Employee Retention

I decided to start a series on employee retention as it has been on my mind lately with quite a few conversations with friends. I've talked with managers, employees, friends looking for work while employed, and friends out of work needing a job. Their thoughts and opinions weigh into this series from all points of view. the series outline is:

Why Retain Employees? (this article)
Employee thoughts - The people that do most of the tangible work, not managers, and how you might retain them.
Manager Thoughts - What managers think and how they view employees?
Keeping Your Job - A look at how to keep your job if you want to
Finding Your Job - A look at what might matter in a job search, or in keeping your job and some advice.

Not that I'm an expert, but I've been in large and small companies, both as a grunt, doing actual work for the company and as a manager, supervising others. I also read and think about this stuff since I think it matters.

Hopefully this will be a fairly timeless series that you can refer to throughout your career and pass along to your managers and others that are interested. Please be sure that you read the feedback as this is one place where lots of other opinions, not just mine, will be cast and there will be good information as well. You can see what others have posted in the "Your Opinion" tab at the bottom of the article.

Why Retain Employees?

It would seem like a silly question, I mean, why not retain employees who have worked for you? The traditional business employee relationship in history was based on the fact that the employee would work for the company, get paid, remain loyal, and the company would provide employment, training, etc., and everyone would work together for the majority of their lives. Except for slavery or if you couldn't or wouldn't do the job, you typically had a job for life. Even in the craft trades where someone would apprentice, it was expected the master would get years of service.

With the rise of capitalism, especially in the technology area, it seems that there is no loyalty, people switching jobs on a whim. And when demand exceeds supply, it's horrible, as I've seen people accept one job, and then accept another, withdrawing from their first commitment before they start!! With supply outstripping demand, as it has the last few years, the situation becomes reversed with layoffs, forced performance rankings, and no security for the worker.

But both of these markets are bad for everyone. When there is turnover, it has an impact on both the employer and employee. The employee that suspects that they will not remain in their position for a long time and as a result, does not do their best work. Nor do they remain loyal, working in the best interests of the company. We all tend to work in our own best interests. Even most of our "going the extra mile", working longer hours, taking a little more time or doing a little extra work, is mainly a benefit for ourselves. We feel better, expect a bonus, recognition, or maybe enjoy the time spent with our co-workers, but there is something in it for us. If we do not feel this loyalty, then we tend not to work that little bit extra.

Employers also suffer when the employee is not loyal or doesn't work as hard. But there is another issue that is associated with employees that are not retained. There is a knowledge loss, business knowledge, product knowledge, even social knowledge that is gone whenever there is turnover. Many large companies ignore this fact, instead treating all people as "resources", for the most part interchangeable, and easily replaceable. The forced turnover of many large companies, the desire to have teams composed strictly of "high achievers" and superstars, is a good idea at first glance, but one that fails in the long run.

In a corporate environment, the business knowledge is invaluable. It takes time to learn how a particular business works and the quirks of a particular company. A large part of the training time, the lost work often pegged at a few weeks, but in reality, much longer, is acquiring knowledge about the particular business. And the more turnover that you have, the more time is "lost" in terms of growing and enhancing your business, because of new employees having to relearn the same things over and over.

The cost of new employees is often quantified in big companies with a day or two of dedicated training and an allotted week or two to get trained in your particular environment. In IT it's usually learning the domain structures, passwords, procedures for various work, etc. For developers it's time learning the code control, staging processes, styles, and getting familiar with the particular product being worked on. But this ignores another factor. The lost time by current employees in answering questions, training, slowing down their work to accommodate a newcomer, etc. Even simple social time, introductions, coffee breaks to chat, small talk at the beginning of meetings, add up to overall lost productivity.

There are certainly cases where this time is minimized in some jobs, but in a large number, it's not. It is lost time just as a virus in a white collar environment "costs" money to eradicate. It's a soft cost, a time lost cost, but it's still one to consider.

Morale

Morale is seemingly less and less a consideration of the modern corporation. I used to work in a large power company where the majority of employees at the power station were blue collar. And morale was something that was important with a large number of events and functions that were designed to bring people together, managers spent time getting to know people and minimize turnover. People were unique and treated as such, with the recognition that people will always complain and there will be issues, but a higher level of morale means more productivity.

As I moved on to more white collar environments, I noticed less and less effort being put towards morale. It was less often that I saw managers beyond my own working with and getting to know the people that were employees. Less and less concern over how they felt and how their lives outside of work were of some importance. It goes with the job, became a phrase uttered more and more, with the expectation that you should just go the extra mile when it was asked of you. And surprisingly, with the emphasis on individual performance and measurements, there is a constant talk of "teamwork".

In my years of working, there are a few things that I've learned and one of which is that people act in their own best interest. Almost always that is true as I've mentioned above. If you want to get the work focused on what is in the best interests of the company, you have to move some of that self interest from bonuses and commissions to the softer, more ethereal rewards of loyalty, teamwork, and pride. Just as salesman sell the products whose commission serve their paycheck the most, a company wants to get an employee to perform better by changing their rewards from strictly financial to more emotional

I truly believe that this is achieved by building teams of individuals, using their strengths, and showing some loyalties to your employees. Synergies are created that will motivate and reward the employees without financially straining the budget or creating salary inequities that strain relationships. A higher morale means that you can count on your workforce, the same thing that you convey over and over to your customers. That the company can be counted on to be there and perform.

Studies have shown the people work better when they are happier. It may not be required for everyone, but most people work harder, are more loyal, and accomplish more if they have a high morale on the job.

Conclusions

This is a hard subject to write on and I'm not sure how well I've conveyed my thoughts here. I've solicited opinions from friends in a variety of situations and I've struggled, and rewritten, with how to make the point that retaining employees benefits everyone. I'm hoping with your feedback and some more thoughts that this series will be something that will be referenced by both managers and workers.

I do want to make a few things clear. I do not think that everyone should be retained, or that there should never be layoffs. Both of those things will occur in any company, but they should be rare events. I also do not think that people should go to work for one company and stay there. The chances of you finding the perfect company are slim and while you should make every effort to look for a good fit, life intrudes on that and both you and the company will make mistakes. Also, situations change, and what was once a good fit, might no longer be the case.

I've seen many estimates that the cost of replacing an employee is around 150% of their salary, i.e. $45k to replace a $30k person. However I think this is low in the IT area where recruiters and headhunters can charge 20-30% of the first year's salary. Add that to the 50% in lost time as well as the risk that you'll pay a new employee even more because they are more talented and that 2005 $80,000 salary could easily be $160k!!

Retention is not something that everyone believes in. There are many companies that do not expect to keep most of the employees for the long term. They view turnover as a good things, a healthy event that makes the company stronger. They may have a better philosophy, but I do not think so. Anything worth achieving takes time and effort and requires investment. Discarding a resource too soon has been proven to be a poor way of building something that lasts. Which is what a corporation is supposed to be, a lasting enterprise. There are many managers that see retention that way.

Except when it comes to retaining themselves.

And if you're interested, an interesting look at how some companies are actually working to retain people: Creative Ideas for Retaining Employees as well as a few others:

Employee Retention