The Challenge of the 7th Wave: Retention
You are out surfing. It is a relatively quiet day with light winds and the waves are strong but manageable after some offshore weather last night. Then, from nowhere, the seventh wave hits. It was birthed way out in the wide ocean in a strong wind. From a distance it looks much like any other waves. It grew up under much the same conditions as all the other waves that come ashore, but somehow the confluence of a number of events leads to the development of a monster. If you are ready for it, the seventh wave can be the ride of a lifetime. If not, it can drag you under. The seventh wave can either be a very good thing or very bad thing for a surfer, and the same is true for a company working to ensure strong employee retention.
As the economy has improved over the last two years we have had waves of employment and job creation, but each was mild and on their own; unimpressive. None have seemed to make a significant impact on the economy or the workforce. Each seemed to rise up as a sector of the economy saw some forward motion and then settle into the new normal without fundamentally changing the landscape of employment or the way employees saw their situation. The latest Bureau of Labor Statistics report for November 2016 highlights that the number of employees voluntarily leaving jobs is running near an 8-year high, but the statistic has been relatively stable for the last six months.
This is quietly beginning to change. As a recent Carnegie study underlined; 41% of US employees are now actively looking to leave their current jobs. The average tenure of employees in the US is now reported to be less than 2 years. The combination of an accelerating recovery from the recession (at long last), the prospect of increasing government spending on infrastructure and defense, as well as the potential for an improved regulatory environment for business in the US is encouraging optimism in major sections of the technical workforce. This is causing employees to reflect on their current employment conditions and the clear potential for “greener pastures” as major portions of the economy begin to expand. This is going to trigger a “seventh wave” type of attrition for companies that are unprepared.
Smartest Employees Leave First
If history is any teacher (and it is) the first employees who could leave your company under this seventh wave will be those with the greatest insight, solid experience, a strong predisposition for strategic thought and the most marketable talents. They will not only be the first to see the potential of the new environment, they are the ones who will be actively pursued by the competitor companies who win early in this cycle.
These employees have the most to gain by changing their position to find additional responsibility, a chance to innovate, an opportunity to be appreciated for their experience and potentially additional money. They are also most likely to leverage the new tools available to pursue opportunities – the explosive growth of opportunity search software, online networking and job boards. As a result; you have a significant potential to lose many of your best and most valuable employees early in this new market. What is most troubling is that this is going to happen just as your market begins to expand and the “tribal memory” and experience of your key teams has the most potential to leverage the work your teams have done in the past.
Retention is a Hugely Efficient Proposal
Keeping even a few of these employees from leaving is clearly a wise investment. The straight cost of replacing the people you most want to retain – the technical employee with strong credentials and experience, can easily run to twice their annual salary. Moreover; there is an indirect cost to losing key employees. Departures of key employees (especially quality leaders) can significantly impact the morale of the remaining team as well as their confidence in the viability of your company. The longer an employee stays on your team, the greater their connectivity is across your organization and the more impactful is their understanding of how to make your particular bureaucracy work. As work becomes more team focused even a replacement with greater education, wider industry experience and superior external contacts will face a challenge in trying to match a key incumbent on your team in these areas. Clearly; retaining an employee rather than having to replace them is most often the most cost-effective approach. If the wave of departures that is coming affects multiple employees in your organization, it could be exceedingly expensive. On the other hand; taking effective steps to retain and engage your workforce could pay off significantly over the next months.
While it’s Important, Money is Often Not the Motivator for Retention
Many senior leaders believe that money is the major key to retention. About eight years ago a study by McKinsey Quarterly contradicted that view; identifying that non-financial incentives were more effective (and, often, much more effective) at motivating employees. The well-known insights from Maslow’s Need Hierarchy suggest that there is a good reason for this – motivation at the basic levels can be directly affected by money, but beyond the second level of need (“Safety Needs”) there is a diminishing potential for money to influence the individual elements of motivation. Since most employees are beyond focusing on their biological and safety needs for motivation, there appears to be a much greater potential to motivate an employee to stay with a company using by non-monetary considerations.
The Difference is Leadership
Preparing for the seventh wave is the way to make it into a great opportunity for your company. Failing to take reasonable steps to prepare for it will cost you money, market position and credibility. One of the key ways to increase retention during this challenging time is to strengthen, develop and empower your first-line managers who lead key employees. Investing now to improve the leadership climate in your company and increase engagement and retention is a cheap, effective and logical step. Don’t let your company and your best and brightest employees get swept away by the seventh wave.