I recently shared an Entrepreneur article titled “Here’s the Secret to Reducing Employee Turnover and Cutting Costs”. Someone I’ve known for many years commented on the post, which prompted me to reflect on the deeper reasons behind companies facing this challenge.
Having reflected, I felt the need to counter some of the points that 30 years in the business have taught me – and add to the thinking around how to address employee churn. While some valid points were made, there is also a lot missing if you are trying to tackle this issue in your business. The bottom line is it all comes down to making your whole organization more talent-centric.
The Severity of the Employee Churn Problem
The author begins by mentioning that, as companies grow, the organization will have to deal with employee turnover. All companies, regardless of size, must deal with this. So, the bigger questions to ask are 1) how long companies want employees to stay employed with them; and 2) what are they doing to see that aspiration come to fruition?
As a startup or small organization, do you really want to hire someone who’s changed jobs every 1-3 years? What makes you think they will stay any longer in your employ? The author suggests staff turnover is a problem for smaller firms. In fact, it’s far worse than that. It can crush them financially. If a company is bootstrapped, this staff turnover could cause them to go under. If they are backed with institutional capital, they may find they have to take on more investment, reducing the amount of ownership they have in their own company.
The Employee Turnover Problem in Numbers
The author cites some interesting data from a study by search firm Heidrick & Struggles:
“8,000 of the 20,000 people they placed were fired, quit, or forced out within 18 months. This underscores that when acquiring new talent, companies should give the candidate some time to settle into their new environment. Depending on the person, this might last for a couple of days or a week, but it’s a good way for the candidate to gauge whether the position and company are the right fit.”
I would argue that the conclusions he draws are flawed.
First off, these numbers are no surprise when you consider that over 50% of people leave a company within the first 18 months, for reasons having nothing to do with skills and abilities. This leaves “culture”, which is about alignment at the executive level and having a talent strategy that reflects this.
What does that mean in practice? It means having a culture of feedback. It means your managers have ongoing leadership training and development. But suggesting “it’s a good way for the candidate to gauge whether the position and company are the right fit” is surely the wrong way to approach this. Establishing there’s a fit should all be done prior to hiring the candidate and if your talent strategy is aligned to your business strategy and vision, your hiring success will be north of 90%.
In my experience, assuming candidates only need a couple of days or a week to settle into a job is wishful thinking. It takes some employees 2-3 months to settle in – and that’s if they have support to help them.
What’s critical to ensuring people settle in? First, it’s key to have organized onboarding. That should include assigning individuals (both HR and management) to support each new employee in learning how things are done in the company. This takes time – and so no company should expect someone to get up to speed in just a few days.
Being Talent Centric is the Cure
I would contend that the bigger issue here is whether the employers are even talent-centric organizations. Heidrick & Struggles, like other search firms, take on searches with a broad range of employers. Some are talent-centric organizations, many are not.
It stands to reason that many of the 40% of placements made by Heidrick & Struggles didn’t work out because the employer wasn’t talent-centric, rather than because of the reasons the author put forward.
In talent-centric organizations, the executive team and board are aligned on their vision and business strategy. Crucially, they have built a talent strategy to support this.
Without this focus on being talent-centric, recruiting is just a band aid and employee turnover will continue. To get to the heart of why you are having high staff turnover, begin by thinking about this alignment. It’s a process that takes time and commitment.
Now, most companies are unwilling to do what’s necessary to truly stop the bleeding, simply because of the time it may take. But what’s really the bigger problem: making the time to put an effective process in place or wasting millions on unnecessarily high staff turnover?