Recently a former client contacted me to discuss why they were experiencing higher turnover than usual. In the prior year, the Company had designed a special bonus program to retain key employees and top performers. Initially the program was well received but in the last six months, several technical specialists had left the organization. Recruiting replacements was going to be expensive and time-consuming. The SVP for Human Resources knew they could go to Google and find an abundance of information on how to retain good employees. These sources infer that you can buy employee loyalty and retention with perks, acknowledging good performance and even letting them bring their pets to work. Yet employees still leave. This executive, like many other leaders, wondered how to solve the revolving door issue. Here are three reasons why retention strategies do not work.
1. Treating the symptoms not the cause
Often with retention strategies, companies are treating the symptom and not the cause. Symptoms, such as mismanagement, lack of recognition, and a bad working environment may immediately come to mind as problems, which need to be corrected. However, completing a thorough root cause analysis may reveal what the real issue is. Root cause analysis is a problem solving method to identify the actual cause and remove it so that any final undesirable event does not reoccur. Leaders must dig below the surface to understand the business cause for retention issues and involve employees in developing the solution.
2. No culture of accountability
As the SVP HR (mentioned above) started a deeper probe on why employees were leaving, one of the root causes identified was managers and leaders were not accountable for employee retention. The CEO and senior leaders thought that attaining the right financial results were their most import task. Implementing retention programs was a task of the HR department. The example below quantifies turnover costs financially,
“Let’s assume the average salary of employees in a given company is $50,000 per year. Taking the cost of turnover at 150% of salary, the cost of turnover is then $75,000 per employee who leaves the company. For the mid-sized company of 1,000 employees who has a 10% annual rate of turnover, the annual cost of turnover is $7.5 million!”
The cost of time to find replacement employees and lost productivity are real costs to the employer. The SVP HR started to work with the CEO and his immediate staff to hold leaders accountable for employee retention. Performance measurements and rewards, such as bonuses, were established for all leaders to hold them accountable for a specific retention level. Consistent accountability for employee retention must come from the top and be ingrained in the culture. Little focus from top executives means the continuity of retention programs will not succeed.
3. Quick fixes
Too often retention programs are developed as a quick fix to turnover problems. A department director, experiencing a 15-20% turnover rate, conducted focuses groups with the help of human resources to determine what the problem was. “Communication and lack of staff meetings are reasons people are leaving” was the group’s feedback. The manager quickly instituted a weekly newsletter and bi-weekly department meetings. The turnover continued to escalate. What the department manager and HR failed to address is that two long-term department managers in the department were not trusted and exhibited bad leadership practices. Quick fixes and short-term solutions do not work as employee retention tools. Creating the right work environment, training managers to be good leaders, recognizing employee accomplishments and making employees feel valued are hard work. These are retention solutions, which must be sustained on an ongoing basis.
Often employees are viewed as expendable commodities. Little time is invested in developing retention programs that work. If a company has an ineffective employee retention program, senior leaders need to look at more deeply rooted issues, such as those identified above, to find solutions.