• Jeff Doolittle

Employee Retention 201: Improving Your Position

Employee Retention

Why it Matters: Employee Retention = Customer Retention

Ask any MBA graduate or newly promoted supervisor, What’s the company's greatest resource? Moreover, you will likely hear it is our people. It is widely accepted that behind every organizational outcome is an employee's actions. Employee retention is a measure of organizational health and can be a leading indicator of future company performance. I have observed key customer engagement metrics having strong statistical relationships (R Squared 0.736 to 0.833 and p<0.001) with employee retention metrics. One caution though is that just like with our temperature where 98.6 is considered healthy, 101 or 95 is not regarded as healthy (for most people) and the same is valid for employee retention. The symptoms companies and teams can experience are similar across industries and companies, but different types of issues exist when employee retention rates are both too low or too high. And unfortunately, unlike our temperature, there is not a single standard across all functions and industries that is considered ideal or “healthy.” In fact, I have read some to suggest a benchmark, but I would suggest only for general guidance because many other factors play into your company's specific “healthy” target.

Culture eats strategy for breakfast. ~ Peter Drucker

One of the most significant negative impacts of low employee retention rates is how it impacts company culture. An organization's culture exists within shared experiences and learnings of its employees. As employee retention decreases the ability of the organization to pass on learnings increases significantly due to lack of experience, fractured relationships and limited employee time due to a lesser skilled workforce. As retention rates drop considerably below healthy levels, the negative impacts are amplified, and companies can find themselves in a retention death spiral. In light of record low unemployment, a shrinking labor force participation rate, and growing economy in the US, there is a perfect storm forming for traditionally high retention companies. In these companies, often culture has and continues to be the single most important competitive advantage for the company, and the impact of this storm can be significant because they have not had to think about these issues before. And unlike with most storm warnings the very last thing these leaders need to do is take shelter.

One of the often silent but deadly negative impacts of high employee retention rates is the existence of organizational blockers. Organizational blockers are employees that hold a position that another qualified individual in the organization could fill as a part of their career path. While having good to high performing employees in the same roles on your team for many years may sound like an excellent thing it comes with some of its own serious drawbacks. Most notably is keeping an "up and coming" high performer in another position from gaining the critical experiences needed or preventing someone who could do the job better from getting a chance. In today's world of constant change and need for innovation, organizations must continually be developing and growing their employees and evolving their businesses to stay relevant.

A Perfect Storm is Making Landfall in the US - Environmental Factors

Many different environmental factors such as, population shifts, societal and generational changes in views on work, and technology are aligning to create the perfect storm for employee retention challenges in the US. One of these environmental factors is today's emerging gig economy:

gig e·con·o·my


1. a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.

The 2017 Freelancing in America study by the Freelancers Union and Upwork estimated that nearly 57.3 million Americans – or 36 percent of the nation's workforce – are now freelancing, most of whom do so by choice (63 percent). This makes retaining a growing part of the economy a challenging proposition.