Are you prepared for turnover rates to double? In the first of a three-part series, Dr John Sullivan looks at the factors of poor retention performance
As the economic turnaround picks up
steam, turnover rates in many
organisations are likely to skyrocket and
recruiting top quality replacement workers 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
Just as in years past, when job opportunities
became more prevalent, employees will
exercise their right to demonstrate just how
much they appreciated the treatment they
received throughout reductions in the
workforce, 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.
Retention is one of the most poorly managed
goals in HR
HR leaders and recruiters talk a lot about the
importance of retaining the very best employees
that the organisation has invested so much
time, money, and development resources in.
Unfortunately, talk is where most HR
organisations end when it comes to formalising
Among organisations that rank satisfaction
with HR deliverables, retention often appears
high in terms of importance but extremely low in
execution, sometimes lower than compensation
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, because few
organisations can identify who’s in charge of it,
what the strategy is, and how retention efforts
are measured and evaluated.
These three factors are the reason
behind most organisations’ poor retention
Reason 1 — Who is in charge of retention?
In many organisations the answer to this very
basic question is “no one”! Rarely does the
organisation’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 a level with enough resources
and power to make a difference (i.e. senior
director or VP).
When it comes to organisational 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 organisation
their approaches will largely be ad hoc in nature
and inconsistently leveraged, opening the door
for anyone disgruntled to scream discrimination.
Reason 2 — The real costs of key employee
turnover are not reported
Retention metrics in most organisations
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 prioritises 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
The economic impact of losing 10 per cent of
the workforce each year in a large 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 organisations 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.
In the next issue of HR Leader, part two will continue with the top 15 retention strategies in use today
Dr John Sullivan is a well known thought leader in HR.