Retaining your existing employee is the best cost effective strategy for improving your HR performances. Yet, even if Retention has always been a mantra for many HR executives for years now, when it comes to showing up results, not many companies have been really capable to demonstrate how good they are at retaining people.
If the logic of retention is always valid. Keeping a person is more efficient than having to hire and retrain a new recruit. Easy.
However, getting to a point where there is 100% retention is not really feasible, and probably not even desirable. Modern companies need to carefully balance the efficiencies gained by retaining their people and the need for new fresh ideas that external recruits can bring.
Whom to retain?
So the key challenge for a people manager is: whom to retain?
If your first answer is “Top Talents”, please go back to article one of this series and then try again. Why? Simple: whatever category of people you associate to the word “talent”, this is the most difficult portion of your people to retain. And in some case it is probably the area you do not want to retain.
- If you intend Talent as (those people holding) top competences, well the question here is what have you been doing to make sure that those specific skills are not kept “embedded” in a set of champions only. A retention activity can be a complement to a broader competency transfer process, but it cannot be its main strategy. Else you will constantly be hostage of the danger of a few people leaving…
- If you intend Talent as High Potential, my question about retaining them is: how much time can you wait until that potential actually transforms itself into Performance? Because here stands one of the biggest errors some companies have done in the past: so focused and concentrated on keeping people labelled as HiPos, they have not even noticed the constant flows of other employees leaving the organisation, bringing away the strength and capability of delivering that are so linked to the company results.
In reality, let’s face it. In so many companies, even if the word retention has been in the wording of top executives every year, the only retention activity actually delivered is the proposal of a salary increase when somebody decides to resign. A practice that, in my opinion, simply stresses the failure of the whole HR practices of that Organisation.
What is people retention
People Retention is similar to maintenance of a building. Of course, in certain occasions you may act directly on the fresco by the top artist on the top floor to ensure the building keeps its value. But it will not take long until you will focus your attention on the foundation of the building, it’s basic plumbing, the whole static structure that ensures the building stands up. After all, if one of these components crumbles, your fresco will not keep you from loosing all of your investments.
So what is the best retention strategy? Answer is easy: not having one. For me a retention strategy is similar to having an exit strategy in a business. If you really trust what you are doing, why would you need one? The same applies here, if you trust your HR processes, your people management practices, and especially your People Development activities, there is no need to create a specific retention strategy.
Focus on turnover
However there is one element that you definitely need to focus on: understand when things are not doing well. The key metric here is your employee turn-over. But the issue here is that so many companies are either not measuring it, or measuring it without a real understanding of e meaning of this measure.
First of all, having a simple percentage does not help. It needs to be benchmarkable, and it also needs to be put in line with some dollar figures (an example of the elements to be taken into consideration when calculating the cost of turnover can be found here ).
Secondly, it needs to be linked to a strategy of turnover. Everybody knows there is no “0” goal in this area. What each company needs to focus on is defining a “good” turnover rate for each job family within the Organisation based on:
- Industry and location benchmarks;
- Competency needs
- Organisational evolution stage
The two last points are the most critical, as they will also allow not to passively accept industry averages. The first element refers to the needs of fresh competences and insights your Organisation may need because of its business objectives. For example, a consulting firm will typically look for having a higher turnover rate than other organisations, and the typical “consulting pyramid” is designed to enhance this.
The second element is however the most important one in my opinion. Young organisations will normally have a low turnover rate at he beginning of their history, then this will consolidate at a certain point. Issue is that in many Organisations the institutionalization phase also corresponds to the moment were turnover reaches its minimum (even if, I suspect, a qualitative look at the figures would probably show a much more dangerous situation), even if changes of people at this point would even be needed.
What to do?
A correct People Management strategy is not only about keeping the people, but also knowing when is the right moment to let them go. As this it a natural element of company’s life it doesn’t need to be seen as a negative moment, provided it is well thought through.
Your retention metrics should exactly be able to show this:
- how effective your People Development strategy is, and
- how good you are in balancing the needs of fresh insights from the market with the necessity of managing underperformers.
Again, easy uh?😉
This is the fourth post in a series of six articles: