Lesson 30: Handling Employee Turnover

Handling Turnover, Building Institutional Knowledge, and How to NOT Restart with EVERY SINGLE HIRE

Many entrepreneurs don’t know how to think about employee turnover because it’s stressful, disappointing, and negatively impacts business operations. But what can seem like a tough subject to tackle is a big part of running any business. This couldn’t be truer for start-ups where the pains of growth and change are a constant reality of life. So, any business leader seeking to drive sustainable growth over the long term must understand the underlying dynamics of turnover to reduce its impact on company operations.

When an employee leaves your company, the reason behind such a decision may not be so simple as incompetence or inefficiency. Everyone who works at your company has a life of their own with different needs, paths, and expectations. Interests change and so do circumstances. It’s said the average worker today will hold ten different jobs before age forty, and that most will take on up to fifteen jobs total in their lifetime. The reality today stands in stark contrast to the experience of previous decades where a worker held on to a single job for the entirety of their life. 

As technology lowers the barriers of movement and gives birth to new industries, it makes sense that turnover will increase across the board. People have more options. People don’t have to stay at the same job in the same city. They can always just leave. This is exactly why you must, as the entrepreneur, think carefully about handling employee turnover.

There are situations where employees are best suited to leaving an organization to preserve employee morale and productivity, but there are also instances when it’s perfectly okay to embrace turnover. 

Here are three main types of turnover you should acknowledge:

Employees who end up being the wrong fit for the company culture end up causing more trouble for the business than they cause for themselves. Since they are often not on the same page as their peers, these employees provide a constant source of unhealthy conflict that can poison the broader team. The impact can translate into lost productivity and decreased team performance. Worse, such individuals may contribute to driving turnover within your company because of their negativity and toxic behaviour. 

You need to be quick to identify such individuals and compel them to move on before it’s too late. Remember that companies are like organisms. In that same respect, start-ups are like smaller organisms with organs concentrated over compact teams. This means that the impact one organ can have on the other is huge. In a team of five, ten, fifteen, or even twenty people, an individual incompatible with your culture can often resemble a cancer that quickly spreads across your small, fragile organization. Keep your eyes open and always move fast to fire such people before they sabotage your company.

There is also turnover driven by employees who do not meet or exceed the standards of a team. As an early-stage company, you cannot afford to sustain anything other than high performance. Your company exists to provide a product or solution. As an entrepreneur, your job is to make sure you are motivating your team to execute such an operation at the highest level of effectiveness and efficiency. This all entails high performance. Companies that can meet such a standard survive, while those that can exceed it not only thrive—they conquer new frontiers! It’s essential you maintain a team of people who are well positioned to not just meet but also exceed the standards of performance needed to take your business to the next level.

There will be moments in your company when you have an employee who is a perfect cultural fit for your team but not the right person for the job itself. If you have any individuals who are like a fish trying to climb a tree, spending their time doing something to which their skills and talents are the wrong match, then you must reconsider their contribution to your company. If that individual truly is a good fit for your business, consider shifting the employee into a different role. If you do not do so because of limited resources or established constraints, then you may have to come up with a process to improve the performance of said individual for their current job. Otherwise, letting them go may be the only option in the name of keeping up performance standards in your business.

There are also times when an individual is not performing because of a lack of effort or interest in the job. When this happens, make sure you address the situation as soon as possible, since you don’t want such a mindset to convert into toxic behaviour. You cannot allow low performers to remain on your team. Your company depends on high performance.

One last type of employee turnover you must recognize is one that is often misunderstood. When an employee willing leaves a company in search of a bigger challenge or a greater opportunity, recognize that such a decision is in part the result of how your company dealt with such a person. People want to grow; they want to evolve in ways that allow them to achieve greater things. This is a natural component of any competent human being. It is also a reality that will be closely tied to their career. Entrepreneurs must recognize the role this plays in the lives of employees and use it as a tool to drive a company culture of growth and opportunity.

If you are not developing the potential of your employees, motivating, and propelling your team to become the best version they can be, then you will inevitably see them go away in search of a leader who does. As the captain of your own ship, you need to cultivate future leaders, more disciples who will not just grow your business but also make it a genuine part of their lives. Far too many business owners are awful leaders. They do not know how to treat their employees let alone position their time at the company in such a way that prepares them for greatness. This is a huge mistake because the company has already spent a lot of resources preparing and developing such talent.

Failing to nurture and grow employee potential is a huge mistake that could cost you some of your best talent over the long term. However, there may be times when a natural end has arrived, a time when your company cannot realistically offer any further growth or opportunity. If that is the case, you must treat the situation with grace, respect, and positivity. Such individuals served the business well and gave their valuable time. Honora their contribution and wish them well on the next stage of their career. Don’t burn the bridge. Leave the door open. That’s what any good leader does. And that’s what you must do as an entrepreneur.

Building Institutional Knowledge: How to Not to Restart with Every Single Hire

One major concern that is closely tied to employee turnover is the loss of institutional knowledge. We see this across all industries as a massive generation of people, the Baby Boomers, retire from their careers and with it take away years of institutional knowledge and operational know-how. This situation also applies to individuals who leave your organization for any reason other than retirement. When you lose an employee, you don’t just lose a marginal input of potential productivity. You also lose their knowledge of your business, its operations, customers, strategy, and more.

This form of brain drain can lead to major gaps in skills and knowledge within your organization. The result is reduced productivity and a new learning curve as your company spends more time figuring out how to get back to a place of stability. To make sure that your company is prepared to handle any loss of institutional knowledge, you must take steps to reduce the risks. 

Simplification plays a key part in achieving streamlined processes and business operations that are scalable and transferable. The more complex something becomes, the more room there is for errors. That’s why you must seek to simplify as much as you can within the margin of viability. That doesn’t mean that you should remove critical steps or components of a process or system. Anything required to achieve efficient productivity will always remain an indelible component of such a process. However, when simplification is not possible, seek to build a knowledge library of content that contains information on all business processes.

There are many ways you can build out your knowledge library. Some of the most basic formats include creating internal wikis, employee blogs, or even discussion feeds. Yet, one of the most powerful approaches to reducing the loss of institutional knowledge is creating video content rich with experiences and information that is engaging. 

One other standard manner of tackling this issue is by assuring that your employee on-boarding and training programs allow employees not just to share and deposit their knowledge, but also to transfer it across the team to other employees. 

Burnout, Turnover, & Addressing Concerns

Sometimes employees can lose their motivation or become disillusioned with your business. As the leader of a start-up, you don’t want your people to feel stuck in a rut or unhappy. You want to preserve a culture of positivity, growth, and rewards. Whenever you notice any of your employees become unfocused, absent, aloof, distant, or even disgruntled, it is essential you talk with them to figure out what is going on. The key here is to be authentic.

You want to care because these people are part of your team. If you aren’t genuinely interested in seeing happy, motivated employees at your company, then you will probably build a system unsustainable in the long term. You want to help your employees feel motivated and happy because the livelihood of your business depends on it. That’s why besides opening about the situation, you must set clear goals so that your people have something to strive for on your team. This could be a potential promotion down the road or even a new work arrangement that includes added flexibility, a bonus, or extra equity. 

Whatever you imparted on your people, remember that when you restart with someone on your team, it is important you position yourself as someone they can trust. If your people can’t trust you, they won’t stick around to help your company accomplish its goals. Therefore, you want to make sure you are looking out after their needs at your company. Make them feel cared for, make them feel respected, make them feel understood. Its why people are the most important component of any business because they are the business!