Many organizations striving to be perceived as a ‘Great Place to Work’ consider leveraging retention as a metric to assess their success. While a common practice, organizations often leverage it incorrectly. Let’s walk through a few of the pitfalls in using retention metrics and get to some meaningful ways to assess if your workforce wants to work at your organization.
One common error is to oversimplify retention measurements. In these cases, organizations adopt a criterion-based assessment along the lines of “no more than 30% turnover” or “no more than x number of employees.” Perhaps the most obvious error with a this approach concerns the number chosen. 30% turnover may be spectacular for a call center industry, but dismal for an electric utility. How do you know your number is a good one for your business and the times in which it operates?
One way to improve on this is to leverage a normative reference along the lines of “our turnover will be within the top quarter of all organizations in our respective industry.” This approach references peer organizations and can vary from one year to the next. It also does a good job accounting for industry-wide variables like supply and demand ratios.
Unfortunately you can have two organizations, both in the top ten percent of their industry, with very different workforces. Why is that?
Ultimately, normative retention measures also fail to support the greater organizational goals like competitiveness and reduced operating costs. This is because organizations relying on this metric have failed to assess who they are retaining. A dismal retention score may in fact be just what an organization needs to clear out the poor performers or transition a workforce to a changing business model.
In most organizations, there are four basic types of workers: 1: Those that are your top performers; 2: others that might be a top performer with further development; 3: still others that get their job done satisfactorily; and finally 4: those that are underachievers or problematic. Most organizations care about retaining the first two or three types. Retaining groups three and four at the expense of one and two may do more harm to an organization than good.
Another pitfall in retention measures (even ones at companies that are sophisticated enough to measure retention of valued performers) deals with accounting for one-time events. Things like mergers, divestitures, closing a line of business are all examples of anomalies to a company’s retention measures. Granted, some companies adopt a strategy of merging and acquiring other companies, in which case they may want to set up multiple retention measures (e.g., for core staff and the staff of acquisitions), but in most cases, these events represent outlying events. A common solution for dealing with outliers is to issue two reports, one that includes the outliers and another with the outliers removed. This provides leadership the necessary information to accurately assess their success.
Amazingly, we still have more to consider. You can do a great job of retaining valued staff and still have some significant issues. At one fortune 500 company for whom I provided consulting services, they had top notch retention scores until the organization decided to delve a bit deeper and see why people were willing to stay. Shockingly, about 80% of the population responded that the only reason they stayed was the high compensation program. In fact, they did not like working for the company and would leave if only they could find another company willing to provide a comparable (or slightly lower) compensation program. Ouch!
This gets to the other factors of a ‘great place to work’ that retention just cannot measure. Things like employee engagement. Employee engagement gets at the heart of why retention levels are high or low. Things come into play like ‘Do employees enjoy working with their manager (often the single greatest factor of retention) and are they being challenged and developed in their job?’ (another major factor of retention). The answers to employee engagement questions typically provide the complimentary detail needed for leadership to decide what they must do to truly provide a great place to work.
Business Transformation Services (BTS) helps organizations understand how to achieve ‘Great Place to Work’ initiatives. Whether it is defining retention strategies and their associated metrics or building integrated talent management programs with performance management solutions, competencies and succession planning initiatives, our consultants can provide your organization with the guidance you need to leverage Oracle or PeopleSoft to achieve world-class results.
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