The Sacred Cow of Retention

Lets take on a sacred cow. Or at least a venerated goat.

Let’s talk about employee retention.

Employee retention is one of those unexamined “obvious” goods. Here’s an excerpt from a typical article, this one from HR.com’s Trendwatcher newsletter, Issue 353, March 23, 2007.

Retention Before the Fact

By Carol Morrison

“Retention is always important because of the investment you make in people,” observes Gerald Shields, CIO of American Family Life Assurance Co.….experts agree that the costs of losing valued employees can be considerable. That is why some experts encourage companies to begin efforts to retain employees before their employment officially begins.

…the average cost to replace a worker in private industry is $13,996…Other sources have replacement costs ranging from nearly 29% of an employee’s annual wages to several times his/her yearly salary. 83% of HR professionals at U.S. companies express concern about both retention and recruitment

…taking care during the recruitment process can save organizations the far greater costs associated with replacing employees who leave and the resulting losses in productivity and morale of remaining workers.

Sounds reasonable until you look under the hood.

What’s happening with employee retention (I’ll deal with customer retention another time) is what happened with loyalty. A good concept has been doubly perverted, by:

• a. Justifying the concept solely in terms of profit to the company, and
• b. Mistaking the indicators for the originally intended object.

It starts with, “Retention is important because of the investment you make.”

Not because it’s good for the people themselves? For the customers? For the society at large?

Nope. Because of the level of company investment.

Not long ago, employee retention was positively correlated with a lot of good things—customer retention, for one thing. Knowledge and familiarity, better judgment, good relationships, motivation. And, yes, lower recruitment costs.

High retention rates meant you were growing and keeping things interesting for employees—an indicator of organizational health. The assumption was what’s good for the organization is what’s good for the employees—and, very much, it was. A virtuous circle.

Fast forward. Good employment advice now is keep your resume updated, keep looking around. Companies outsource and combine. Careers develop across companies. Keep your eyes and options open. Be flexible.

Don’t bemoan the loss of “loyalty” between company and employee—that’s so 20th century. Loyalty still has meaning—but it’s loyalty to teammates, friends, co-professionals, clients and customers, not so much to the one signing your paycheck. This is not bad: it simply means the corporate entity as a permanent source of identity and cohesion is kaput.

But we’re stuck with the ideological residue of still thinking that company and employees both benefit by high retention.

In today’s world, “retention” often looks like “restraint.” Keeping people in cages is the most effective form of retention, but it’s not politically correct.

Instead, we have golden handcuffs. Vesting. Club memberships. Equity. Non-compete agreements. Whispers of disloyalty about those who leave. Signing up search firms to get on their non-raid list.

Is this consistent with “we care about our people?” Not any more. Yet many firms claim to pursue both.

But you can’t have it both ways, not anymore. When careers are developed across companies, then bolting the door is—very simply—not in the interests of your employees. Their interest is to develop. That may or may not happen by staying put.

Great firms don’t mistake restraint for retention. Their people stay because they are free to leave—and choose not to. And those who do choose to leave are celebrated as alumni, not shunned as disloyal.

Paradoxically, the firms who actually do care about their employees—up to and including celebrating them finding a better job outside—will continue to have the highest employee retention rate. By serving employees—not restraining them. By treating them as ends, not as means.