What’s Wrong With The Retention Effort At Your Company… Pretty Much Everything!

The #1 CEO challenge is retention, but few know how many likely quits were identified and prevented.

Note: This article has been designed for either a quick scan or a 5 minute read

You Better Act Now

It’s puzzling to me why corporate leaders routinely tolerate a retention approach at their company that has had “pretty much everything wrong with it for many years.” And if you think that a great retention program isn’t necessary because you think your employees are unlikely to leave. You should now know that recent turnover research has revealed that in North America, more than half of the surveyed employees plan to look for a new job in 2021.

Retention May Be The Worst Managed Strategic HR Program 

During my nearly 25 years of retention research and practice, I have discovered that painfully inadequate “soft retention programs” are still extremely common. Consistent underperformance should be a major concern to HR and Talent Leadership. “Retaining existing talent” is literally the top management challenge listed by CEOs (79% chose this issue as part of the CEO Confidence Index). Unhappiness with retention will skyrocket immediately after your CEO is told that up to 75% of all of their costly turnover is preventable without spending a lot of money (WOW!).

Also, if you’re going to provide retention solutions to your CEO’s #1 most difficult challenge, I recommend that you start by developing a list of common strategic retention program weak points. I call these “What’s wrong flaws.” It’s important to note that as a contrast, I have also periodically included a retention program, “Critical Success Factors” (a.k.a. CSF). CSF’s are the often-omitted positive retention factors that literally cause a retention program to succeed wildly. However, when I have conducted an audit of a retention program, I almost universally have found “way too many” of the negative “what’s wrong flaws.” And very few of the positive “Critical Success Factors.” So that, at least from my perspective as an HR and talent management thought leader, I have concluded that retention programs are literally the worst managed of all of the high-impact HR programs. 

The remainder of this article lists and then highlights each of the top 10 most impactful “What’s Wrong” retention program flaws.

The Top 10 “What’s Wrong Flaws” That Are Often Part Of Many Retention Programs

This list primarily focuses on the common and most damaging top 10 “what’s wrong flaws.” However, when appropriate, during the narrative portion describing each factor, I have also briefly mentioned the related “Critical Success Factor,” which is often the opposite of the what’s wrong flaws. The top 10 retention program flaws are listed below, with the most damaging flaws listed first.

What’s wrong flaw #1 – The business impacts of retention are not converted into dollars 

A #1 Critical Success Factor for any quality retention effort is the continuous building of a business case. The convincing arguments and the business impacts of retention are revealed. However, as part of the business case, it’s important to realize that almost all retention functions severely underestimate “the real costs of losing an employee.” A related flaw occurs when the retention program leader fails to convert traditional retention program outputs into their more understandable dollar impact on revenue. Of course, it’s important to understand how to convert retention outputs and costs into dollars. That conversion will make it easy for all managers to compare the overall business impacts of retention side-by-side with the already dollarized program outputs from other business functions and programs. For example, most simply reported that Mary left, which meant we have a 1% turnover rate. However, this type of reporting leaves out the dollar impacts of losing a top performer (Example: – we estimate that Mary’s departure will cost us up to $3 million). Hopefully, everyone can see how dollarizing your retention results will be much more likely to energize managers to spend more time retaining them.

I recommend that you start the cost calculations for losing Mary by using a standard salary multiplier. These salary multipliers range from .5X to 3X.  I include many more cost factors in my calculations. I find that the 3X calculator is best. So given that Mary’s salary was $400,000. Three times her salary would mean that Mary’s departure will cost us at least $1.2 million in lost revenue next year. However, there might be some added turnover-related costs that should be added and then converted to dollars. 

Start with a likely loss in sales performance based on the assumption of our weak recruiting process. When we hire Mary X’s replacement, we will likely have “to settle” on a second-tier average performing candidate. We know that the performance differential of a top salesperson can be between 4 and 10 times higher. So, using a higher number, we can expect that our newly hired average salesperson will sell 10 times less than Mary X did. Since Mary sold nearly $3 million worth of merchandise, it means that the new hire will likely only sell $300,000 worth of merchandise their first year. This startling performance differential will mean that settling for an average performing new hire will mean that we will lose much more, which means $2.7 million in lost revenue next year ($3 million in Mary’s sales, minus $300,000 in sales for the new recruit = $2.7 million in lost sales). 

You can also include the real costs resulting from the lost team production. The position was vacant every day, and the cost of the many hours of the manager’s time spent on recruiting and retention. 

Finally, you can also include the lost value due to the many positive team and people impacts (like teamwork, best practice sharing, higher engagement, and improved candidate attraction and leadership development) that will no longer likely be provided. The replacement salesperson, as a rookie, won’t likely be adding anything of value in these “soft skill” areas. 

So, take the initial salary multiplier loss calculation and add the value lost in each of these other areas due to Mary’s departure. These expanded loss estimates could raise the total cost of losing Mary X up to $3 million. And since a year’s worth of retention impacts will almost always reach into the millions of dollars, everyone involved should automatically realize that retention is adding great strategic value.

What’s wrong flaw #2 – Rather than a formal retention program, there is only an ad hoc effort

Another Critical Success Factor is that the retention program itself must be permanent and formally supported with an annual budget. Unfortunately, when I examine the administrative structure, I usually find a “what’s wrong flaw,” often the case when a retention program is run on an ad hoc basis.

With no full-time dedicated expert leader that is 100% accountable for the program’s results, another common flaw is that retention programs are periodically eliminated. So the retention function literally disappears for years when turnover ceases to be a major problem. Unfortunately, this lack of continuity often results in data loss, best practices, and key staff/leadership whenever the program periodically shuts down.

What’s wrong flaw #3 – The damaging assumption of complete employee loyalty

Another key “what’s wrong flaw” occurs when individual managers operate under the assumption that all good employees are automatically loyal. Perhaps managers and executives are drawn to this “Pollyanna assumption” because they both have big egos. By surveying your managers, you can find out if they have bought into this damaging “everyone loves me assumption.” It’s also important to realize that operating under this “ loyalty” assumption will make it extremely difficult to get your managers to act proactively when retention issues arise. Another possible step to consider is periodically reminding individual managers what percentage of their team departed during the last year. This data may also help them to eliminate their currently held but damaging “employee loyalty assumption.” 

What’s wrong flaw #4 –– The retention process is not data and metrics-driven

You can usually attribute most of the low business impacts that most retention programs routinely produce because most current programs operate primarily using emotion, intuition, and outdated practices. Instead, what they should be doing is using the fourth Critical Success Factor – maximize capabilities and results by having a 100% data and metrics-driven retention program. Unfortunately, to move into a more successful model, retention efforts must transition “from an art into a science.” And using the scientific approach means that all significant decisions must be made using data. Retention data should be available in at least these five areas. Including, who is regrettable, the cost of losing them, who is at risk, the likely causes behind this turnover, and the most effective tools for countering each individual turnover cause. Some success metrics include the dollar impact of turnover on revenue and the percentage of employees at risk of leaving (we know that up to 95% of flight risks can be preidentified), rather than using a single broad turnover metric, like the percentage of all employees that left. You should also include an individual metric covering new hire turnover, regrettable employee turnover, and diversity turnover. I also recommend a metric revealing your employees ending up (on LinkedIn) and performance turnover (the percentage of departing employees rated as top performers). 

What’s wrong flaw #5 –– “Regrettable” retention targets are not identified and prioritized in the business case building

Another Critical Success Factor is the prioritization needed so that you don’t waste retention efforts on low-value employees who are not likely to leave. Therefore, you should avoid the significant “treat everyone equally flaw,” which occurs when a retention effort purposely treats every employee the same. Prioritization should replace treating everyone the same because some key individual employees (and any employee in some key jobs) are much more expensive to replace. These higher value employees should be labeled as “regrettable.” Meaning that if we lost them to turnover, we would deeply regret their loss. And of course, among that initial list of prioritized “regrettable employees.” You should further prioritize and only use your retention efforts on those few regrettable employees who are also highly likely to leave within the next six months. And finally, among this remaining group of regrettable’s that are likely to leave, you should further prioritize those who have primary turnover causes that can normally be easily and reasonably resolved. For example, you should give an even higher priority to a regrettable “flight risk employee” whose primary turnover cause is something that can easily be mitigated, like their work schedule. However, if the individual employee’s primary turnover cause was that their family is currently actively moving out of state. That employee would be a lower priority because there is only a small chance that the primary turnover cause can be reversed. Maximize retention’s overall impact by prioritizing retention targets to handle first, with the best retention consultant, the most resources, and the best retention solutions and tools.

What’s wrong flaw #6 ––The role and the involvement of the manager are not fully maximized

The Critical Success Factor here is maximizing every manager’s understanding of and commitment to retention. While at the same time providing each manager with the freedom to use or not use retention solutions that use only the retention solutions that best fit their team’s situation. Unfortunately, it is fairly common to find retention strategies and solutions that are forced upon managers. And this lack of freedom often causes many managers to lower their commitment and involvement in retention purposely.

Being forced to use a required retention approach may also cause individual managers to lose any feeling of ownership that they might have developed for their retention problem. Unfortunately, management involvement will also reduce whenever the managers don’t fully understand the important role they can only play in retention. Managers must accept their role in each important retention area, including business case building, accurately identifying who is at risk of leaving, the key turnover causes, and which retention solution or tool is the most appropriate for eliminating this employee’s strongest individual turnover cause. 

However, when managers are not provided with the necessary educational materials on retention. Many managers will never fully realize the significant impact they have on creating or reducing the causes of turnover. For example, managers can and do impact as many as 75% of the common turnover causes. Therefore, there needs to be an additional process for identifying and fixing bad managers. In addition, the retention program should be taking proactive actions to increase the usually limited time commitment that most managers have assigned to retention. Unfortunately, their time commitment is usually quite low because many managers think that the retention staff should do retention work. Finally, it’s a major flaw if you fail to make each manager fully accountable for producing stellar retention results. Maximize their accountability by measuring, recognizing, and rewarding managers for great retention and productivity.

I call the next 4 flaws “The Big Four” because they rank among the most powerful retention solutions. 

What’s wrong flaw #7 –– High flight risk employees are not pre-identified

Most retention efforts try to keep every single employee. So, they offer everyone extensive retention services. This is a big mistake because not every employee has a high probability of leaving. And some (like those a year or two away from retirement) have no turnover risk. So, an essential step for prioritization is based on whether you are a “flight risk.” Begin with a goal for determining which of the “regrettable employees” have a high probability of leaving within six months. Some firms use sophisticated algorithms to predict their flight risks. While others simply develop an informal risk factor checklist (click here for an example). This checklist covers the “at-risk indicators” that have historically proven to be precursors of upcoming turnover in this job. Also, managers should be educated on the importance of pre-identifying who is at risk of leaving. This early warning provides managers with enough time to have a reasonable chance of convincing the “flight risk employee” to stay. Or with enough time to find an equal replacement. Recently the success rates of sophisticated efforts to “identify flight risks” have improved to the point where successful identifications are now reaching between 80% and 95% accuracy.

What’s wrong flaw #8 –– The actual turnover causes were not identified in the exit interview

Retention efforts can’t be very effective without the Critical Success Factor of knowing the precise reasons why each top priority retention target has left. Unfortunately, most turnover cause identification efforts for departing employees rely on the highly flawed standard exit interview. Exit interviews almost always produce general and non-offensive answers. In part because the departing employee is often reluctant to be fully honest. Because they feel that they may still need a positive reference from their manager. Others consciously soften their answers covering negative issues because they don’t believe anything impactful will actually happen due to their most serious exit interview complaints. So, it’s a serious error to rely heavily on exit interviews for regrettable employees. Instead, I strongly recommend that you utilize the post-exit interview. This delayed interview approach purposely postpones the asking of the standard exit interview questions until at least 3 to 6 months after termination. Even a simple two-week delay before holding the post-exit interview will improve the accuracy of received answers by 40%. I also recommend that the manager uses a third-party contractor to conduct the interviews. Because a non-company employee conducts the interview, the former employee interviewed is more likely to be more brutally honest about the factors that caused them to quit. 

What’s wrong flaw #9 –– No proof of the effectiveness of retention solutions

Once you accurately identified the causes of turnover for an individual employee. The Critical Success Factor is to apply only the retention solutions and actions that have been proven with data to be effective for resolving each individual turnover cause. Most retention efforts frequently have no data or even a process for proving which available retention solutions work extremely well (e.g., stay interviews). They also likely don’t know which retention solutions routinely fail (e.g., retention bonuses). And finally, I have found that in over 95% of the “what’s wrong” retention functions.” The overall list of the frequently applied retention solutions simply doesn’t even come close to matching up with the corresponding top causes of turnover that have been identified in this job family. And when managers don’t know which solutions have a proven high success rate. Unfortunately, you should realize that they shift to the trial-and-error selection approach. Or they use the primary fallback retention solution, which is “give them more money” (even though pay ranks 9th on the key drivers of retention list). Incidentally, most effective retention solutions are never applied across the board, where everyone gets the offered retention solution (like a raise). Instead, what is needed is a personalized retention plan that addresses each employee’s unique set of likely turnover causes. 

If you’re interested in the most impactful retention solution that has historically been the most effective, it is the stay interview. Stay interviews discover and then reinforce the reasons why an employee stays with this company. And for those that want development opportunities, the best retention solutions have been part-time job rotations and/or giving the employee their personal development budget. And the retention solutions that are often used, even though they seldom work, include retention bonuses (as opposed to a project completion bonus). Also, realize that minor pay raises that are applied across the board also almost never work. 

And the final learning related to turnover causes. When you are trying to retain an employee with multiple reasons for leaving, you will need to customize your retention solutions so that there is a different effective solution for each major turnover cause that this “at-risk employee” has.

What’s wrong flaw #10 ––Frequently, there are several noticeable program omissions, including diversity retention, getting “that will work feedback,” and the omission of Stay interviews

Almost every major organization now spends millions on recruiting diverse employees. However, after they start work, there is hardly ever a follow-up diversity retention initiative that keeps this hard-fought-over diversity recruits from soon walking out the door. A second frequent omission is failing to show your retention solutions to the targeted employee so that they can give you their “that would work” feedback. To ensure that the solutions offered will be enough to stop this employee from leaving. A third common omission involves failing to have a data-driven “recruiter blocking strategy,” which proactively uses data to minimize recruiter access to our employees. And finally, the absence of the widespread use of periodic stay interviews on each of our “regrettable flight risks” is, of course, a huge mistake. In part because stay interviews are the retention solution that is the easiest to implement. But also, because these “why do you stay” pre-exit interviews are the cheapest, the easiest to learn, and they produce results almost immediately, making them superior to all other preemptive retention solutions. 

Final Thoughts

Everyone should know that the importance of retention is increasing every day. First, because top CEOs have declared it to be their #1 strategic talent issue. But it is also increasing in importance because your employees see that there are millions of open opportunities to choose from every day. Many employees already have recruiters that are actively pursuing them every day. Retention is growing in importance because the pandemic has been winding down. Those in the US have been experiencing the highest US turnover rate in over a decade. And finally, expect retention problems to explode soon because a “Turnover Tsunami” has already been predicted to start once this current pandemic finally comes to an end.

Author’s Note 

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About Dr John Sullivan

Dr John Sullivan is an internationally known HR thought-leader from the Silicon Valley who specializes in providing bold and high business impact; strategic Talent Management solutions to large corporations.

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