Small firms hit by high staff turnover

Retaining talented staff is getting more difficult for smaller firms, experts warn.

According to the Chartered Institute of Personnel and Development (CIPD), small firms are struggling to hold onto staff amid years of low unemployment and a stable economy which leaves them competing for a smaller pool of talented workers.

CIPD research shows four-fifths of employers have suffered staffing problems in the last year so the organisation urged firms to improve their recruitment processes.

Changes in procedures can weed out unsuitable candidates before they join the payroll and also keep talented staff out of reach from larger firms, it said.

“Getting it right by recruiting the most suitable candidate and selecting the appropriate induction process can transform a standard task into a chance to improve the organisation’s performance by improving the quality of the people they are asking to deliver that performance,” said recruitment guide author Gareth Roberts.

“Get it wrong and it doesn’t matter how good the development programme is, how well an employer motivates their staff, how well they manage their performance or even how well they reward them; they are always making up for that one bad decision.”

One in eight employees leave their job within the first six months, the CIPD reported, and adding to firms’ high turnover are separate figures showing small businesses are now almost twice as likely to fire an employee than they were five years ago.

The report from Bank of Scotland (BoS) reveals 31% of small firms have been forced to lay off an employee in the last five years, while only 17% dismissed an employee between 1995 and 2000.

“Despite operating in a tight labour market, owner-managers are not prepared to let the high standards of their businesses be compromised,” said Kevin Gillett, from BoS.

“Nevertheless, making that vital final check – following up the reference – would undoubtedly slow the speed of their revolving recruitment door.”

Incompetence, poor behaviour and theft were the top reasons for dismissal, but over a third of employers admitted they do not regularly check a candidate’s references before they hire someone. This was most likely among older bosses.