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Apr 22, 2021

In some circles, employee retention is considered the holy grail of a healthy, happy, and productive workforce.

I suppose it’s a logical conclusion, right? 

Many people still believe that a strong culture and an effective employer brand should be measured according to the percentage of employees it can retain. In fact, in a recent study, 87% of HR experts said retention was among their highest priorities over the next five years. 

But it doesn’t stop there. Look up “employee retention” on any search engine and you’re guaranteed to find an assortment of stats, resources, and case studies espousing the benefits of retention and why it should serve as a key measure of cultural health. 

If you, too, are a long-term believer in the business value that employee retention offers, then what I’m about to say might shock you. 

Retention is overrated. 

Before you run, allow me to present an alternative way of thinking that could transform the way you view retention and organizational culture. 

Retention Slows Career Progression

As the saying goes, nothing changes if nothing changes. When organizations prioritize retention over other cultural metrics, you tend to run into a wall. If no one leaves, how can you promote other people? 

OK, I understand that this thought experiment has some limitations. Every company, no matter how well retention is measured and prioritized, will still have some degree of turnover. But this question raises an interesting point: When retention becomes the primary metric by which employers measure cultural health, it tends to slow down career progression and hinder internal movement and growth. 

One of our clients acknowledged this problem. They reported that people who love their company leave so they can gain more valuable experience elsewhere. Once time has passed, they re-apply for more senior jobs from an external vantage point because that’s the only way they can progress. 

Furthermore, in a survey of more than 440 senior executives across the globe, decision-makers said that to acquire talent with the right competencies, companies need to use strategic workforce initiatives such as talent acceleration programs that help develop people’s skills, learning, and development. 

But an over-reliance on employee retention could negatively impact an organization’s ability to make talent acceleration a strategic priority. If retention becomes too paramount, then talent acceleration will have to take a back seat, since you can’t prove people’s careers will accelerate if promotions are few and far between. 

Retention Can Be at Odds With a Performance-Driven Culture

Having worked in the world of employer branding for well over a decade, there’s one thing I can say with absolute certainty: To perform at their best, people need a reason to succeed that goes beyond financial incentives. There has to be something in it for them; something intangible that will drive true purpose, impact, and belonging. 

When employers place too much emphasis on retaining their existing workforce, this can be at odds with the cultivation of a performance-driven culture. Think about it: If you know that your job is relatively safe and secure due to your company’s focus on retention, then there’s a tacit implication that KPIs and performance objectives are more of a guideline and not clear targets with consequences.

Retention Reduces the Urgency to Develop Early-Career Talent 

The pandemic has hit young talent hard, particularly new graduates fresh out of university looking for employment in a radically changed job market. To compound matters, in a world where retention seems like the ideal metric to strive for, organizations are unwittingly reducing the urgency to develop young talent and invest in their people.

It follows that if there’s less organic requirement to fill lower level positions, then there will be less need for employers to make the recruitment and development of early-career talent a strategic priority. 

Retention Hinders Diversity 

When you over-focus on retention, then you risk negatively impacting your diversity goals, since you can’t bring in as much diverse talent. In other words, when you place too much weight on retaining existing staff, you can fall into the trap of maintaining the status quo. Essentially, this means you actually prioritize retention ahead of diversity.

It’s now been proven that diversity strategy is more than just a moral, ethical, and cultural issue. McKinsey has shown that companies in the top quartile for racial and ethnic diversity are a whopping 35% more likely to have financial returns above their respective national industry medians. 

So in short, retention should never come at the expense of equal opportunity. 

Retention Forces HR to Fight a Losing Battle

In the world of talent acquisition and retention, it’s inevitable that employees will pack up and move on. When companies put a great deal of effort and energy into increasing their retention rate, they’re essentially fighting a losing battle. 

I hate to break it to you, but you may as well embrace the fact that people are going to leave. 

Let’s look at the facts. The average length of tenure is estimated at 4.2 years, but younger demographics are quickly changing the status quo. A CareerBuilder survey found employers expect 45% of their newly hired college grads to remain with the company for less than two years. The same study showed that by age 35, about 1 in 4 young employees will have worked for five different companies.

The truth is quite obvious: You can’t control tenure, so you shouldn’t even try. As an employer, you should simply accommodate choice and focus on building a reputation as a talent accelerant, come-what-may. 

Moving From Retention to Regrettable Loss

You can now see how prioritizing retention as a key business objective can carry a string of unwanted side-effects. While I’m not saying that we should drop retention as a goal entirely, I am recommending that we reconsider the weight of this metric when viewed from a wider lens.

Organizations should focus more on measuring regrettable loss, which can determine whether an employee’s departure from a company has a negative impact on the team. It then becomes possible to accurately gauge organizational health and determine how many lost employees were regrettable vs those who were not. Ultimately, this more nuanced interpretation of regrettable loss surely feels like a more logical and effective approach. 

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