Bettina Pickering and Tom Marks, of PA Consulting Group, question whether high employee retention really is the key objective to ensuring the overall performance and growth of an organisation.
Many of us will have recently experienced an increased focus on improving staff retention within our organisations. HR magazines and internet sites are full of articles and research on the costs of replacing staff and suggestions for retaining staff, ranging from golden handcuffs to painting the office walls.
Generally people join an organisation to do a good job. This attitude can be eroded if, firstly, there is a reality gap between what was promised in the interview and the day-to-day reality of work; and secondly, if pay increases are not considered sufficient to compensate for that reality gap.
Making sure that the work reality of the organisation is represented accurately and getting the base salary level right are therefore crucial factors in retaining employees.
Is high employee retention really the objective?
Many benefits increase in line with length of service, effectively tying employees to an organisation. A significant increase in employee productivity is often expected in line with these increases. However, a lack of stimulus in the work environment (people, responsibilities, objectives, performance measures and promotion opportunities) often results in reduced employee performance.
‘Plateau-ing’ is often used to describe the situation where employees become expert at what they do – carrying out their role automatically without trying to improve how they do it. Some form of challenge is required in order to break this ‘plateau’ status, and for most of us this comes from a career move, either through promotion, moving sideways within the same organisation or joining another organisation.
High employee retention and low turnover can, therefore, result in this phenomenon of ‘plateau-ing’ employees, and as a result can seriously inhibit innovation, growth and overall performance.
Furthermore, for some industries high-employee turnover is not a problem but an expected reality. For example, in music retail, where sales assistants tend to be young students working during their holidays, turnover is often 70 per cent plus – a figure that would send a chill down most HR/recruitment advisers, while warming the hands of the external recruitment agencies.
Why is this not a problem? Because they invest in their recruitment and on-boarding process, so that individuals have the skills to meet required performance levels quickly. This is not the case, however, in highly-skilled businesses such as professional services or scientific-based organisations where the perception is that low turnover (less than 15 per cent) means greater business performance.
Certainly high-turnover would be a problem for these organisations; but where there is little or no-turnover, innovation and growth often happen slowly, if at all. Often the only way to bring about energy and new thinking is a major re-organisation of the business or to buy it in by hiring externally.
Think about the benefits and the costs
You should consider the benefits – and the costs – of high employee retention. Organisations often refer to the benefits delivered by high employee retention, but very seldom discuss the costs of retaining staff in terms of performance stagnation. These costs can be seen in the level of workforce productivity, increased absenteeism and slowed growth in sales.
This performance stagnation is often poorly understood, with the reasons often simplified to personal issues with certain people. Organisations who successfully maintain high levels of performance amongst long-serving employees look at pro-actively managing individuals’ careers so that, as far as possible, individuals are kept challenged and engaged and performance continues to increase.
The costs of performance stagnation should be an input to every retention strategy if we are to strike the right balance between retention actions and proactive turnover.
Only when an organisation considers both the positive and negative implications of employee retention is it possible to identify the turnover rate required by the organisation to support its business strategy. Depending on the types of skills and the level of innovation required to support this strategy, the retention strategy can be detailed, and other HR processes adjusted to support it.
It then becomes more straightforward to make the appropriate employee investment (training, succession planning, talent development and other learning and development actions) at the time they are valuable to the organisation.
The point is this; you’ve got to understand what level of turnover and equally what level of retention is right for your organisation and flex this up and down accordingly depending on your needs and circumstances, and not be fooled by the low turnover + high retention = high performance argument.
One Response
It’s no good concentrating all efforts on employee retention
All the statistics show that the substantial efforts to improve employee retention give only marginal results. For organisations to actively support a flexible labour market and then try to reduce jobs churn at the same time is like shouting into the wind.
Short jobs tenure is here to stay. As such it is more cost-effective to accept the reality and deal with the problems directly, the main one being the Alheimer-like corporate amnesia that employers inflict on themselves. With institutional-specific knowledge walking out of the front door at conveyer belt speeds, employers cannot learn from their own experiences, which is the way most organisations progress.
This is an issue that nearly everyone overlooks. It also happens to be an area of huge unrecognised cost, characterised by the succession of repeated mistakes, re-invented wheels and other unlearned lessons that litter British industry, commerce and Government. According to Proudfoot, the international management consultant, the price tag for the cost of wasted productivity in the UK is 7.5% of GDP, a figure that outranks many of the other areas of our corporate deficiency.
To ensure that employers get the maximum benefit from the flexible labour market, the discipline known as experiential learning has to be taught and implemented. A field that is still largely misconceived, this means that employers have to have formal processes in place to capture their exiting knowledge and experiences and then know how to turn that intellectual asset into better decision-making. The ‘asset’ is not what many organisations end up recording in their sophisticated and expensive electronic data banks. It is the implicit, ambiguous, functional and context-specific type of knowledge that is acquired largely by their own experiences. Tacit knowledge is the non-technical ‘how’ of getting things done, what Edward de Bono, the inventor of lateral thinking, calls ‘operacy’ or the skill of action, and the late Peter Drucker identified in the use of the word techne (the Greek for ‘skill’), characterised by the citation referring to the current predicament of the National Aeronautical & Space Administration: “If Nasa wanted to go to the moon again (as it is planning to do by 2018), it would have to start from scratch, having lost not the data, but the human expertise that took it there last time.”
If transient employees, and specifically managers, are not taught how to how to better benefit from their employers’ ‘hindsight’, the dialogue in one of English novelist J.L. Carr’s texts will continue to echo: “You have not had thirty years’ experience. You have had one year’s experience 30 times.”
Sincerely,
Arnold Kransdorff. author “Corporate DNA: How Organizational Memory can Improve Poor Decision-Making” (Gower, 2006).