Talent Management

Why Employees Quit Their Jobs at Small Businesses

Published by in Talent Management

Want to learn more about how you can retain your best workers? Check out the companion piece to this article: “Why Employees Stay at Small Businesses

According to the Bureau of Labor Statistics (BLS), more U.S. employees are quitting their jobs than ever before.

On a macro scale, we can point to things like a thriving economy, increased worker mobility, and a record number of job opportunities as reasons.

At a micro level, though—say, at your small business —any number of things could be causing your best employees to walk out the door, from your managers to your location, or even your company culture.

a graphic showing a woman with a box of personal items leaving her job while her colleague sits behind her at his desk

Identifying and fixing causes of high turnover is vital. Small businesses with a revolving door will always have one eye on recruiting and hiring. Those with high retention, on the other hand, can fully focus on what ultimately matters: building a great product or service and achieving growth and profitability.

That’s why we decided to ask former employees of small businesses why they left.

Our findings, presented below, are based on a survey of over 300 people who left their jobs at U.S. small businesses (with 100 employees or fewer) within the past two years.

Check out our results, and use our insight to ensure you’re addressing the most common factors that cause valuable employees to take their talents elsewhere.

Let’s get to it.

Poor compensation, bad managers among top reasons employees leave small businesses

Money may not be able to buy happiness, but it can play a major role in whether employees stick around at your small business.

Poor compensation or benefits is the top reason employees leave their jobs at small businesses, cited by 33% of respondents. The employee’s manager (26%) and poor work-life balance (25%) round out the top three.

Bar chart showing the top reasons employees quit their jobs at small businesses

It’s time for small businesses to address stagnant compensation

Basic economics says that when unemployment is low and the number of job openings is high, companies should raise wages to compensate. According to Pew Research Center, that’s not happening. In fact, in some sectors, wages are falling.

There are many theories out there as to why wages aren’t budging, but the result is the same: Workers are leaving for better pay instead of sticking around for a raise that might not happen. Research from the Federal Reserve Bank of Atlanta shows this strategy is paying off, as job switchers are making 30% more than those who stay with the same employer for a year.

What to do about it at your SMB: If you’re experiencing high turnover, it’s time to pull the trigger on increasing compensation. Not only can you attract and retain better workers than your competition in a stagnant wage market, but you’ll also enjoy other benefits, such as increased production. Compensation management software can help you home in on the right number for each worker.

If you can’t justify raising salary and wages, cut costs for your workers in other ways. Adopt insurance plans that are more affordable and comprehensive, offer wellness and commuter benefits, or stock your office kitchen so workers don’t have to spend as much on groceries.

Why we’re in a manager epidemic

Even though it was the second most-cited reason for quitting, we may still be underestimating the damage that bad managers pose to worker retention. According to a Gallup poll, as many as 50% of employees have left a job to get away from their manager at some point in their career.

The problem is twofold. First, managers have more influence over their employees’ day-to-day than anyone else in an organization. They communicate goals, address department issues, and set the tone for expectations. One manager has the power to make a worker’s life easy and fulfilling, or overbearing and miserable.

Second, there simply aren’t enough great managers to go around. In that same study, Gallup found that only 18% of current managers had all of the skills required by their role. Small businesses should be investing more in developing promising workers into great managers, but they’re failing here too. The BLS found that small businesses only provided 12 minutes of manager training per six-month period, on average.

What to do about it at your SMB: Simply put, the quality of your managers can make or break your small business. Not only should you be leveraging data in your performance management system to find great managerial candidates who aren’t just top individual contributors, but you should also provide ongoing training to help managers develop and refine important skills.

Gen Z is quitting to advance their careers

Breaking down our respondents by age, the most common reasons for quitting were roughly the same across Millenials, Generation X, and Baby Boomers.

However, when we looked at Generation Z (respondents born in or after the mid-’90s), a different top reason emerged. For this group, poor compensation or benefits also played a role (28%), but so did limited options for career progression (28%).

Bar chart showing the top reasons that workers ages 18 to 25 leave their jobs at small businesses

Young workers have no patience for promotions

If you’re expecting entry-level workers to come in, pay their dues, and wait diligently for a promotion, you’re in for a rude awakening with Gen Z. This group wants to move quickly. According to research by Robert Half, five years out of college, 20% of the Gen Z workforce expect to be successful entrepreneurs and 32% expect to be managing people.

As a result, this group values career progression and growth above all else—84% of Gen Z workers consider it their top priority when evaluating potential employers. Call them ambitious or impatient, but it’s clear that if small businesses don’t offer a clear progression path, this youngest generation of workers will leave for an SMB that does.

What to do about it at your SMB: To combat this, you need to define a career path for every role in your organization, along with specific criteria to be considered for the position. You should also leverage employee engagement tools to give more continuous feedback to Gen Z about their performance outside of annual appraisals.

Women are 70% more likely to quit for family or personal reasons than men

Prioritizing your career or your family is a tough decision for anyone to make, but our survey found that this choice weighs heavier on female employees than male.

Women are 70% more likely to cite family or personal reasons for leaving their job at a small business than men (27% vs. 16%), marking the biggest discrepancy between genders of any reason given by respondents.

In fact, enough female respondents cited family or personal reasons to make it the third most common reason for quitting among female employees behind poor compensation or benefits (34%) and their manager (30%).

Bar chart showing women are 70% more likely to cite family or personal reasons for quitting a job at a small businesses than men

Are you subtly making the ‘work vs. family’ decision for your female employees?

For some women, the decision to quit work and start a family is entirely personal, and welcome. There’s nothing you can do to keep them from leaving.

For many others, though, the decision is made for them because of inhospitable conditions for working mothers:

  • Only 38% of U.S. employers offer paid parental leave.
  • Only 40% of new mothers have access to break time and private space at work to support breastfeeding (despite Affordable Care Act requirements for both).
  • 40% of mothers have no choice but to miss work when their child is home sick, 56% of whom don’t get paid as a result.

Three out of every 4 mothers in the U.S. with children under 18 are full-time employees. Unless your small business makes it easier for these women to tend to their family, they’ll leave.

What to do about it at your SMB: If you’re not already offering paid maternity leave, do so. You should also offer flexible work arrangements such as flextime shifts or the ability to work from home, and look into your compensation practices to ensure you’re offering equal pay.

Lastly, consider offering backup care benefits. This trending perk—now offered by 4% of small businesses—gives parents access to qualified caregivers when their regular childcare falls through.

Remember: Small businesses aren’t powerless to stop turnover

When it comes to talent management, nothing feels worse than watching a good worker leave. It’s like a painful breakup.

Especially during periods of high turnover, it can seem like nothing you’re trying is fixing the problem.

Consider this, though. We asked respondents if they agreed or disagreed that their former small business employer could have done something to keep them from quitting. Close to 70% agreed.

Pie chart showing 70% of former small business employees say their former company could have done something to keep them from quitting.

A little turnover is unavoidable. It comes with the territory of running a business, and in some cases—like bringing in a fresh perspective—should even be welcomed.

But whether it’s analyzing your compensation structure, increasing your managerial training, giving more feedback and career progression opportunities to young employees, or supporting the mothers you employ, there is always something you can do to improve the lives of your employees and increase the odds that they’ll stay.

Looking for Talent Management software? Check out Capterra's list of the best Talent Management software solutions.

About the Author

Brian Westfall

Brian Westfall

Principal Analyst @ Capterra, covering the latest in HR and recruiting software. BS in Marketing and Economics, Trinity University. Published in Forbes, SHRM, and TechRepublic. Based in Austin. I love corgis, baking, and rooting for my hometown San Antonio Spurs (Go Spurs Go!).


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