The value of a good team cannot be overstated, it is more important than strategy, technology and even cash available. I have written before on some of the principals for recruiting a great team and how you should never stop recruiting. It is ironic how much effort companies put to recruiting the best but do not put the same effort into their existing team members until it is too late.
While most companies acknowledge the importance of recruiting, they often neglect the complementary principle that you need to put as much effort in keeping your existing team satisfied. Just as increasing user acquisition costs intensifies the value of retaining existing players, the increasing difficulty in finding great employees intensifies the need to minimize employee churn. There are multiple costs of replacing a good employee
- The hard costs of recruiting a new employee. This can be payments to a recruiter, referral fees to employees, travel costs to attend recruiting, travel costs to bring candidates in for interviews, etc.
- The lost time spent evaluating candidates. The time you and your team spend reviewing resumes/CVs, interviewing candidates and discussing options. These days, almost all candidates go through multiple rounds of interviews before being offered a position. Each of those interviews takes 30 minutes or more of someone’s time, if you value that time based on the interviewer’s salary, you quickly get into the thousands of dollars (even more for a senior candidate who meets with leadership).
- Training costs. These are both direct and indirect. You may have to send the new employee to various external training courses to prepare him for the job. More likely you will need to spend you time or your colleagues will training the new person on how the company works, practical issues (i.e. where the bathroom is), systems, interactions with other teams and what they need to perform their tasks optimally. Again, there is a cost for every minute that you and colleagues spend getting a new hire up to speed. When you break out salaries by how much the person earns per hour, this training cost often runs into the thousands of dollars.
- The lost productivity in losing a high performer. You should never consider replacing an employee as an upgrade. If there are better people on the market, you need to recruit them proactively and replace weak team members. Assuming you adhere to this principle, if someone leaves voluntary, it means their replacement is not likely to be as good as the existing team member. The cost can range from minimal to huge in having somebody not as good performing a role on your team.
- Less output. If you employ somebody, they should be providing a valuable service (or else you should proactively have eliminated the position). When you lose somebody, that task either does not get done until a replacement is in place or you must take other people off of their tasks (which again are worthwhile or you should not having them doing it). In either case, the overall output of your organization decreases.
- Stronger competitors. When a good employee leaves, by definition they go somewhere else. That somewhere else is often a competitor, so not only are you losing their services but a competitor is likely improving. If Messi were to leave Barcelona for Real Madrid, the loss to Barcelona would be magnified by the improvement of their arch competitor.
- Higher risk. Regardless of how rigorous your recruitment process, there is always risk that you make a bad hire. Many people interview above their actual competence, while others may just not be a good fit for your organization and processes. Thus, you have the risk that not only will the new hire be slightly weaker, they may prove incapable of doing the job and themselves have to be replaced. Then you have both an extended period of the job not getting done (or people being pulled off other tasks) and a repeat of the costs above.
Respect your team
This post was prompted when a friend of mine, whom, I felt was one of the most valuable members of his company, left because someone was made his supervisor whom he felt was not as qualified as himself. A key takeaway from this incident is that it was not an issue of money (his salary was not decreased), it was not an issue of title (he was not demoted) or an issue of job responsibility (his tasks did not change materially). Instead, it was the perceived slight that the new manager was considered senior, thus implying that his skills were not highly (or as highly) valued. Employee retention starts with respecting your current employees.
A critical factor in retaining employees is to communicate with your team. Not only should you regularly be speaking with your direct reports, but the whole team. Communication is not simply telling them what to do, but actually talking to them. Understand what is important to them individually. Learn what problems they are facing. Find out what is happening outside of work. See how they view their colleagues. The important thing is having a consistent two-way communication stream. As well as ensuring communication is bi-directional, talk to your team members consistently. What is not an issue today could be an issue next month or year. You will then learn about problems before these issues prompt somebody to leave.
Understand their career goals
Tightly related to the need to communicate is the need to know how they want their career to develop. You are more likely to lose somebody if they feel they are not progressing towards their career goals than due to missing a bonus payment. Once you understand the aspirations of your employee, there are three things you can do to help retain the employee:
- Build a plan so they understand how they reach their goal and agree on the timing of each step.
- Provide training that gives them the skills to reach their goal.
- Avoid pulling them off their desired path. Rather than assigning them a role that does not move them forward, you can give them the tasks and responsibilities that keeps them on plan.
If their career path is not consistent with their position or your plans for the employee, it is better to address this issue immediately than make believe it does not exist. Sometimes people do not have the skillset to meet their ambitions. Or you may have a much bigger need in a different part of the business. It is preferable to discuss the reality of the situation with the employee. Maybe you can help them become more realistic about the best career choice. If you have a high priority in a different area, you can make a deal with the employee to help alleviate any long-term damage it causes to their plan. Even if there is not a clean or easy answer, the problem does not go away by ignoring it. Best to agree that you will separate in the future and be prepared for that inevitability.
Team leadership is not fantasy football
One of the most destructive practices to retention is when you treat your employees as if they are your fantasy football team. Some leaders look at their team on paper and see who they may be able to improve results by moving X into position Y, then hiring Z to take X’s position, firing A and moving B into their role and then bringing in C from another part of the company to do A’s job. While this may seem like an efficient way to run a team, it is one of the biggest contributors to churn. If X does not want to move into position Y, they may do it but at the same time they will be sending their resume to your competitors. Leave your fantasy football to ESPN and treat your employees like people.
Treat them as well as you do outsiders
When you are recruiting, you often offer competitive salaries, bonuses, improved titles and other perks to candidates to bring them onto your team. Keep in mind, your competitors are doing the same to your people. You should regularly look at your team and assess what you would offer that person if they were a candidate and not an employee. If there is a large delta, you should either promote them or increase their compensation. While it may seem like an unnecessary expense, the costs I outlined above tied to losing an employee make it a worthwhile investment. If you have to wait for them to have another offer, you have already lost. You will still lose them or overpay to keep them and still probably lose them (more than 50 percent of people who are enticed to stay end up still leaving within a year).
Focus more of your energy into retention
Just as I extoll on the product side, put as much or more of your energy into keeping your team (and on the product side existing customers) as you do in recruiting new team members. I am not suggesting you do anything to reduce your recruiting efforts (just as I do not suggest you reduce the time you spend on user acquisition) but make the same effort to reduce employee churn.
- There are multiple direct and indirect costs in losing an employee and they add up to a much higher expense than you realize. Thus, it is as critical or more to retain your talent.
- A critical element to retaining your talent is good communication. Understand everyone on your team, not simply your direct reports, and work with them to ensure you are both in the best possible situation.
- Your employees are not your fantasy team. As soon as you lose sight of their individual goals and needs, you set the foundation for churn.