Why retention is important

While we should celebrate the departure of a valued employee as a recent graduate of our program, it is imperative that we treat retention as a major goal for our teams.

We have all felt the pain of departed colleagues. Attempts to quantify the financial burden of departures range everywhere from fifty percent to two hundred and fifty percent of an employee’s salary. Since everyone knows that the departure of a valued team member is a near term challenge for any team, fully defining this loss is often curtailed as teams focus on hiring another team member to fill the gap. However, to fully address a problem we need to define all the facets, so that we can make educated decisions about how to face it.

1. Time is a finite resource and hiring consumes a large amount of a manager’s time, but it also takes time from Human Resources, time from team members spent training the new employee, and time from the new employee getting up to speed. It is important to acknowledge that some resources, time included, cannot be regained except through more careful future action to conserve it, while under the burden of the already lost resource. While a department can request additional budget, time lost is always a loan against future time, with interest. In some ways, this makes time a more valuable commodity than budget.
2. Seniority is another finite resource, one used to preserve experience, organizational knowledge, historical knowledge, and mentoring capability. In a manner similar to time, a team can’t regain seniority through action, they can only reclaim seniority by saving it in the future while operating with a reduced level of seniority until it is accrued again. Prioritizing the retention of seniority in the first place is the only way to minimize the loss of this resource.
3. Reputation is yet another finite resource. For the purpose of this handbook, we can simply define reputation as being built by positive interactions and lost by negative ones. Companies from small to large have an external reputation, observed by customers, business partners, and potential hires. If your business partners or customers are constantly working with new or disgruntled employees, how likely are they to consider your company as a stable employment opportunity? If a potential hire lives in the geographic region of your company, what is your external reputation as a member of the community?
4. Each team and team member also has an internal reputation. In a company trying to build a culture of valued employees, an incongruous lack of retention efforts undercuts this culture and destroys the reputation of whomever is pushing the culture as well as the team leader letting employees go. Managers lose reputation each time HR conducts a negative exit interview, and each time HR expends time to help hire an employee only to have them leave a short time later. Team members observe these reputational changes when they decide which team they want to work with or for. Once again, reputation is the kind of resource where regaining it is more expensive than keeping it.
5. Last of all, morale is gained as a combination of innumerable interactions, achievements, even failures as your team bonds over time and gains confidence in their value and capabilities. Morale results in teams being comfortable taking the right risks at the right times, while garnering pride in their ability to work well together. The path to a high morale team suffers a setback every time changes are made to membership, which of course means that retention is a requirement for high morale.

Notice in each area that the costs we can’t easily define are the ones that are also the most difficult to reclaim. A manager can also make a business case for additional budget, but there is no executive to request reallocation of time, reputation, or seniority. A failure to achieve retention is not simply a loss of productivity until a new employee is hired with some fiscal cost of re-hiring. Every employee lost is a permanent loss of time, reputation, and seniority that cannot be reclaimed.

In addition to the losses accrued as a failure to maintain retention, we also gain a few negative factors. Stress increases as employees are left with the same workload, less employees to complete it with, and the debts discussed earlier. Stress leads to burnout… which leads to further retention issues.

Having defined retention as more than simply the fiscal or productivity cost, we have a better idea of why it is so imperative that we take serious action to retain our employees. Retention also leads to positives beyond ‘not suffering pains from low retention’. Some of these benefits are straightforward, for instance not gaining a bad reputation usually leads to gaining a good reputation. Not losing time, or seniority to retention means that you’re gaining this resource. There are other areas that also need to be specifically identified as positives of maintaining retention.

1. First and foremost, retention builds a culture of valued employees. A culture of valued employees is a multiplier for your internal and external reputation. It also results in higher team morale, as conflict can be handled in a healthier manner from employees who feel valued.
2. Higher morale leads to reduced stress. Reduced stress and steady workload results in less burnout.