Understanding Available Retention Strategies: Are You Prepared for Turnover Rates to Double? (Part 1 of a 3-Part Series)

turnoverAs the economic turnaround picks up steam, turnover rates in many organizations are likely to skyrocket and recruiting replacement workers of the same caliber will be extremely challenging.

Study after study has confirmed the notion that many employees would have left their employers months/years ago had the option to do so been viable. The economic downturn, combined with the mortgage crisis, has forced many frustrated, disappointed, and unmotivated employees to stay put. The trend is not a new one and is consistent with past downturns.

While turnover rates are at an all-time low, they most certainly cannot be taken as an indication of a firm’s status as a desirable place to work.

Just as in years past, when job opportunities become more prevalent, employees will exercise their right to demonstrate just how much they appreciated the treatment they received throughout reductions in force, furloughs, clumsy mergers, travel freezes, and budget cuts. The level of animosity among many will render most traditional retention approaches ineffective.

Some studies indicate that as many as two-thirds of employees are ready to go. Unfortunately, few corporations are preparing today to handle the dramatic increase in voluntary terminations that will come tomorrow.

While few organizations completely decimated their staffing functions, the majority have cut back to the point where capability has been negatively impacted. Strategic programs that deliver retention have been cut, and in most cases, no one is held accountable for retention solutions. It might seem outrageous, but unless you consider the phrase “let’s keep them all” to be a retention strategy, it’s a fact that most HR and recruiting executives can not even list common retention strategies, let along devise their own.

Retention Is One of the Most Poorly Managed Goals in HR

It’s hard to argue that retaining key employees isn’t a high-value activity, and I can’t say that I have ever visited an organization that would argue otherwise. In fact, most HR leaders and recruiters talk a lot about the importance of retaining the very best employees that the organization has invested so much time, money, and development resources in. Unfortunately, talk is where most HR organizations end when it comes to formalizing retention efforts.

Among organizations that force-rank satisfaction with HR deliverables, retention often ranks high in importance but extremely low in execution. In fact, it’s often lower than compensation and benefits, if you can imagine that!

Its perennial position at the bottom of the list qualifies it as the most poorly managed staffing activity. However, its position at the bottom should come as no surprise, since few organizations can identify who’s in charge of it, what is the strategy, and how retention efforts are measured and evaluated.

These three factors are the reason behind most organizations’ poor retention performance:

Reason #1 — Who is in charge of retention?

In many organizations the answer to this very basic question is no one! Rarely does the organization’s design for the HR function include a role(s) charged with designing, developing, and executing retention programs. When such a role does exist, rarely is it positioned at level with enough resources and power to make a difference (i.e., Senior Director or VP).

When it comes to organizational design, nothing says “low importance” more than lack of budget or executive-level leadership at the helm. Some might argue that all are responsible for retention, but merely listing it as one among many responsibilities essentially guarantees a mediocre enterprise-scale effort.

While great managers may assume ownership of retention activities in their group, because there is no clear support organization, their approaches will largely be ad hoc in nature and inconsistently leveraged, opening the door for anyone disgruntled to scream discrimination!

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Reason #2 — The real costs of key employee turnover are not reported.

Retention metrics in most organizations begin and end with overall turnover by period. Absent are metrics that measure the business impact of turnover and specific goals to mitigate predicted impact. If your retention function doesn’t measure and report these five key metrics, chances are your efforts are under-managed:

  • The cost of turnover. Reporting a percentage turnover rate seldom excites executives, but converting that turnover rate to a dollar impact on business performance can establish the visibility on talent issues needed to transform a good recruiting function into a great one.
  • Top performer/key employee turnover. Often called regrettable turnover, this measure prioritizes the jobs and individuals based on the degree to which their leaving hurts the firm.
  • Competitor win/loss ratio. This metric is simply the ratio of the number of top performers you have successfully recruited away from a competitor compared to the number of top performers who voluntarily terminated to join a competitor. If a top performer quitting goes directly to a competing firm (vs. retiring), it raises the costs because it hurts the firm while aiding a competitor.
  • Preventable turnover. If turnover is occurring for silly or preventable reasons, the percentage of cases where that is true needs to be reported and fixed.
  • Percentage of “at risk” employees. The best firms proactively identify high-priority individuals who present a high risk of leaving during the next one or two years. Reporting the percentage of target individuals at risk alerts managers helping them put into place proactive programs attacking retention issues before they get out of hand.

Reason #3 — What is the name of your retention strategy?

The economic impact of losing 10% of the workforce each year in a major corporation amounts to tens of millions of dollars. With that amount of money and disruption involved, retention is clearly a strategic issue. To develop a competitive advantage around a strategic issue requires a strategy that is measurably superior to that of your competitors.

Unfortunately, it’s rare for organizations to develop a formal retention strategy. To make matters worse, most HR executives don’t even know the common retention strategies in use that they could adopt.

Before launching into a comprehensive list of common retention strategies, note that all retention strategies fall into one of three categories and usually contain five common elements.

The Five Common Elements of a Retention Strategy

  1. Goals of the strategy. This element identifies the goals and specific results the strategy should produce.
  2. Prioritization process. This element specifies the methodology that will be employed to determine which (if any) employees should receive priority treatment.
  3. Identifying turnover causes. This element specifies the methodology that will be employed to identify the primary factors that “cause” employees to leave.
  4. Retention solutions. This element contains a catalog of proven counter measures or solutions that can be employed by managers to halt or reverse a trend of turnover categorized by common cause.
  5. Success measures. This last element covers the process for selecting retention metrics and reporting the results.

The Three Categories of Common Recruiting Strategies

Retention strategies usually fall into one of three categories, but world-class organizations often employ a hybrid approach that uses different strategies for different groups within the organization based on their role in achieving wildly important organizational goals. The three common categories include:

  • Laissez-faire approaches. This group contains decentralized retention strategies that rely almost exclusively on operating managers to solve the retention problem.
  • Comprehensive approaches. These approaches attempt to retain all employees by improving the treatment, pay, or benefits of all employees. These approaches are also called “peanut butter” strategies because they attempt to spread the improved treatment evenly across all employees.
  • Targeted or personalized approaches. This category concentrates retention efforts on high-priority individuals and jobs and then customizes the treatment as much as possible in order to fit the individual needs of the targeted employee.

Next week, part two will continue with the top 15 retention strategies in use today.

Note: If you have corporate experience operating a retention function, I welcome your comments on critical factors that can make it more/less effective. In addition, if you have questions that you would like answered on corporate retention strategies, please post them in the article comments section following this article.

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.



22 Comments on “Understanding Available Retention Strategies: Are You Prepared for Turnover Rates to Double? (Part 1 of a 3-Part Series)

  1. Does anyone really think that Y2K is coming back? That the days of multiple job offers at any one time are just around the corner? Sure, those days are around in foreign countries. As for the US, that is just a memory. I don’t think those days will ever happen again in America. From now on, jobs will be tight. The much-anticipated job recovery is years away. I’m a software engineer, have been for 20 years. I know the reality of jobs going overseas. I hear the news media telling you to get an education. I have a bachelors and masters. I know plenty of folks with masters degrees or mba’s that are out of work. An article like this is wishful thinking. The US is not going back to the old days of lots of hiring. Any hiring is going to be strategic, replacing someone that retires. Most of the people I know that have jobs have burrowed in like ticks, hoping that the grim reaper passes them by.

  2. I completely agree that turnover will rise as a natural by-product of economic recovery, and that a well organized and measured retention strategy is important. I also think it’s alarmist to think that huge percentages of the work force feel that they were forced to “stay put” during the downturn and that a prevailing sense of “animosity” exists. Many companies made very difficult and tough decisions in this recession. Of course every decision didn’t sit well, but you can’t ignore that fact that these were and are unusual times. I’d like to think that few organizations acted willfuly to short-change employees, that most folks know that, and that many feel a strong sense teamwork and loyalty for having managed through a challenge together.

  3. The employment churn will happen. Greg seems to think that the employers cared about their employees, while that may be true of some managers within an organization it is not the message that was delivered. The message was we need to cut costs so we are cutting staff. ALL remaining employees have had to take on extra burdens – without being rewarded. Most have worked extra hours and put in work well above and beyond. I talk to these folks daily – if and when an opportunity becomes available they will jump – guarenteed!

    The days of company loyalty are long gone. There are always exceptions to that rule but overall the impression is that companies feel that employees are just an expense item to be cut and employees feel that they must look out for themselves because the company won’t! This will lead to a major reshuffeling of talent – and the productivity numbers that were so great in the first part of 2009 will be headed downward as employees leave for better opportunity.

  4. Jim is absolutely right. The message delivered at a lot of companies was that employees are an expense and always an expense. Employers don’t often look for opportunities to spare employees for the time being and trying to save money in as many other areas as possible, using layoffs as a last resort. It now seems to be the top way to save cash. No sense of loyalty to the workers. Just do something so it looks to the shareholders that costs are being controlled. Never mind that the person you lay off today may well go to your competitor or could get another job and start poaching people from your organization because so many of these employees are disillusioned and have woken up and “smelled the coffed”

  5. Regardless of whether or not turnover doubles because of current and soon to be conditions, it’s never a bad time to talk about reducing turnover of your high performing, reliable performers. Turnover is a complicated issue, and involves many factors, such as:

    – actually being able to quantify who your most reliable, or highest performers are. When it is a blue collar type workforce, it can be tougher to quantify without the right tools.

    – Some turnover is good to have. Yes, sometimes turnover can help a company. Turnover of poor performers and overpaid marginal performers is a good thing for an organization.

    – Depending upon the recruiting and training costs involved in the position being filled, of course turnover can cost a pretty penny.

    Bottom line is that at anytime, especially for large employers of blue collar workforces, managing turnover….preventing the good guys from leaving, but letting the bad go away, is one of the fundamentals in managing a large blue collar workforce.

  6. John – A great article and an equally good title! I echo your message to my clients and audience as well. Employers are in for a rude awakening as the economy rebounds especially among the skilled and talented. An interesting study in the future will be following the rate of turnover of the skilled vs the unskilled or lesser skilled. The studies you mentioned however were based in 2004 and 2007. In today’s market, 5 years is like an eternity. The oldest Boomers hadn’t even reached 60 yet. Gen Y were just entering the workforce. Don’t you feel this data may even underplay the severity of the turnover?

  7. I’m not an HR person. I follow ERE to see what HR people are thinking about, trends, etc. I can’t believe that people are getting so concerned about maintaining talent in this country. From where I’m sitting, many companies are making great efforts to send as many jobs as possible overseas. The last company I was at was sending all new development to India and the manufacturing is going to Singapore. I keep reading that these “green jobs” will help the ex car workers. Well, those green jobs are very low pay compared to what an auto worker makes. I read about many college graduates not being able to find jobs and saddled with tremendous debt. The US is evolving into an economy that I am really unsure about. I don’t think we will ever have another surge of productivity and optimism like with Y2K. Maybe there is something down the road for the US, but I don’t see it. I sure hope there is something out there, something new and exciting. Otherwise, the consequences won’t be pretty.

  8. The problem with all retention strategies -at this point- is that they will be too little too late for this recession. If they were not in place prior to now, those folks you wanted to retain will be moving on. They will view all attempts to keep them as more empty promises.

  9. John,

    As usual, you are spot on. While many people are unemployed, there are many who are employed that are just waiting for a crack in the glass to flee. My perspective comes down to organizational culture – if an organization did everything they could do to reduce spending and they were committed to their human capital and their values, they will fare, from a retention point of view, far better than the companies that slashed and burned positions.

    I have recently been introduced to a new certification program on Retention. In your review of the top 15 retention strategies, I recommend taking a look at: http://www.retentioninstitute.com I feel this approach will certainly bring a new way of thinking and supporting retention.

    There is also a new LinkedHR Subgroup on Retention, so it is evident this topic is quickly becoming top of mind, even in these tough economic times.


  10. Thanks for the great article John. I have some experience operating a retention function in a Fortune 300 company. I agree with Bart that turnover is a very complicated issue and is driven by various factors, some controllable and some non-controllable. For companies that experience high turnover and are serious about retention, they should:

    • dedicate a business executive to the staffing and retention function
    • include retention targets in management MBOs
    • ensure alignment between the staffing and business groups’ objectives
    • develop processes and systems to capture relevant data that enables decision making and promotes accountability at various levels
    • develop a solid fact-based understanding of key drivers of turnover, and critical workforce segments
    • quantify the cost of turnover

    The above factors will ensure strategic focus on retention and enable the collection of critical data and insights that can lead to appropriate hiring and retention strategies. For example, if employee referrals or college interns make for better hires, the company can divert more resources to hire from those sources. If a significant number of employees leave because they realized that the job is not what they thought it would be, the company could employ realistic job previews to help lower turnover.

    Vikram Gundoju

  11. Ira

    There are many studies predicting turnover increases but I don’t suggest that you rely on them. Instead I recommend that firm’s do their own surveys. The information that is needed is your own firm’s “value at risk” related to losing top talent, not what the general trend is.


  12. John – I agree entirely that individual companies need to know rates and risk of turnover, especially for key positions (and in a “lean” company, every position is key!). Plus the rate of turnover is not as relevant without considering the cost. In any case, I agree organizations must develop their own metrics…and then understand them. Thanks for your continued insights.

  13. Retention of top performers is a subject I love and champion and believe it is quantifiable. However, I do not believe that top performers are ready for a mass exodus. In general, most organizations know who these people are and take care of them. On the other hand, if you’re every day average performers all migrate out at once your organization will feel the pinch. In addition, if your organization is small or spread out over a large geographical area, loosing a few folks here and there could be a strain. It pays to stay close to your folks. Get to know your people so you can learn about their grievances quickly. One grumbling employee will create an unhealthy atmosphere and bring down the ship. Colleen

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