Retention and Attrition

Good companies care about retention and create a metric around it. They want to know their organizations is a fostering and positive place to work. They value people, especially good people, and they want to retain those good people as employees. Employee retention is also an effective marketing tool, both in order to attract new talents as well as customers. Companies frequently have named employee retention initiatives and measure their retention percentage periodically.

Retention is also important because the employees of a company hold their intellectual property and institutional knowledge. Losing employees can mean losing some of those assets. The cost to replace an employee – recruit, hire, orient, assimilate, and train – can be significant. The hidden costs of disrupting the status quo – such as backfilling work, reshuffling responsibilities, contacting customers, changing passwords, etc. – can be significant as well.

As managers, we then have a responsibility to support the organization’s retention goals. We have to hire good people; we have to undergo the necessary due diligence to ensure an individual will succeed in the intended role (and possibly future roles) and to ensure the individual will be content in that role or roles. We have provide them competitive compensation and benefits and challenge. And we have provide them with a satisfactory management-employee relationship, for as First, Break All the Rules: What the World’s Greatest Managers Do Differently argued over a decade ago, “people leave managers, not companies”.

Yet should not over-value the retention metrics. Attrition is not necessary bad. People change and people grow. Especially in IT, engineers and technicians can stagnate if they do one thing for too long. It some cases, for those employees to grow, increase their skills and value, they may need to leave and move to another employer.

from "Jack: Straight from the Gut" (2003)

Also, companies change and companies grow. Employees at the top of Jack Welch’s “Vitality Curve” may be at the bottom years later when the company adopts a new business model. This is especially true of long-term employee who was a superstar when the company or unit was founded. As time passes on, they can lose the ability to think outside of the box. They can become complacent and inadvertently adopt a culture of entitlement. They cannot summon the motivation to make the change that will take the company to the next level. They may want to continue the job they have been doing rather the one you want them to.

In these cases, attrition is much preferred alternative to change inhibitors, the cancerous spread of discontent, costly performance management activities, and ineffective performance. Thus, managers should also plan for attrition as well as retention.