New Ways to Think About Employee Retention

The movement of people into, through, and out of an organization is a well-studied phenomenon. It is described variously as recruiting, attrition, retention, growth, layoffs, internal mobility, development, or reorganization. Much of the academic study on the topic sees the question as one of ‘employee turnover.’

Employee turnover is the rotation of workers around the labour market; between firms, jobs and occupations; and between the states of employment and unemployment Abassi et al. (2000). The term “turnover” is defined by Price (1977) as: the ratio of the number of organizational members who have left during the period being considered divided by the average number of people in that organization during the period. Frequently, managers refer to turnover as the entire process associated with filling a vacancy: Each time a position is vacated, either voluntarily or involuntarily, a new employee must be hired and trained. This replacement cycle is known as turnover Woods, (1995). This term is also often utilized in efforts to measure relationships of employees in an organization as they leave, regardless of reason.[1]

The skills workers need to succeed change rapidly. In today’s labor market, the half-life of a technical skill is rapidly approaching three years. A skill’s half-life is the length of time required for a successor skill to appear. In software development, where things move at breakneck speed, the pace is even faster.

Workers Should Always Be Growing and Honing Their Skills

Workers cannot rest on their laurels. Their hard-won skills become obsolete almost faster than they can keep up with them. For workers, retention can carry a penalty.

This is because the requirement for new skills evolves more slowly inside of a company than outside. In order to effectively produce repeatable products, processes, and services, a company must standardize on a specific version of a technology and innovate on the value they are creating.

In the marketplace, technology moves without the encumbrance of creating specific value.

That means that a worker who stays with a company beyond the half-life of the technology that they use is constantly falling behind and losing value in the market. This is one of the underlying reasons behind the idea that people leave their jobs in search of challenge or opportunity. Employees simply cannot afford to bet their employer will offer enough compensation or incentives to overcome the skills deficit employees face by staying.

At the same time technology is exerting a strong pull on workers to move towards new challenges, tools are emerging for employers to manage accelerating attrition. These tools monitor factors associated with employees who are considering leaving and notify employers when there is new behavior that could indicate flight risk.

Imagine that you’re looking at your company-issued smartphone and you notice an e-mail from LinkedIn: “These companies are looking for candidates like you!” You aren’t necessarily searching for a job, but you’re always open to opportunities, so out of curiosity, you click on the link. A few minutes later your boss appears at your desk. “We’ve noticed that you’re spending more time on LinkedIn lately, so I wanted to talk with you about your career and whether you’re happy here,” she says.[2]

Workers Crave Upward Mobility Opportunities

In other areas of the economy, a different trend is taking shape. Rather than trying to hold on to employees, the idea is to help them prepare for their next assignment. By continuously developing the staff (and encouraging them to seek deeper better challenges), the company becomes a source of people who are successful in other settings. This in turn makes the company an attractive place to work. The virtuous cycle is built on hurrying attrition to an appropriate velocity.

As the technology half-life continues to decline, more interesting approaches will emerge. Already, as you can see in this short article, two schools of thought have emerged: retention as a method for retaining value and attrition as a way of improving talent quality. Most companies ought to have a blend of the two.

Want to learn more about this topic? Check out these employee retention myths.

[1] A review of the literature on employee turnover, Henry Ongori; Department of Management, University of Botswana, Botswana. E-mail: ongorih@mopipi.ub.bw ; https://pdfs.semanticscholar.org/6c59/565014bc0ad6298c7984dfd333d303fe86a3.pdf

[2] Harvard Business Review, Sept. 2016. CEB. Why People Quit Their Jobs. https://hbr.org/2016/09/why-people-quit-their-jobs

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