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Employee retention discussions are often reserved for burgeoning economic times when competition for talent is high. Therefore it holds true that during tough economic times, when unemployment is high, employee retention quite frequently just gets ignored. Today’s Myatt on Monday’s question comes from a CEO who asks: “In a post earlier this month (“Workforce Reduction“) you criticized CEOs who use layoffs as an operating strategy, but could you comment on how to retain employees during tough times?” In today’s post, I’ll examine the topic of employee retention…

Few things in business are as costly and disruptive as workforce churn…whether it occurs knowingly as a result of layoffs, or unknowingly through poor employee retention practices, having the proverbial revolving door for employees to exit from is never a positive sign. While there are many secondary and tertiary items that can influence an employee’s decision to leave, I believe there is one single factor that constitutes the overarching reason which drives a person’s decision to leave their employer…Poor Leadership.

Let me begin by stating that no company in the world has a 100% retention factor if measured over any meaningful length of time. It is also important to note that while the least productive component of your workforce might be less tempted to jump ship during tough times, your tier-one talent is always at risk for what I call “opportunity shopping.” Highly skilled and talented executives tend to have a “grass is greener” mindset, whereas while less-skilled workers might dream of greener pastures they have fewer options and are more risk-averse.

The reality is that in good times and bad, there are definitely companies that have created excellent work environments leading to superior employee satisfaction and retention. Organizations that display the healthy, dynamic, and positive culture that fosters a motivated and engaged workforce all have one thing in common…great leadership.

There is an old saying that goes; “Employees don’t quit working for companies, they quit working for their bosses.” Regardless of tenure, position, title, etc., employees who voluntarily leave generally do so out of some type of perceived disconnect with leadership. Furthermore, while the accuracy of exit interviews are somewhat debatable, they nonetheless support the conclusion drawn in the previous sentence. The following list contains just five representative samples of the differences between solid company leadership and poor leadership…

Hiring Methodology: Great leadership teams use a values-based hiring methodology. They hire slowly, carefully, and only to fill a defined need with a specific skill set. Companies with challenged leadership hire quickly, often based on how affordably they can fill a position and many times in the absence of a defined need.
Leadership Continuity: Great companies have a clear vision, mission, and strategy, which are evangelized by a cohesive leadership team. A crisply articulated vision and continuity of leadership creates an engaged workforce that understands the business model and key objectives of the enterprise. Companies that have a fractured leadership team lose the confidence of line and staff. Employees that don’t understand what they’re playing for are very difficult to motivate and as a result, are often disengaged and non-productive.
A Planned Transition: Outstanding leadership teams set employees up for success and not for failure. They have an established onboarding process that puts forth an initial road-map for a successful transition by clearly defining key performance indicators, business objectives, and other key metrics. Well-honed leadership teams immediately assign an in house mentor to new hires to help ensure a successful acclimation. Unsophisticated leadership teams usually have a sink or swim mentality with regard to new hires and have substantial voids in training and management processes in the early days of a new hire. Poor leadership teams have a lack of continuity in their training and development which breeds discontentment and dissatisfaction.
Compensation: Great leadership teams understand the value of tier-one talent, and are not afraid to pay-up in order to attract it and retain it. They create a multi-tiered compensation plan that rewards employees at the top of the industry scale when performance objectives are met or exceeded. Moreover, they understand the value of non-compensatory recognition and apply it generously and judiciously. Companies with poor leadership often trip over dollars to pick up pennies when it comes to compensation. Their compensation plans lack sophistication, creativity, and are engineered by default and not by design. People will often cite non-competitive compensation as an issue for leaving a company, but what they are really stating is that the company has an unsophisticated leadership team that is out of touch with both the market and the needs of its employees.
Professional Development: Solid leadership teams challenge their employees by offering them a clear path toward personal and professional growth. Great companies create a career path that offers the successful employee the option of matriculating throughout the company based upon achievements, needs, and qualifications. Great leadership teams understand that in order to create a thriving and sustainable enterprise that a key priority is to develop talent to their greatest potential, and ultimately to create other leaders. Poor leadership teams don’t see the value in training, mentoring, coaching, and other forms of professional development. Their workforces are stagnant and not competitive, which places them in not only a competitive disadvantage but also at risk for long-term sustainability.

While today’s post was an extemporaneous highlight of just a few critical acknowledgments, I hope it clearly portrayed the value of leadership in employee retention and development.

Image credit: Dentistry IQ