Increasing Employee Retention is Great — But It Can Backfire if You’re Not Careful

If you’re not discerning about your retention goals and efforts, reducing turnover can inadvertently lead to a decrease in performance.

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Retaining great employees is a goal of every wise leader, and it is indeed a wise goal. Replacing a lost worker is costly — estimates range from 33% to two times an employee’s salary. Not to mention the additional value that long-term employees bring to the table, from deep working relationships to familiarity with company norms to years of industry knowledge. By all means, make retention a priority.

But sometimes we lose the forest for the trees in our efforts to reduce turnover. We focus so intently on retention that we forget retention itself is not the goal — it’s performance.

Is It Retention or Performance You’re After?

We strive to hire and build a culture around people who stay, so that we avoid the costs (including a hit to productivity) and reap the benefits (including consistent performance) of hanging onto our talent.

Except: Not every employee makes sense to keep around. Not every employee is a high-value contributor. The goal shouldn’t be to retain anyone and everyone; it should be to retain your top talent.

What’s more, if you’re hyper-focused on retention without accounting for performance, you could be unintentionally dis-incentivizing some of your best people to stay. It’s easy to see how it happens; it looks something like this:

  • You set retention as a goal

  • You do some data analysis on long-term employees (“stay” interviews, role, department/team/manager assignments, career progression, etc.)

  • You determine the common characteristics of people who stay

  • You create a culture around those people

The problem: Only some of those people are your top talent. It’s better to optimize for the heavy hitters. Even better, you should identify the sweet spot of characteristics among employees who both contribute a lot and stay a while.

Know the Profile of Your Loyal High Performers

It’s different for every organization, but there’s a set of traits common among your top-performing, long-term employees. And as is so often the case with talent data, they may not be what you’d expect.

Take a look at this example from one of our clients. These are the results of an analysis for one particular role within their company: a business analyst.

This “fingerprint” illustrates where various employee characteristics lie on scales of performance and retention. It includes academic markers like school attended, GPA, and area of study; info on past work, athletic, and extracurricular experience; and measures on the most important factors in today’s innovation economy: soft skills.

You can see how hiring and optimizing for retention-based characteristics without regard for performance can get you into trouble. 

People who stay are not always top-performers, and top-performers are not always the type of people who stay. 

In this example, you’ll see that analysts with finance industry experience had high retention, but ranked lower on performance. The sweet spot of traits for this role at this company was high levels of Grit and Ownership, coupled with time devoted to a thesis or capstone in college.

Find the overlap, and focus your efforts there.

Use AI for Hiring

Of course, evaluating these soft skills and finding that sweet spot — while also ensuring everything is accurate and unbiased — is easier said than done. That’s where machine learning is a big help. A “smart” hiring solution can quickly and intelligently analyze reams of employee data, uncovering interesting patterns and pinpointing those common traits among your most loyal, most valuable employees.

But regardless of how you crunch it, be sure you’re not looking at — and acting on — turnover data in a vacuum. You might bump up retention, but it could come at the cost of decreased performance.

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