and personal health. By creating a flexible, family-first environment for employees, your staff will not have to choose between their jobs and their private lives. Employees should feel comfortable asking for time off to attend doctors’ appointments and family events. Employees who feel trapped in a job commonly look for a quick exit.

Create Employee Incentives – Staff members work harder when they have a personal interest in seeing your business succeed. Whether this means granting stock options, implementing holiday bonuses, or offering additional commission, consider rewarding hardworking employees for their best efforts.

Offer Competitive Salaries & Benefits – Even when you cannot afford top-level salaries, consider offering valuable potential employees alternative benefits. Candidates may accept a lesser salary in exchange for a remote work environment, reduced hours, additional vacation days, or better retirement and health plans. Find out what’s most important to your staff and create enticing benefits packages tailored to their lifestyles.

Prevent Hostile Work Environments – Most staff members do not judge a business based on one bad experience. However, they will judge a company based on its response to a negative employee incident or hostile work environment. Consider creating an open-door policy for employees and a feedback system to identify and address workplace concerns. Business owners should also monitor mid-level managers to ensure they’re creating a healthy work environment for dedicated staff members.

Implement Feedback from Exit Interviews & Dedicated Employees – Listen to current and former employees. By learning why an employee left and correcting the situation or addressing current employee concerns, you may stop your business from falling into a dangerous turnover cycle.

Experienced corporate counsel in Virginia can often help business owners identify critical areas of concern and develop policies to encourage employee retention and grow your business. Speaking with employees directly can often help small business owners prioritize the changes necessary to prevent employee loss while restructuring their policies.

Implementing Employee Retention Plans & Protecting Your Legal Interests During the Hiring Process

Dedicated turnover prevention lawyers commonly recommend creating a holistic employee retention plan supported by local laws. These plan often involves drafting the following written policies, documents, and legally enforceable contracts:

  • Non-disclosure, non-compete, and confidentiality agreements
  • Training protocols, including allocating training responsibilities among staff members and offering senior employees training and mentorship incentives
  • Guides directing manager conduct
  • Employee complaint, feedback, and recommendation forms
  • Employment contracts, benefits packages, and incentive guidelines
  • Exit interview questionnaires

Sometimes, an attorney can help owners identify the primary factor leading to low employee retention and tackle this issue without exposing the company to liability. A lawyer might work with small business owners to legally terminate ineffective managers, redraft employee contracts, and address serious complaints commonly leading to employment discrimination and trade secret litigation.

Invest in your Business by Investing in Your People with the Help of McClanahan Powers, PLLC

Every company has different resources, ideals, goals, and needs. At McClanahan Powers, PLLC, our dedicated team of corporate attorneys can help Virginia businesses address and prevent an inefficient cycle of regular employee turnover. If you’re struggling to keep or recruit employees, consider whether you need to increase incentives, retrain managers, or diffuse hostile work environments. By listening to your employees and working with professionals, you might create a lasting and profitable business benefiting you and your staff.
Connect with our experienced Virginia and D.C. small business lawyers by calling (703) 520-1326 or contacting our virtual office online to schedule an employee retention analysis.