6 Reasons Your Employee Retention Efforts Are Failing, and What You Can Do About It

As seen on LinkedIn Talent Blog.

The Department of Labor reports that employee turnover is now at its highest level since 2008. However, it’s a fact that most corporations spend more time on product inventory turnover than they do on employee turnover, even though employee turnover often has a much higher impact.

This inverse resource allocation occurs because the HR retention function often doesn’t spend time calculating and reporting the actual cost of turnover in dollars. It would be a revelation to most executives if they were provided with data on the tremendous cost of turnover (e.g. 2X salary costs times losing approximately 25% of their workforce each year). And, the cost of each employee who walks out the door is $100,000 worth of product.

The truth is, employee retention has the highest impact on corporate revenue and profit margins of any of the 22 different people management functions. Seeing these kind of turnover numbers would make it immediately obvious to executives at any major corporation that employee retention is at least a $100 million problem.

The obstacles to employee retention and how data can help 

The extensive use of data can help any retention effort identify “what’s working” and “what’s not working.” Some of the key turnover / retention problem areas that should be explored include:

1. Only a single broad turnover metric is reported, so problem areas are obscured 

Many retention efforts report only one single turnover metric, which is usually the percentage of all employees who voluntarily left last year. When a single turnover metric is provided, comparison numbers should also be included covering last year’s turnover, and the industry average turnover rate.

However, the single turnover percentage metric needs to be supplemented by an array of metrics covering each of the categories of “regrettable turnover.” Those categories often include the turnover rate and the dollar impact in key areas, including high performer turnover, critical turnover in key jobs, linchpin employee turnover, diversity turnover, turnover among obsolete/poor performer employees, turnover among hard to replace employees, and preventable turnover.

2. The real causes of turnover are not identified

Most organizations utilize traditional exit interviews to identify the causes of turnover. Unfortunately, even this basic cause of turnover information is often poorly managed and the collected data is seldom systematically applied to prevent future turnover. It’s also true that many exiting employees don’t tell the real truth during exit interviews (for fear of hurting their chances of getting a good reference).

A superior approach is called a “post-exit interview,” which after a delay of 3 – 6 months, identifies the causes of turnover in a telephone or email interview. The retention function should also utilize surveys of current employees to identify key employee motivators and frustrators and any barriers to productivity (because productive employees are more likely to stay). And obviously for each of the identified major causes of employee turnover, data needs to be collected and utilized to determine which specific actions best mitigate each cause.

3. There is no proof showing which turnover mitigation/prevention tools are the most effective

Once leaders know what factors cause turnover within their company, they must develop one or more solutions for each major cause. Unfortunately, at many corporations, it is a common practice to utilize retention solutions without a shred of proof that they actually reduce turnover. And once a tool is used, it is likely to be continually used for years without question because there is seldom any plan or timetable for determining if it remains effective.

And without continuous assessment, I estimate that up to half of all corporate turnover mitigating actions have no significant impact on turnover. And managers are not able to accurately choose between the various available tools because there is no data indicating the impact and the probability of success of each tool.

To remedy this problem, no new retention program should be rolled-out without first implementing a pilot program that reveals its “proof of concept.” In addition, all new retention programs should be required to gather results data and have a formal process for post-rollout assessment to determine if the new tool actually mitigated the targeted cause of turnover (e.g. does raising engagement scores reduce turnover?).

In the same light, whenever a major retention effort that is focused on a key employee fails (i.e. they quit anyway), there must be a failure analysis conducted to find out specifically why the complete intervention didn’t work. If you haven’t yet collected data, I have found that the most effective turnover prevention tools often include:

Stay interviews:               

  • A “what motivates you” survey
  • “You are overdue” lists
  • Challenge and learning plans

Post-exit interviews:

  • “What’s the best way to manage you” survey
  • A personalized retention plan
  • CEO retention visits to key employees

4. There is no process for identifying which employees are “a flight risk”

When it comes to the prevention of turnover, no single process has more impact than one that “pre-identifies which high-value employees are most likely to quit” in the near future. An effective early identification process is critical because it allows you to focus your retention efforts on those that are most likely to leave, and it provides you with sufficient time to mitigate the target’s turnover issues.

The retention function must develop a predictive algorithm that uses both internal and external factors and behaviors to predict who is the highest “flight risk.” Obviously, once a key employee is assessed to be at a high risk of leaving, their manager and their generalist must be alerted and then given retention toolkits that provide “how to’s” covering the most effective best practices in your company. Google, for example, has found that a feeling of being “underused” is a strong predictor that an employee is a flight risk.

5. Across the board, solutions don’t work for everyone and it wastes resources

Some employees will be at a point in their career where they will never consider leaving and many others will have a low probability of leaving. However, a majority of the “retention solutions” that are implemented in most corporations are applied “across all employees.” This is a mistake because first of all, applying solutions too broadly makes retention much more expensive.

And this “broad approach” may actually increase turnover among top performers. Because they may feel slighted because they were treated the same as the average worker when they feel that they should have been treated better because they are proven top performers.

It’s also true that not all employees face the same reasons for wanting to leave. So an across-the-board solution simply won’t affect those employees that are not facing that particular turnover cause. And finally, a retention solution applied to “all employees” equally won’t focus resources on the jobs and the employees that you have prioritized for retention.

A superior approach is to “personalize” retention solutions to fit the specific turnover issues and the best solution for each prioritized group or employee. Obviously, you can’t develop a personalized retention plan for every employee, but it makes sense to do it for those high valued employees that are flight risks.

6. Retention metrics have a historical view, but they should be forward-looking

In most organizations, 100% of the little retention data that is provided to executives is historical, because it reveals what happened last year. But in order to prevent upcoming turnover, executives need forward-looking “predictive metrics.” These add great value because they alert managers when there is still sufficient time to prevent upcoming turnover in their team.

Other predictive metrics should be developed to identify which employees are most likely to quit in the future, which jobs, months or managers are likely to soon have a spike/drop in turnover, and whether the causes of turnover and the effective solutions for each turnover cause are likely to change in the near future.

Final thoughts

After nearly 20 years of retention research and practice, I have come to the sad conclusion that retention is literally one of the most poorly managed of all business functions. Even though turnover in the US is at its highest level in nearly 9 years, most corporate retention leaders seem quite happy “flying by the seat of their pants.”

There are many reasons why retention is not scientific or data-driven. Those reasons include that you can’t attract already developed retention experts because you can’t get a college degree in retention, there is no professional retention society to capture best practices and I have found that there are no data based certification programs in retention, so it’s hard to learn retention best practices and metrics.

Because of the lack of data and formal training available in retention, I have found that as much as half of the retention actions taken by corporations simply have no impact. And some, like offering cash retention bonuses to those that have announced they are leaving, can actually have a negative impact on the company (because even though they stay, they are still unhappy and they will likely poison others with their attitude).

So my final advice is after you learn the lessons from this article, walk over to your corporation’s customer retention team (who are light years ahead of employee retention) and learn from those professionals how to quantify your impacts, and how to develop a scientific, systematic and data-driven approach to retention!

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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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