The war for talent has been heating up for some time now. The unemployment rate is about 4.1% and wage growth, which has been anemic for years, has started strengthening in the last four to five years. When you add all of that together it equals…Turnover. Or at least the perception that turnover is coming. It also means employers are struggling to find good talent.
At the same time keeping current employees happy and engaged becomes more challenging. Employees know they are worth more and they will start to demand more; and not just in compensation. Employees will look for opportunities to work on cutting edge projects, enjoy cultures that are more pleasant and find organizations that are making a difference in their community and the world at large. With so much pressure we get into the mindset of…how do we keep our people? But really should we? We really shouldn’t. In fact, it may be just the time to let some people go.
I know. I know. That sounds crazy. What about the cost of turnover? What about the increase in compensation costs? What about the loss of expertise?
There are always two sides to a coin. What about the cost of keeping someone? What resources will we have to use to keep them happy and what will be the impact on others and other priorities? What expertise could we bring in?
The truth is keeping certain people may cost you more than letting them go. In fact keeping certain people may cost you the productivity, engagement and retention of others. Keeping certain people may be hazardous to the health of the organization. Even though the churn can impact productivity, cause you to lose time, recruiting and on-boarding can cost money, and engagement and morale can take a hit; maybe…just maybe there are some real reasons and times turnover is of value. After all, shouldn’t we challenge the predominant wisdom that says; turnover is bad!
What is the negative impact of tenure and why can some turnover be good?
1. Change is fast, wild, unpredictable. With the computing power we have today, the playing field has been leveled. One person named David can truly take on a Goliath like IBM. Thomas Friedman calls it “The Power of One.” That means organizations can only stay ahead of the curve based on the intellectual capital and drive within their associates. Static employee populations don’t typically drive change and dynamic new ideas. A strong team will always outperform one person, but not if they don’t have the right team members. And as the needs of your business change so will your needs for talent. If you want to keep up with a dynamic economy you will need an energetic, ever-changing employee population to meet the challenge.
2. Performance will plateau or decline. Each of us has limits on our time. We cannot get more hours in the day. A teller can only handle up to so many transactions a day. At some point an employee’s performance plateaus. But the problem is deeper than that. Some of the weakest performing companies have long tenure rates. In fact, one study from MIT demonstrated that when team tenure hit five years, performance clearly declined. Part of the reason… the team looked inward. They developed a “Not Invented Here” mentality.
3. Compensation costs can become unmanageable. While performance may not go up with tenure, compensation sure does. We handle that by reducing percentage increases or even freezing someone’s ability to get paid more. Typically, when this occurs a person’s morale drops and so does their performance. A Walmart study determined the cost of a seven year associate was close to 55 percent more than a one year associate. Regardless of our preferences…costs do go up with tenure.
4. The razor’s edge of lifelong learning will dull. When we are new, we are eager to learn and we have a need to prove ourselves; to prove our worth. As we gain status in our organizations we really lean on our expertise – meaning what we already know and are good at. Everyday I have conversations with executives about how to handle people who no longer want to strive for more; that no longer want to learn and grow. They are concerned because they know they have people that want to just keep doing what they are doing, the same way they have been doing it until they are ready to retire. These are not poor performers, but they are no longer the best performers and their attitude can hurt the organization in the long run.
5. Resistance is futile, but some will resist anyway. Much like the high school star quarterback who likes to relive their former glory days, some employees live in the past. They remember what the organization used to be like and they want that back. They distract others by reliving the “old” days and reduce morale by complaining about what the organization has evolved into. And even worse, they become a pariah because their co-workers are not stuck in the past.
6. Many protect what they built. Fiefdoms are built and then they are protected. When we have nothing, we take risks; we take chances. Our goal is to make our mark. When we are established we tend not to rock the boat. Our goal is to look good and preserve what we have even if that is our reputation. Defense is always good. But you can’t win a game without scoring goals. So the saying goes the best defense is a good offense.
7. Dead bodies destroy engagement. We have a saying in our business…You may have the bodies, but how many souls have left the building. That is worse than turnover; people who have lost their passion. You can walk through some company buildings and they seem filled with lifeless bodies; I guess you could consider them the equivalent of a corporate Zombie. These types of employees create a culture of mediocrity because they are tolerated. And what is worse is that their soulless existence spreads like wildfire to others. It can be cancerous to an organization’s success. Should we focus on engaging our employees…yes. But those that have disengaged may need to go.
8. Blind spots become prevalent and bigger. Groupthink is the psychological phenomena that arises inside a group when the yearning for agreement or conformity causes a pointless, irrational and/or dysfunctional decision-making result or conclusion. People no longer play devil’s advocate, ideas are hidden, solutions and problems go unexplored all in the name of minimizing conflict. This type of behavior can occur with groups that have become too familiar overtime. And unfortunately, important factors are missed or overlooked completely.
9. Discounting “newbie” perspectives hurts recruiting and retention. New blood definitely has a lot to learn. But they also have a lot they can teach. However, all too often organizations that have a great deal of tenure tend to disregard the opinions of newer employees. When less tenured employees are slighted, they leave and tend to attract negative publicity. What makes that situation worse today is for those employees to use social media and the internet to spread negative public relations like wildfire, hurting your recruiting efforts in the process. Think GlassDoor or Indeed.
10. Stale and out of touch mentalities can take over. When an organization has a great deal of tenure, new ideas are not brought into the mix as often. And when an organization has been successful over time it can become even worse. These types of organizations often develop a “not invented here” mentality when it comes to new ideas leaving the tried, proven, but no longer helpful or relevant strategies to prevail. Over time competitiveness falters and the organization suffers.
The truth is we want turnover. We need turnover. We just want controllable turnover. We want and need to keep the very best and clear the deadwood. High amounts of voluntary turnover should set off alarms. But organizations must make difficult choices and sometimes that means parting ways even with good people. If handled proactively and in a respectable manner everyone can win. The organization can become stronger and the employee can find a place where they are a better fit and may even reignite their passion and performance. The key is to “name the game.” Share the rules with everyone and be transparent in the process.