Why Good Employees Quit Your Service Business

Why retention matters

Hofrichter starts by listing four items that hinder growth, as described in Verne Harnish’s book, “Scaling Up,” and how they’re all connected.

1. Not enough people

2. Not enough leads

3. People are not productive

4. Not enough cash

“If you don’t have enough people, you’re turning down work. You’re not able to expand,” Hofrichter says. “Cash is going to be low. When cash is low, there’s no money to spend on marketing or hiring someone to make outbound calls, so you’re not going to have enough leads. And if you don’t have enough leads, your people aren’t going to be productive. It’s a vicious cycle.”

Employing enough people stops the cycle, according to Hofrichter. 

“You need to have good employees, because they’re the solution to growing the business,” he says.

Why good employees quit

To know how to improve employee retention, business owners must understand why employees leave in the first place. 

According to Leigh Branham’s book, “The Seven Hidden Reasons Employees Leave,” 89% of managers state their employees quit due to compensation, but when you ask employees, that’s only true for 12% of them.

A McKinsey and Company report shows employers list compensation, work-life balance, and burnout as the top three reasons employees leave, while employees report the reasons as not feeling valued by their organization, not feeling valued by their manager, and not feeling a sense of belonging at work.

“This disconnect is exacerbating the problem,” Hofrichter says. “Because if the leaders and owners have a different idea of why employees leave, they're not addressing the problem.”

Strong retention requires addressing the root cause of why employees leave, which can be demonstrated with the Workplace Hierarchy of Needs. Based on psychologist Abraham Maslow’s Hierarchy of Needs, employees won’t move up a level until their needs are met at their current level.

Why Good Employees Quit Slide 1Safety

For safety needs, employees must make enough money for their basic necessities, like a place to live and food to eat.

“Safety needs are basically trust,” Hofrichter says. “Do I trust this company to consistently give me a paycheck? Do I trust this company to give me the number of hours I need to make my rent? If I'm a technician or a plumber, do I trust I'm going to have enough calls?”

Social

Next are social needs, which equate to a sense of belonging and how the person aligns with the company’s culture. 

Self-esteem

Once safety needs are met, employees want to feel appreciated and valued. 

Self-actualization

Self-actualization lies at the top of the pyramid and refers to putting plans in place for career growth. 

“A lot of really high-achieving employees max out at self-actualization because they feel like they are stunted or stuck in their current company,” Hofrichter says. 

So what leads to employees’ needs not being met?

• Poor communication: Employees feel their managers lack communication skills.

• Owners/managers feeling burned out: Employees are far more likely to experience burnout when their managers feel burned out.

• Lack of vision from leaders: Employees feel their managers lack confidence.

• Employees don’t feel engaged: Managers fail to build engagement through one-on-one meetings with their employees. 

• Unclear expectations: Employees receive no clarity about how they’re allowed to work and what’s expected of them.

• Lack of career development and advancement: Growth opportunities are not discussed, and employees see no way to rise to the next level.

• Feeling disrespected/undervalued: Team members fail to be treated as humans first, and employees second.

How to address employee needs and bolster retention

Retaining employees requires a proactive approach. Hofrichter offers the following checklist to ensure that your company and leadership meet employees' needs.

1. Inform employees about what constitutes good performance in their role.

Hofrichter coaches his clients to give their employees KPIs and build a self-actualization plan to help them achieve those goals.

2. Provide employees with a clear understanding of their future career path.

“A great strategy is if there's a complete plan for someone to go from a helper to a lead installer to a maintenance tech,” Hofrichter says. “There should be a whole career mapped out for them where they could be at your company for 10-15 years.”

The same goes for office support positions. 

“Don't assume,” Hofrichter adds. “You need to ask your employees what areas they want to develop in.”

3. Show employees you care about them.

One way to show care is through regular one-on-one meetings. Hofrichter notes this is scalable, depending on your company’s size.

“In a large company, the owner can't meet with everyone,” he says. “They can conduct one-on-ones to the level below them, then those people provide one-on-ones to their reports, and so on.” 

Other ways to show employees you care are through benefits, office culture, and company values.

4. Implement a high-quality development and training plan.

Consider professional and personal development opportunities for your employees.

“We have a book club at Service Business Evolution, and we read books on leadership and culture,” Hofrichter says. “We discuss how to grow as humans and become better people. Little things like this make a big difference in whether employees feel a sense of belonging.”

5. Offer employees effective coaching.

While training provides education, coaching offers mentorship. 

“If employees don’t have someone they can trust and who has their best interest at heart, their safety needs may be unmet,” Hofrichter says. 

6. Give employees feedback.

“Feedback, oftentimes for owners and leaders, seems like a really scary thing to navigate,” Hofrichter says. “They’re afraid employees may take feedback the wrong way, and that might actually cause them to leave. 

“The reality is, in all the surveys, employees are demanding feedback. They want clear expectations, and if they're not doing well, they want to learn how they could do well,” Hofrichter adds. “The important thing is how you deliver the feedback. When trust is there and we are listening, feedback can be communicated in a way that's welcomed, encouraged, and received.”

7. Provide employees with the information and tools to do their jobs well.

Hofrichter recommends asking employees if there’s anything they need to do their jobs more effectively or make their jobs more enjoyable. 

“As a leader, you should remove the obstacles that keep people from reaching their potential or being as successful as they would like to be,” Hofrichter adds.

As an exercise, Hofrichter says employers should consider the Workplace Hierarchy of Needs and what level each of their employees is on. 

“If you plot them on the pyramid, you can predict the reason why that employee would quit,” Hofrichter says. “You can individualize your plan for where they're at and help them remove the obstacles keeping them from meeting those needs. Strategic retention is all about meeting their human needs first and seeking to address those.”

Motivation requires more than just money. 

“Some people are motivated by money, some people are motivated by recognition, some by freedom,” Hofrichter says. “Hold one-on-one meetings to find out what motivates your employees and makes them feel like they belong. Ask good questions, then listen to your employees.”