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You'll Never Escape the Cycle of Turnover If You Don't Learn This Important Skill Employee retention is a top challenge for small business owners — and the key to keeping your employees happy and engaged starts with a skill you can learn to embody as a leader.

By Nellie Akalp Edited by Kara McIntyre

Key Takeaways

  • Small business owners identify hiring and retention as top challenges, with over 60% finding it difficult to hire the right talent and 45.8% struggling with employee retention.
  • Active listening can counter high turnover, and involves three key aspects: cognitive understanding, managing emotions and showing interest, both verbally and nonverbally.
  • Improved employee engagement through active listening can enhance team morale, increase productivity and save costs on employee turnover.

Opinions expressed by Entrepreneur contributors are their own.

Attracting and retaining employees remains one of the biggest challenges facing entrepreneurs today. A recent Megaphone of Main Street report from SCORE on employee engagement revealed that 60.7% of small business owners rank hiring the right talent as their top challenge, and 45.8% say retaining existing staff is difficult. Another 33% of small business owners say retaining and motivating employees is a "concerning issue."

Of course, there are important reasons to retain staff. Long-time employees have a lot of institutional memory about your customers' likes and dislikes, which helps create a better customer experience. Employee retention also helps cement staff loyalty, improves morale and enhances productivity.

Replacing an employee typically comes at a high cost. The Society for Human Resource Management (SHRM) estimates replacing a staff member costs nearly $4,700. Others estimate the cost of replacement to be three to four times the position's salary — so retaining your current team will most likely save you money.

Related: How Small Businesses Can Master a Complex Labor Market

The power of active listening

One way to combat "rampant job switching" is "to be a good listener," according to Boris Groysberg, a professor of business administration at Harvard Business School, and Robin Abrahams, a research associate there. Writing in Harvard Business Review, they say, "Employers who fail to listen and thoughtfully respond to their people's concerns will see greater turnover. And given that the highest rates of turnover are among top performers who can take clients and projects with them and the frontline employees responsible for the customer experience, the risk is clear."

So, what exactly is active listening? Typical listening involves understanding what the other person is saying. Active listening involves conveying "interest, engagement and caring" to the person/people you're talking to.

Groysberg and Abrahams say there are three aspects to active listening:

  1. Cognitive: Paying attention and understanding everything that's being said.
  2. Emotional: You need to remain calm and compassionate during the conversation, and manage any emotional reactions, such as annoyance or boredom you might feel.
  3. Behavioral: Verbally and nonverbally showing interest in what's being said.

Active listening is especially important in hybrid and virtual workplaces, where most conversations happen not face-to-face but over the phone or via video conference. At the beginning of the Covid-19 pandemic, when we had to send our rapidly expanding workforce home, I realized it was more difficult to communicate expectations, share our updated mission and purpose and get honest feedback from our staff. Sometimes, it felt like we were talking past one another.

Related: Why Active Listening Is a Critical Skill for Founders and Entrepreneurs

How I learned to be an active listener

I've always prided myself on being a good listener — it comes with the territory of being a mom of four. But my listening skills seemed off. Then I remembered learning about active listening in law school.

  • Participating in class discussions, moot court exercises and legal clinics taught me the importance of concentrating on what people say, understanding their message and responding appropriately.
  • Effective listening helps us think critically and analyze complex issues from multiple perspectives.
  • Law school taught me the importance of listening with empathy and acknowledging the emotions and concerns of others. Empathetic listening helps build trust and rapport, which can be key to retaining good employees.

Going to law school was a valuable training ground for me. It made me a better listener and gave me the foundation to build several successful businesses. I understand most business owners don't have a background in law, but that doesn't mean you cannot apply these essential lessons.

How you can become an active listener

Being an active listener takes conscious effort and consistent practice. Groysberg and Abrahams say one of the most important things you can do as an active listener is "repeat people's last few words back to them." They say it "makes the other person feel listened to, keeps you on track during the conversation and provides a pause for both of you to gather thoughts or recover from an emotional reaction."

They also say that one of the ways people get off track in a conversation is by offering nonverbal listening cues when you're uncomfortable with them. If you're so focused on trying to look people in the eyes, then you're likely not listening to them. But it's important to pay attention to nonverbal cues, such as tone of voice, facial expression and body language, given by the person you're talking to.

Another key to being an active listener is borrowing a trick from journalists and asking more questions than you think you need to. Groysberg and Abrahams say this makes the person/people you're talking to "feel listened to, ensures you fully understand their message and makes sure details aren't overlooked."

Finally, don't formulate your answer while the other person is still talking. That will distract you from actually hearing what they're saying to you.

Related: The Art of Active Listening Requires Leaving Your Ego Behind

Increasing employee engagement

A recent Gallup survey on employee engagement reveals that, compared to 2020, today's employees feel more detached from their jobs, have less clear expectations, experience lower levels of satisfaction, and aren't connected to their company's purpose. And most don't feel that anyone at work cares about them as people.

This mirrors the SCORE survey results showing that 62% of business owners say it's a struggle to keep employees engaged and productive.

One of the benefits of active listening is that, by increasing morale, it can directly contribute to creating a more cohesive team at your small business. When your team feels heard and understood, they become more loyal, engaged, motivated and productive, helping drive your small business toward long-term success.

Nellie Akalp

Entrepreneur Leadership Network® Contributor

CEO of

Nellie Akalp is a passionate entrepreneur and mother of four. She is the CEO of, the smartest way to start a business, register for payroll taxes and maintain business compliance across the United States. 

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

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