As organizations and operating environments become more complex and the success of leaders becomes more tied to what their employees accomplish rather than to their own technical skills or task completion, building and retaining human capital is becoming central to the viability and success of all leaders (and the valuation of your organization). And, unlike technology or equipment or fiscal capital, human capital (and teamwork) is a competitive advantage that cannot be commoditized. If you care about your own success as a leader, you’ll care about keeping your employees and particularly your best people! If you need a financial argument, replacing employees can cost as much as 200% of their annual salary.
There is a spectrum of commitment to employee retention across organizations, with some basically ignoring retention as a purposeful activity and others investing significant effort and resources. What is interesting is that most employers and bosses misunderstand what employees actually value most. As a result, even where there are employee retention efforts, they often focus on the wrong things. Most typically organizations believe that compensation and benefits are core to employee retention. While the research confirms that employees need “adequate” compensation and appreciate good benefits, actual employee retention (or turnover) is usually driven by other factors. And it seems that we fail to get this right early on because over 30% of new hires quit their jobs within six months! Likewise, at any given time, about 25% of all employees are “retention risks” and it turns out that managers usually don’t even know who’s at risk!
What the research shows is that while employees will leave an unfulfilling job for improved compensation and benefits, those are actually lower on the list of importance of what they want from work than other items. Most studies put compensation anywhere from number 4 to 8 on employee lists of priorities.
So, what should you do to keep more of your employees?
Assuming that compensation and benefits are “adequate,” your leadership focus needs to be on the work environment and the work experience. There will always be turnover, but it’s become clear what factors can limit the loss of employees over time.
Crunching lots of data, Facebook recently found that people stayed with the company when the following three things were true: They enjoyed their work, they used their strengths more often, and they believed they were growing professionally. All of these factors superseded compensation and benefits. As Lori Goler, Head of People at Facebook says, “If you want to keep your people — especially your stars — it’s time to pay more attention to how you design their work.”
Although there is some variability in the research, there is also a strong consensus about what factors support employee retention over time. The most important variables tend to be:
- Flexibility and Autonomy
- Professional Growth and a Visible Career Path
- Engagement and a Sense of Purpose
- Compensation and Benefits
- Rewarding Relationships
- Job Security
- Work/Life Balance*
- Ethical, Transparent Managers
*The notion of “work-life” balance is also often misunderstood and is addressed in another article.
Even though the prioritization is often somewhat different from individual to individual, compensation almost always shows up in the middle of the list or lower. As a manager, while you must compensate people equitably, it is liberating to know that your retention efforts tend to be less about money than most people think. On the other hand, creating an environment and work experience that will retain your people is a lot harder than just writing bigger checks!
The good news is that much of your effort toward employee retention also applies to other leadership imperatives around healthy organizations, empowering employees, sustainability and a number of other things you need to be doing anyway. And, in the end, improving retention is a win-win proposition that provides a positive, re-enforcing cycle for everyone involved.