Challenge of Retaining Top Talent:
The Workforce Attrition Crisis
B. Lynn Ware, Ph.D., and Bruce Fern
It is no wonder
that in today's aggressive business environment, the challenge of
sustaining a competitive advantage preoccupies the minds of many
business leaders. Corporate customers and individual consumers have
more providers to choose from than ever before. Furthermore, they
often perceive that what they are purchasing is, for all practical
purposes, a commodity that can be easily obtained from other companies
if need be.
So how does
a corporation distinguish itself in a highly commoditized and competitive
market? Today's businesses are more dependent than ever before on
their top performers to innovate and provide services that differentiate
a company from its fierce competitors. In other words, corporations
are reliant upon their human assets to survive and thrive.
unemployment now running at less than 6%, many corporations and
government agencies are struggling to find and keep these valued
employees. Changing work force demographics, such as the shrinking
of the most desirable labor pool (25-34 year olds) and the negative
impact downsizing has had on employee loyalty, have led corporate
America to search for answers to recruiting and retaining the strategic
asset of the twenty-first century: talented people.
talent was less of an issue in the past, but the shifting tides
of the unspoken employee/employer contract have created new currents
in the workplace. The old contract asked employees to:
- work hard
- be loyal
- give their
In return, they
- a job for
- a home away
- regular salary
- a good chance
for a promotion
The new contract
is substantially different. It states that employees must now work
harder, doing not only their jobs, but the jobs of their former
co-workers who were "right-sized." In return, job security is extinct,
promotions are scarce, salary increases are modest at best, and
the constant uncertainty of change is almost guaranteed. Is it any
wonder that employee loyalty is on the demise and talented individual
contributors and managers feel less bonded to their organizations?
increased flow of defecting employees plagued our clients, Integral Talent Systems, Inc., a national consulting and training firm
and Bruce Fern, an expert in the field of retention, engaged in
an aggressive endeavor to tackle the attrition dilemma. As part
of this project, we conducted attrition and retention research with
our clients (1), and substantiated our findings by reviewing industry
practices and the behavioral science literature. We uncovered a
number of critical findings, seven of which are described in this
The Costs of Attrition Can Be Staggering, But Often Unseen
What does it
cost an organization when a talented employee defects to the competition?
Some of the cost factors are obvious, such as productivity losses
due to a vacant position. However, there are often unseen costs,
like the reduced productivity from the departing employee who
is inevitably distracted during his or her job search and therefore
contributes less during this time period (sometimes called "short-timerís
calculations, one technical company in California's Silicon Valley
estimates that it costs them an average of $125,000 when
just one employee leaves. Other companies calculate that attrition
costs them annual productivity losses of 65-75% in the position
the employee departs.
Another of our
clients with a national sales force of hundreds estimates that they
have to scramble to make up for over a million dollars of potentially
lost sales when just one salesperson leaves. To add insult to injury,
this does not even take into consideration the departed employee's
attempts to woo his or her past customers over to his or her new
employer. Multiply these costs by the number of employees who leave
in one year, and the financial impact is dramatic.
The Reasons Employees Stay are Not the Same as Why They Leave
do not have a handle on the actual reasons why employees stay, as
well as the actual reasons why they depart. Many organizations attempt
to capture the causes of attrition through exit interviews. Unfortunately,
traditional exit interviews just scratch the surface of the causes
for attrition. They inevitably fail to differentiate between factors
that make the new job attractive to the departing employee, versus
the reasons why the employee was prompted to consider leaving his
or her current job in the first place.
many employees report "better compensation" as one of their main
reasons for leaving. In many cases, our research revealed that these
same employees were not, in fact, originally dissatisfied with their
compensation. Instead, other reasons prompted them to consider
leaving their current job, such as the absence of professional development
opportunities. However, they often do not report these negative
reasons associated with their old job (possibly from fear
of retribution), but instead report what is attractive in the new
job. Because of this phenomenon, organizational data from typical
exit interviews fails to surface the real causes of an organization's
This is just
as true when an employee is actively recruited by the competition.
Our work in retention shows that attractive candidates receive calls
from recruiters all the time! What causes the sudden shift that
makes an employee act on a recruiter's call at a particular point
in time? We consistently found in these circumstances that something
deteriorated in their work situations that caused them to take the
current recruiter's call more seriously.
organizations unknowingly misdiagnose the situation and fail to
surface the most critical factors that contribute to attrition,
their solutions to correct the problem fall short of the mark. The
result is a bad diagnosis leading to improper prescriptions.
The Manager's Role in Attrition is Paramount but Underplayed
we interviewed as part of our research in retention lamented the
loss of talented contributors. However, when asked to diagnose the
reasons for an employee's departure, the average manager pointed
to a variety of external organizational factors as the causes of
attrition, failing to take any personal responsibility for
the situation. They typically did not acknowledge any factors within
their control that contributed to the employee's departure.
managers often attributed attrition problems to such factors as
compensation. Certain factors that are the responsibility of "the
overall corporation" can certainly aggravate attrition if they are
not in order, such as inequitable pay scales or excessively rigid
policies that dilute employee autonomy. However, we discovered that
a large number of factors contributing to employee retention are
within the manager's circle of influence.
results of any attrition intervention are dependent upon the organization's
ability to provide managers with an awareness of those factors,
as well as tools to help them meet their personal accountability
in retaining top talent.
managers need this guidance more than ever before. Managers' span
of control has been widening in most companies over the past several
years, and the number of times the manager "touches" the
employee is therefore less frequent. Each contact must maximize
any opportunity to influence employee motivation and commitment.
Prevention is the Best Medicine
The loss of
key employees, even in small numbers, can be devastating to a company.
(This points to the importance of tracking not just overall attrition
ratios, but also tracking the level of performers leaving.)
we were interested in determining the degree to which managers rank
retention as a high on-going priority. Not surprisingly, we found
that the only time the average manager thinks about retention is
when she or he receives a resignation from an employee. We also
found that most managers predictably attempt to talk departing employees
out of leaving, trying to convince them that they are making a mistake.
predictably, we found that the vast majority of the time, these
employees leave their resignations on the table, resisting attempts
to persuade them to stay. And, in the infrequent situation when
a manager successfully persuades the employee to remain, he or she
often leaves within six to nine months anyway. (The exception is
when there is a clear salary inequity which is remedied, and the
employee is satisfied with everything else about the work situation.)
solution lies in tying retention to critical business activities
so that managers do not think about retention after the fact,
when it is too late, but rather see it as integral to business success
and survival. Treating retention as an on-going priority
enables the manager to focus on proactive measures to sustain long
term employee commitment, rather than on reactive attempts to reverse
Retention Has an Often Unrecognized Impact on the Customer
well aware of the impact on their function when a valued employee
leaves. However, even managers of customer contact functions, such
as sales or customer service, often fail to demonstrate a sensitivity
to the impact attrition has on customers.
When key employees
leave customer contact functions, customers often experience:
- a discontinuity
in the relationship
- a negative
impact on their own productivity
- time wasted
reorienting the new employee to their operation and the way they
When the relationship
represents a value-added partnership, the change in account managers
or service providers can set the relationship back months and give
competitors a weighty advantage. This is especially true if the
transition to new account personnel is not well managed. At a certain
point, regular changes in account personnel can send a message of
organizational instability and create the impression that the organization
does not care about the account relationship.
In the case
of development or support functions, we also found a general lack
of awareness on the manager's part of the negative impact the departing
employee has on internal customers. The departure of a top performing
employee can therefore have a "ripple effect" on the organization
and its clients that creates problems for months.
Misguided Thinking: "Attrition is Inevitable"
It is true that
some level of attrition is unavoidable. In fact, a certain degree
of attrition is desirable in order to compensate for poor hiring
decisions. However, human resource and senior line managers often
question whether they can really increase their retention ratios.
The answer is
definitively yes, with evidence to support it. In one of
our client organizations, the attrition rate for one of their divisions
in 1995 prior to our intervention was 18.5%, with 25% attrition
in one of the most critical occupation groups. After working with
us in 1996 and making retention a priority for every manager, the
attrition rate dropped to 11.7% overall and 15% in the critical
One might predict
that other factors contributed to this outcome. In fact, it should
be noted that there were actually reductions in employee
compensation during this time, which should have increased attrition.
Nevertheless, we still saw an increase in retention rates.
Another of our
clients asked that we conduct a retention risk analysis and intervention
in a critical technical division because the organization feared
that attrition would rise in the near future. Two interesting findings
emerged from our research with this group. The first was that this
division was already following a number of the retention prescriptions
we provide our clients (one of the few divisions in the entire company
to do so). More striking, however, was the fact that as a result
of following these prescriptions, this group's retention rates were
over 10% higher than the rest of the company's, thus validating
the efficacy of our model.
in the Northwest began with an attrition rate of 17%. After following
the same prescriptions (2), they reduced their attrition rate to
3%, bringing their retention rate up to 97%. As the evidence suggests,
attrition is not an unbeatable foe. Instead, it is a challenge that
can be overcome with the right strategies and tools.
World Class Retention Reflects A Multi-Factored Solution
in many organizations is the same. Someone, such as a senior line
manager or HR professional who is tied to the business, raises the
red flag of attrition, recognizing its potentially devastating impact
on the company's strategic position. Then, someone scrambles to
pull some sort of training or tools together which focuses on only
a few (but not all) of the factors that are required to reduce attrition.
The result is the organization experiences mediocre results, or
no results at all.
retention solution is like the story of the blind men and the elephant.
Never having seen an elephant, three blind men were brought over
to a young elephant to let them experience it. Each man touched
a part of the elephant. The first one touched a leg and said, "Now
I understand. An elephant is like a tree trunk." The second man
touched the tail and said, "No. You are wrong. An elephant is like
a snake." The third man touched an ear and said, "You are both quite
mistaken. An elephant is like the leaf of a big palm tree."
If any of the
men wanted to control the elephant, they would have found themselves
incapable of doing so, because their understanding of the elephant
was only partial. This is also true of many organizations that try
to tackle only one factor of the attrition dilemma.
One piece of
anecdotal evidence comes from a report made by one of the nation's
leading financial services companies. In an attempt to stem the
outflow of critical managers and individual contributors, they contracted
with a reputable training firm with whom they had worked successfully
in the past. While the firm admitted they were not experts in employee
retention, they nevertheless conducted sessions for senior managers,
hoping to help their client to deal effectively with the problem.
but also predictably, the firm addressed only a fragment of the
retention solution. The kick-back from the managers was strong,
since they intuitively sensed this was only a partial solution and
it would not effectively address their issues. Therefore, one litmus
test for a retention solution is to assess its scope and depth.
Any solution that is unidimensional is bound to fail.
surfaced six dimensions that are most critical to influencing retention.
These dimensions must be infused into three major components that
must be in place and aligned for an organization to achieve world
Manager Retention Practices
consistently validated the reality that the manager plays a significant
role in influencing the employee's commitment level and retention.
There are a number of manager retention practices which increase
the probability that an employee will remain committed to an organization
practices represent the manager's actual behaviors on the job. This
often has little to do with the amount of classroom training they
have received. Furthermore, the best retention practices are not
the same as the standard menu for good organizational management.
Most organizations ask their managers to place productivity as the
highest priority, underscored by pressures to fulfill "our obligations
to our investors."
practices focus not only on what the employee is contributing to
the company, but also focus on how the manager can create a climate
so that the employee is retained and committed on a long term basis.
While enlightened leaders balance the needs of the organization
with the needs of the employee, the truth is that these leaders
are rare. Though managers play a very crucial role in retention,
they do not control all of the factors that can affect attrition.
Therefore, the second component represents the organization's responsibility
in the retention equation.
Organizational Retention Systems
There are a
number of organizational systems and processes that influence retention.
Some of them are evident, such as equity of pay scales. Other systems
are less obvious, and their impact on retention is often unrecognized.
For example, there is evidence that an organization's recruiting
systems and processes can significantly impact retention ratios.
These systems support the Manager Retention Practices, but they
also increase the likelihood that employees are committed on a long
term basis and are performing at their best.
Measurement and Accountability
to the other components, this component ensures that retention becomes
an on-going priority. Many organizations do not even know what their
attrition rates are. And those that do often lack enough data to
pinpoint where the problem is most severe, or to uncover the specific
causes of attrition.
those organizations that measure attrition sometimes do not track
it by length of service. The tenure patterns of the departing employees
can reveal valuable information concerning the potential causes
for attrition. Additionally, many organizations do not track attrition
by occupational group other than by "manager" or "non-manager."
This simple segmentation is often a crude one that does not provide
the organization the refined information it needs.
goes hand in hand with accountability. Organizations must hold their
managers personally accountable for retention. Likewise, they must
hold their corporate staff accountable for developing, maintaining,
and upgrading their retention systems. When retention is relegated
the status of being a "HR issue," it often falls to the bottom of
the priority list for managers. When it becomes one of their business
goals, it takes on a new perspective.
comes from one of the world's top hardware manufacturers. In a recent
meeting, the new director of the telephone technical support group
presented the following four new business goals to his management
team. The first three were:
- Fulfill Technical
Support Contract Obligations
the Highest Level of Customer Satisfaction
- Manage Costs
The fourth goal
was to retain employees! After some discussion, the entire management
team observed that they would not achieve the other goals if they
could not achieve their retention goals. In another division of
the same company, the senior managers' personal bonuses are calculated
on the basis of their success at retaining their best people. When
managers are held accountable in this fashion, it ensures that the
motivation to examine and enhance their personal retention practices
is ever present.
enough, organizational experts predicted that mergers and downsizing
would result in employees who felt lucky to have a job and who would,
of course, stay. This may be true for employees in the lower tiers
of performance. However, top talented employees recognize they represent
a valued organizational asset. When their loyalty deteriorates,
the tendency to switch organizations increases.
costs of replacing today's defecting work force are eating away
at the profitability of even the healthiest organizations. Even
when the bottom line remains intact, the loss of just a handful
of key employees who have a special expertise or who maintain valued
customer relationships can shake an organization to its roots. In
this age of high stakes and unpredictable market and organizational
changes, organizations must educate their managers and create an
environment where today's top talent can thrive. The alternative
1997 Integral Talent Systems, Inc. All Rights Reserved.
Because of the sensitive nature of any organization's attrition
problems, we have not identified our clients or other organizations
by name in this document when citing examples of their retention
problems or solutions.
This was not one of our clients, but rather a company we discovered
during our retention research.