Not All Turnover Is Bad — Why Keeping Every Long-Tenure Employee May Be Overrated

Screen Shot 2015-05-07 at 9.53.39 AMThis is “a think piece” — it is designed to cause you to rethink any preconceived notions that you might have that the retention of long-tenure employees is always a positive thing.

As turnover rates for employees continue to increase, there seems to be an almost universal agreement among HR and managers that “we must do something” to retain our employees. But take a step back and think about it: should all employees be kept or just the ones who currently and in the future produce high value?

In particular, should the employees with the most tenure be automatically kept, even though they may be expensive, and in some cases, they may be one of the primary roadblocks to corporate change? In fact the goal of this article and my many years of research on the topic is to identify the top potential issues that can be attributed to long-tenure employees.  

Some of the weakest-performing firms including Xerox, General Motors, Pitney Bowes, and Kodak all have a high number of years of average employee tenure and extremely low employee turnover rates. Wal-Mart revealed the performance plateauing and the diminishing ROI of longer-tenure employees in this quote: “the cost of an associate with seven years of tenure is almost 55 percent more than the cost of an associate with one year of tenure, yet there is no difference in his or her productivity. Moreover, because we pay an associate more in salary and benefits as his or her tenure increases, we are pricing that associate out of the labor market, increasing the likelihood that he or she will stay with Wal-Mart.”

My overall message regarding long-tenure employees is simple: don’t be naïve and assume that long tenure and seniority is always a positive thing. In fact, it might be a good rule of thumb assumption to start with the premise that initially, a lack of tenure can certainly hurt a new hire’s productivity and then tenure may pay off between 5 and 10 years, but after that, performance and an employee’s ROI have a significant probability of declining.

Research Reveals Negative Impacts of Long Tenure

Although there isn’t much publicly available corporate research on the negative impacts of long tenure, internal research by Google found that even with all its great perks, it identified the very real “sinking effects of tenure on satisfaction.” Fortunately, it also learned “that employees who self-identify as more grateful are largely immune” to this negative effect that tenure has on employee satisfaction.

The problems associated with long tenure also occur outside of individual employee performance. For example, one study of scientific teams by Katz and Allen showed that team performance increased after 1.5 years of average team tenure but by five years it “declined noticeably.” A study of CEOs by Luo, Kanuri, and Andrews demonstrated that after five years of CEO tenure, a “company’s performance diminishes, no matter how united and committed the workforce is.”

Don’t Generalize; Instead Find Out for Each Individual Employee

Avoid stereotyping and don’t put every long-tenure employee into the same category. Look at individual cases in order to find out which if any of the many negative factors listed here may apply to an individual long-tenure employee and if they do, whether they can be turned around. And to those who worry about age discrimination, note that by “long-tenure or long term,” I’m not in any way referring to an employee’s age (a 28-year-old employee can have 10 years of tenure), but instead, I’m focusing on their years of tenure at a single company.

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The Top 10 Reasons Why You Shouldn’t Keep Employees With Long Tenure

  1. Performance may decline — there is ample data showing that CEO performance can decline with tenure, and the same is probably true in many of your jobs. Whether it be obsolescence, boredom, extensive self-confidence, slowed learning, or burnout, there are many proven examples where employee performance flatlines or even declines after a certain number of years. Find out when and in which jobs where performance reaches a peak at your firm. You also have to be careful about rewarding and celebrating these individuals because of their tenure, because “years of service” and seniority systems might run counter to the “performance is everything” message that executives are trying to send.
  2. Innovation may decline — in a world where innovation may have a higher ROI than employee productivity, see if innovation declines with tenure. Seek out data to see if within your firm the rate of innovation declines as tenure increases and even if there is a point where it completely ceases. Employees may have an “innovation span,” which declines with tenure or with an increase in frustration resulting from not being able to implement new ideas.
  3. An entitlement mentality may develop — long-tenure employees may develop a sense of entitlement and an attitude that they “have put in their time” and thus have “earned” job security and special treatment. This occurs even though they have been rewarded over time for their historical contributions. This entitlement mentality may cause them to develop a negative attitude, which may impact other employees.
  4. They may become resistors to change and defenders of the status quo — long-tenure employees may be the strongest and most powerful resistors to major change because they are comfortable with the past. Some call them “defenders of the past.” Because they have built up power, relationships, and internal political connections, they may be the most effective blockers of change in the organization. Because they have a long history with the organization, they are often the first to bring up the excuse that “we tried that once, and it didn’t work” as a reason not to try new things again. In addition, long-tenure employees may have built up cliques and “good old boys’ networks” which may act in unison to resist change.
  5. They may be resistant to technology — in a world where technology solutions have a high impact, they may use their power and relationships to avoid or slow the uses of new technology. Even when new technologies are adopted, these individuals might not use it.
  6. They are likely to be risk adverse — they may have more interest in job security, retirement, and incremental changes, so that their decisions may be overly slanted towards low risk options. It is highly unlikely that as leaders that they will “bet the firm,” even though that may be the best option in a highly competitive world. Their unwillingness to take risks and invest in “big bets” when radical change is necessary may unfortunately cause others (especially innovators) to reduce their risk profile also.
  7. A potential decline in skills — long-tenure means long-term employment but it doesn’t guarantee that the employee has sharp or up-to-date skills. The “you can’t teach an old dog new tricks” rule simply isn’t true, but overconfidence may lead them to fail to devote the necessary time in updating their skills and capabilities. Having long tenure but limited or no recent upward movement may mean that this individual has plateaued and that they do not have the “future skills” that are necessary for continued upward mobility. Whether the job requires physical or mental skills, it is wise for executives to assess the “career trajectory” of both long- and short-tenure employees. Employees in customer service may be the most likely to plateau in their performance and skills.
  8. They are likely to have a NIH attitude — because they have been at one firm for so long, they may discount things that have occurred in other firms. This “but we are different” mantra may cause them to reject proven best practices because they were “not invented here” (NIH). This attitude may lead to excessive “trial-and-error learning” and the avoiding of external practices that can be adapted quickly and effectively.
  9. Groupthink and an internal focus may occur — long-tenure employees may be way too satisfied with the status quo to the point where they develop groupthink. This may cause them to be inward focused and be less aware of and fearful of external competition. They may even reduce their anticipation of and planning for the many changes that are occurring in external environmental factors and the competition. If the organization itself has been around for many years and it has successfully overcome numerous obstacles, the overconfidence of long-tenure employees may cause them to influence executives and employees to the point where together they do not sufficiently fear external threats.
  10. A possible negative impact on recruiting and retention — candidates may witness a “you are new so you don’t know anything attitude” because many long-tenure employees invariably introduce themselves with “the number of years they’ve been with the firm.” Candidates may be more reluctant to accept jobs when they encounter this rookies-don’t-know-anything attitude, and they may post their negative experiences with it on social media sites, driving others away. Recent hires will also experience this “we know better” attitude and that may force them to quit prematurely or reduce their performance and frustration. To make matters worse, when given the opportunity to hire new people, they may subconsciously hire “B players” because these lower potential individuals will be less threatening to them.

Additional Reasons Why Long-Tenure Employees Can Be Problematic

If the above reasons to be aware are not enough, here are 15 additional issues to track.

  1. They defend the culture right when it must change — my work in the corporate world has revealed that long-tenure employees are the most ardent defenders of the corporate culture. Unfortunately in a fast-changing world where revolution is everywhere, the corporate culture must continuously evolve. Those that continually remind others that “this is the way we do things here” may be the anchors to the past that are most detrimental to your change initiatives and the firm’s long-term success.
  2. Long-tenure employees may be the most expensive — in most organizations, a long tenure means a series of pay raises that may result in them being paid the highest salaries and the maximum amount of vacation. If you’re trying to create salary savings, long-tenure employees are likely targets if their performance is at such a level that a junior employee can do the job at a similar performance level. If their performance is superior, there can still be a positive ROI, despite their higher salary costs. If they are merely “coasting” until they qualify for their pension and retirement, their costs to the organization may be even higher. Their value may be justified if they have long-term customer relationships, provided of course that those contacts remain customers.
  3. VUCA requires adaptability — in a turbulent VUCA world, adaptability and speed are critical for success. Unfortunately, long-termers who are grounded in the past may not want to or have the capability to adapt to a fast-changing world. Research by the Harvard Business Review determined that “You can’t have an agile company if you give employees lifetime contracts — and the best people don’t want one employer for life anyway.”
  4. The best don’t want to stay for their entire career — the best employees may desire to continually grow, learn, and be challenged, and as a result, they don’t even consider the idea of staying in a single firm for their entire work life. In some cases, these long-tenure employees may stay at a single firm for the wrong reasons, either because they don’t have the initiative to look for a new job or because recruiters at other firms simply don’t find them desirable. If the company is in trouble, the best are likely to have choices and to leave early, thus unintentionally increasing the percentage of employees who are mediocre.
  5. There may be diversity and tolerance impacts — individuals from different generations may be less tolerant of diversity and the differences found in international employees. They may look down on and even refuse to work with employees who come from new generations. Even the perception of the existence of “a good old boy network” can scare away “new generation” applicants and recent hires who now demand a high level of tolerance, transparency, and diversity.
  6. They may not be forward-looking — they may be so comfortable with the past that they stop being forward-looking. This may cause them to fail to see the upcoming obsolescence in what they currently do, and it may reduce their interest in developing forecasts and future plans that vary from the current or past ones.
  7. Their learning may slow — Google data has found that learning ability is a universally critical factor in employee success in a fast-changing business world. Even though long-tenure employees may be able to learn, they may assume that they already know it all or they may simply learn in a way that is ineffective in a social media world. In addition, the fact that they are comfortable and complacent may reduce any interest in further development. Their lack of interest in rapid learning may unfortunately cause them to fail to support it in others, which may cause other employees to unnecessarily reduce their learning speed.
  8. Being in leadership positions increases their negative impacts — because long-tenure often leads to promotion into manager and leadership positions, you must consider the possibility that their decision-making may reflect an over-reliance on the past. Given that they probably hold formal organizational as well as political power, their ability to block and slow change maybe even stronger than you think. They are also more likely to be comfortable with a command-and-control style of management, even though a freedom and empowerment approach may be needed with a modern workforce.
  9. Their speed may decline — speed and the ability to move quickly is essential in a fast-moving world. Long-tenure employees may have lost their sense of urgency and they may have simply lost their ability to move fast.
  10. They may be satisfied with past successes — just like in sports, people who have won previous championships may simply become satisfied with a firm’s past successes. A “been-there, done-that” attitude toward winning and industry dominance may lead to mediocrity and being satisfied with past victories. To further complicate matters, they may also be overly optimistic about the future, even though the firm’s capabilities have severely declined.
  11. Their stagnation may limit the movement of others — if their performance and learning have plateaued, it is highly likely that long-tenure employees will no longer be selected for any new internal movement or promotions. Their lack of movement may serve as a type of roadblock that may limit the opportunities of other still-growing employees below them to move up, which may frustrate those who feel that they have earned the right to move up within the team.
  12. Their high engagement may not be related to performance — because they are fully bought in to the culture, values, and the status quo, they are likely to be extremely loyal and engaged. However executives must consider the possibility that their high engagement level will not correspond with higher performance.
  13. They may mentor and coach others in the wrong direction — even if they are well intentioned, they may inadvertently coach and mentor new hires and developing leaders “in the old ways.” This might confuse employees when corporate leadership is saying one thing and these long-tenure employees are sending a different message.
  14. They are more likely to resist M&As — mergers and acquisitions are a frequently used and needed tool for increasing corporate growth and market share. But because M&As invariably disrupt the corporate culture and force major changes, long-termers are likely to resist any M&A move. And because of their power base and influence, the resistance is likely to be effective even though an M&A might be the best economic move for a struggling company. And if one does go through, long-term employees are likely to inordinately insist that the traditional ways and processes remain dominant.
  15. They may be hard to get rid of — even when executives realize that long-time employees need to go, they often proved to be the hardest to release because they have learned how to use power and influence within the organization. Because of the long tenure, they know how to positively influence performance appraisals, forced rankings, and layoff lists. And if they also happen to be over 40, they know that age protections make it even more difficult to release them. And finally, their salary costs may be so high that other firms may have no interest in recruiting them away.

Final Thoughts

During my tenure as chief talent officer at Agilent, I immediately noticed that the strong resistance to change came primarily from proud long-tenure HP employees. But unfortunately, almost every corporate leader there thought they were an asset. Ever since then, I find that it is problematic to write or talk about the possible negative impacts of long tenure, because of the guaranteed high volume of negative responses that even mentioning the possibility will generate from long-tenure employees and those who defend the aging population.

In case you think I have a bias for youth and inexperience, note that I am 67 and I have worked at the same organization for 35+ years. So for the record, I agree that you should never stereotype and lump all long-tenure employees into a single positive or negative basket. What I do recommend is that firms look at individual jobs and employees to see if there is an inflection point or peak where on average, performance plateaus.

If you do find a plateau or a decline, it makes economic sense (given all the time and money that you have invested in these employees) to develop programs and plans to see if any decline in performance, learning, attitude etc. can be quickly reversed (as Google has found in the case of long-tenure employee satisfaction). Incidentally if you are interested, my original article, “Not All Turnover Is Bad, Celebrate Losing the Losers” highlights many additional reasons why some employee turnover can even be a positive thing for a firm.

Dr. John Sullivan, professor, author, corporate speaker, and advisor, is an internationally known HR thought-leader from the Silicon Valley who specializes in providing bold and high-business-impact talent management solutions.

He’s a prolific author with over 900 articles and 10 books covering all areas of talent management. He has written over a dozen white papers, conducted over 50 webinars, dozens of workshops, and he has been featured in over 35 videos. He is an engaging corporate speaker who has excited audiences at over 300 corporations/ organizations in 30 countries on all six continents. His ideas have appeared in every major business source including the Wall Street Journal, Fortune, BusinessWeek, Fast Company, CFO, Inc., NY Times, SmartMoney, USA Today, HBR, and the Financial Times. In addition, he writes for the WSJ Experts column. He has been interviewed on CNN and the CBS and ABC nightly news, NPR, as well many local TV and radio outlets. Fast Company called him the "Michael Jordan of Hiring," Staffing.org called him “the father of HR metrics,” and SHRM called him “One of the industry's most respected strategists." He was selected among HR’s “Top 10 Leading Thinkers” and he was ranked No. 8 among the top 25 online influencers in talent management. He served as the Chief Talent Officer of Agilent Technologies, the HP spinoff with 43,000 employees, and he was the CEO of the Business Development Center, a minority business consulting firm in Bakersfield, California. He is currently a Professor of Management at San Francisco State (1982 – present). His articles can be found all over the Internet and on his popular website www.drjohnsullivan.com and on staging.ere.net. He lives in Pacifica, California.

 

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12 Comments on “Not All Turnover Is Bad — Why Keeping Every Long-Tenure Employee May Be Overrated

  1. I once worked in an organization with historically low turnover. While the stability and institutional knowledge was great, some forward-looking people I worked with saw some dangers down the road–namely, most of the employee cohorts were of the same age and were in danger retiring simultaneously.

    Now the retirement age wasn’t for another 10-15 years (at the time I was there), but we started planning for a huge loss of manpower and institutional knowledge which was to occur all at the same time. It was quite challenging.

    1. The danger with that is in many jurisdictions you’d end up paying huge severance claims. In Canada severance pay posted by the government are only the minimums. The employee tends to challenge it in court where the judge would take into consideration the age, years of service, and employability of the employee and if he’s not desirable to you then how desirable would he be to your competitor? That’s the rub. You’d be paying out hundreds of thousands in severance payouts and at the end of the day you’ll end up with an inexperienced work force. So long as they are producing there’s very little incentive to call in the lawyers and dealing with legal costs and buyout costs.

  2. This post is going to be very difficult for long-tenured employees to read, but I find every point you make to be valid. Another problem with long-tenured employees is the generational conflicts with millennials, the largest generation in the workforce. Young millennial tenure is around 2-3 years, and 5 years for those around 25-30 years of age. Due to their short tenure, they tend to be the complete opposite of long-tenured employees with the negative qualities listed. I work in IT, where the average developer age is 28. If a company fails to identify the negative impacts of long tenure, they risk hurting their bottom-line and scaring away millennials.

  3. I think that is tremendously wise advice to treat each employee as unique and to not generalize.
    My question in regards to tenure, is what is the impact of talent mobility within an organization? Does that reset the clock, as it were?
    Thanks,
    Jim

  4. There’s nothing written here about long tenured employees that couldn’t just as easily apply to short tenured employees, so why not just make the decision based on performance and ignore tenure, and not propose a list of stereotypes after cautioning people not to stereotype? People sticking around too long is a failure of management.

    I’ve also seen many a manager dismiss a long term employee and not realize how much they were handling until they left, and how much it all depended on their institutional knowledge.

    1. Agreed. Our management assessment of every employee is detailed. The long term employees became tenured because they are high producers and rewarded while short term employees were disengaged or chasing better pay elsewhere and often in a different industry.

  5. Jim D’Amico’s question seems pretty key to me. Does the research indicate a clock-reset, and if so under what circumstances?

    Also, if a company is have change issues, dumping the long-tenured employees feels like the quick, but ultimately unsuccessful solution. Change is difficult for everyone and is always going to be hard work.

    1. I did a quick search but couldn’t find anything on this myself. At a guess I’d say likely not, the issues that lead to dissatisfaction and the falling off of productivity are more likely to be longer term issues, and only partially counteracted by promotions or lateral moves.

  6. This is not a think piece at all…just a laundry list of things that could come up in the future.

  7. Thank-you Dr John Sullivan for a very well put together
    list. I am a business manager at a 90 year old civil engineering consultancy in South Africa. We currently have a problem of a very high turnover of millennials, especially those who are high achievers. We’re a top heavy organization with some staff in their 20s, few staff in their 40s and most staff approaching or in their 60s. I believe that certain attributes on your list are definitely causing younger staff to leave our firm in less than 1-2 years of joining. If I may identify key attributes from your list which I see daily:
    Point 3. They have developed an dreadful type of entitlement mentality which shapes the organizational culture to such an extent that it’s become acceptable behavior.

    Point 4. They defend the status quo so intensely that one almost believes that change is not possible or is bad.

    Point 10. They have developed a false sense of all knowingness; so when employees leave – say through irreparable damage to their psychological contracts caused by the firm’s rotten culture, they dismiss issues around retention and high turnover as, “ahhh there goes another one, just chasing money”.

    Add Point 1. They hold this belief very close to their hearts, “The culture never has to change, because if it worked in 1978, then it can work today. Why fix it if it isn’t broken”.
    Add Point 8. And this is my biggest issue with the long-tenured employees, is that many of them are only in positions of leadership because of the number of years they have spent at the firm and they have been promoted to their level of incompetence whereby holding tightly to their position of power, they are able to negatively shape the dreams, ambitions and ideas of the millennials.

    Add Point 11. Their stagnation limits the movements of others. They don’t progress anymore and hence there is no room (often) to promote younger and more promising and ambitious employees.

    Add Point 15. They are nearly impossible to get rid of. We have an employee who has been with the firm for 42 years and believes she now has the right to do whatever she wants in terms of her role. The problem is she heads IT and her attitude has become a massive risk – this is a tricky situation because of the perceived power she holds – treat her badly and the email server will mysteriously go down for a day…

    1. The big question is: have you vacated your own position and moved on so that someone younger takes your job? Why are you squatting? Move move move!

  8. Don’t you just absolutely HATE dealing with organizations that lack experienced employees? Banks are especially guilty of this – I’m constantly being put on hold as the rep seeks answers to every question.

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