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Let Your People Go

Fall 2012

Let Your People GotcbrPDF normal

Should your company allow—even encourage—voluntary turnover?

By Vadim Liberman

Vadim Liberman is senior editor of TCB Review, where’s he’s worked for almost one-third of his life.

How can we hold onto our people? Everyone  is concerned about retention for a reason: Companies are very much aware that employees feel disengaged, overworked, and undercompensated. As soon as the economy picks up—any day now!—your best people will surely  be working their latest LinkedIn connections and filling headhunters’ inboxes with résumés. With each upward spike of the Dow, we’re warned, more and more workers will vanish from their desks like a scene from Left Behind. You’d think that you’re facing a cataclysm preventable only with prayer, or maybe restoration of that gold-plated healthcare plan you dropped back in 2008.

Sure enough, turnover can sicken an organization, leaving gaps that can’t be filled and further burdening everyone who sticks around. But just as treating a disease can inflict greater harm than the illness itself, so too regarding retention strategies. Your efforts may tether people to your firm, but low turnover may cloak various corporate cancers. Worse, it may exacerbate them.

Attempts to padlock exit doors have warped turnover into retention’s devilish twin. According to consultant Dawn McCooey, “There’s so much focus and countless books on retention”—including, she admits, her own, Keeping Good Employees on Board—“that managers overlook the value of getting people off board.”

In other words: Are your people—most of them, anyway—worth fighting to keep? Should you be making it easier for employees to leave, even if they might head across the street to your chief competitor?

In developing a more nuanced perspective that positively values voluntary turnover, you probably need not trash your retention initiatives entirely—not everything you’ve been told is wrong—but “there are a lot of myths out there,” says consultant Beverly Kaye, author of Help Them Grow or Watch Them Go. “One of them is that all retention improves business results.”

It’s time to draft a new script.

Exit Signs

First of all: How often do people voluntarily quit jobs? And are Gen-Xers and millennials as restless and disloyal as you’ve heard?

Back in December 2007, about 2.7 million private-sector workers quit their jobs, according to the U.S. Bureau of Labor Statistics (BLS). In September 2009, with jobholders feeling insecure, the number plummeted to 1.5 million; in June 2012, it was up to 2 million—rising but nowhere near the Great Exodus about which everyone warned. During their first year on the job, almost a quarter of new hires currently decamp, and 13 percent of organizations lose at least half of their new workers, according to an Allied Van Lines study of five hundred HR professionals.

That sounds like a lot of movement, at a time when we’re constantly reminded that the traditional employment contract is in tatters. But today’s workers are sticking with their current companies longer than ever. In 1996, during the height of the talent wars, people spent about 3.8 years with their existing employer, according to BLS. Over the next fourteen years, tenure rose to 4.4 years. More dramatically, in 2010, tenure for white-collar professionals rose to approximately 5.2 years, up 13 percent over a decade.

Furthermore, you may have heard that today’s younger workers are less tied down than their older counterparts, even more so than in previous generations. Actually, since the mid-1990s, tenure has increased among employees under 34 and decreased for the majority of those older.

So what should all this mean to you? Maybe nothing. For starters, the above stats depict differences of months, not years. Secondly, such snapshots are interesting, but like many business metrics, they are only interesting. Sure, you now know some numbers, but do they explain if voluntary turnover is good, bad, or irrelevant to an organization? Never mind that an organization is not your organization.go4

Regardless, counting on a continuing weak economy to retain workers isn’t much of a strategy. “Companies can be asleep at the switch,” McCooey says. “It’s easy to assume that just because people need jobs, they will stay.”

Certainly, some remain because they dread that the grass is always yellower elsewhere, but “if you think that your people should be happy just because they have a job, you’re going to find yourself in deep trouble,” Kaye says. “Good players know they always have options. I recall at one company when an employee left, his boss said, ‘No big deal. There’s plenty of talent out there.’ Those words got out in the organization, and six more people left within three weeks.”

Was the supervisor wrong in his opinion—or in voicing it? Much depends on who packed up. (Maybe six better people arrived shortly after.) For now, the overarching point is this: A sputtering economy might make for a potent retention tool, but potent isn’t necessarily good.

“The state of the economy shouldn’t affect retention strategies,” says Teresa Tanner, chief HR officer at Cincinnati-based Fifth Third Bank. “I worry if leaders get lazy during tough times, or if they see false positives. They see that turnover is down, so they immediately assume it’s for reasons other than what they really are”—reasons such as loyalty, satisfaction, engagement, apathy, and anxiety. Low turnover might indicate workers eager not to arrive each morning but to leave each evening. This past June, nearly one in three employees surveyed by Mercer said they were keeping an eye on the exit sign. Granted, thoughts don’t always lead to actions, but you have to wonder: Are daydreams of departure good for workplace innovation and collaboration? “People may be staying, but they’re not adding value to the company,” says Jeanne Meister, a partner at Future Workplace, a New York-based consultancy.

For workers fantasizing about walking out the door, might opening it for them make you better off?

The Turnover Calculator

It’s disheartening to tally the costs when key people leave unexpectedly: client loss, temps, paperwork, help-wanted advertising, recruiters, background checks, screening, interviewing, training, et cetera. And there’s a lot of et cetera, including indirect losses pertaining to knowledge, skills, productivity, engagement, and morale. For instance, HR leaders surveyed by Allied estimate that it takes about eight months for a new hire to reach full productivity. Beverly Kaye insists that a new salesperson in her organization must work eighteen months to two years to provide an ROI. By the time you push the calculator’s equal sign, replacing someone can cost 150 to 250 percent of the person’s annual compensation.

However, with so many intangibles attached to diaphanous dollars, we should take care not to make cents into nonsense when counting turnover expenditures. “Some costs are hard; some are soft. At times they are overstated, at times understated,” Teresa Tanner explains. “It’s always going to be debatable.”

"A good leader has a transparent relationship with the employee. If the worker is a good performer and you can't find a better role for the person, you're better off helping the individual transition out of the organization.

Debatable costs notwithstanding, turnover rates can serve as a quick measure of corporate well-being—a big mistake, argues Dick Finnegan, CEO of workplace consultancy C-Suite Analytics. Retention figures have no meaning unless someone gives them meaning, he says, adding, “CEOs can’t readily translate turnover percents into dollars. If an HR director says turnover is 19 percent, the CEO will ask how it compares to that of peers. If it’s lower, the CEO thinks the company is doing well. But if the HR person says that turnover is costing the company $10.8 million a year, the CEO won’t care about the percent and how it compares to peers’.”

Is the number really $10.8 million? Maybe it’s higher, or lower, or zero. Yes, there are tangible costs to losing people. But you can hire or promote replacements at lower salaries or save on healthcare premiums by replacing experienced workers with young, entry-level hires.

Most turnover advantages aren’t line items on accounting spreadsheets; then again, neither are many retention benefits. Still, there are more quantifiable savings to keeping workers than losing them, which explains why “we look at the negative effects of employee turnover but not the positive effects,” Dawn McCooey says. “These are expenses without invoices. Because they aren’t easily measured, they’re easily ignored.” Ignored, that is, when discussing turnover. We continue to calculate retention benefits despite lingering intangibles.

For instance, we highlight the importance of retaining workers to preserve knowledge and skills but fail to acknowledge turnover’s role in attracting fresh ideas, expertise, and competitive intelligence. Similarly, loyal clients may follow departing executives . . . straight to the organizations that hire them. (Hypothetically, you don’t have to lose someone to bring in someone, but employment budgets are not so hypothetical.) Also, low turnover can turn hiring managers stale, given lack of opportunity to do their jobs. Ironically, then, efforts to keep good workers may cripple you from hiring any.

Meanwhile, we lament that turnover drags down productivity, but “when someone isn’t pulling weight, losing that person can make you more money,” explains Brandi Britton, a regional vice president in the Los Angeles area for staffing and recruiting firm Robert Half International. Imagine an underperformer who quits. Chances are, you’d replace him with a better worker—and it will probably take less than eight months and 150 percent of his salary, especially if you promote a high-potential employee, an opportunity you may not have had if not for someone leaving. In fact, the individual you’re now elevating may otherwise have left.

Plus, turnover calculations rarely account for costs of continuing to employ a craptastic vampire who sucks spirit and productivity from those around him. We’ve all worked with, if not for, one of these irritating bats. Once one flies out the window, morale and other benefits usually flood back in.


The Conference Board

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The Conference Board Review is the quarterly magazine of The Conference Board, the world's preeminent business membership and research organization. Founded in 1976, TCB Review is a magazine of ideas and opinion that raises tough questions about leading-edge issues at the intersection of business and society.