A New Approach To Employee Retention — Part 1
Editor’s: This is part 1 of a two-part series on employee retention by Mark Waschek of Ag1Source, the largest agricultural recruiting and personnel solutions organization in North America.
Long gone are the days when the term “career” implied to 30-plus years with a single employer. In the past, it was assumed there was a contract between the employee and the organization in which the employee would be loyal and committed while the company would take care of him/her for life. Today’s work environment is much different.
The latest Bureau of Labor Statistics report states the average tenure for employees is 4.7 years. When you break down the numbers by age group, those closest to retirement (ages 55 to 64) skew the numbers with 10.4 years average tenure. Meanwhile, the youngest segment of workers (ages 25 to 34) average less than three years. Retail agronomy is tracking very close to these same numbers, with perhaps a bit more tenure for the older group, and slightly less for the younger group.
Keeping Employees Is Critical
In retail agronomy where markets are shifting, and margins are tightening, the ability for an organization to increase employee tenure and reduce turnover is a critical component to profitability. Consider the following items and how they impact your organization each time an employee leaves: Reduced productivity; loss of customer engagement; training costs are lost; and the added expense of recruiting, interviewing. There are additional items we can add to the list, but it doesn’t take long to see the impact of employee turnover on your business.
When you add the above items up, your costs can range from a low of 75% of the individuals annual salary if they have less than two years of experience up to 150% of annual compensation for a more tenured employee.
Working with your management team and employees to create a culture that reduces turnover and enhances retention is very important. However, what we intend to do in this series is leverage turnover to create win-win scenarios while you are working on those steps.
To understand the concepts we will discuss, we need to first come to terms with today’s employment environment. The current trend of employees leaving after just a few years of service is not simply a result of younger workers not wanting to embrace company loyalty. In fact, it’s quite the opposite.
Consider the first day of employment for most folks in our industry.
The employee is greeted by their manager (Step 1) and welcomed to the company with enthusiasm and excitement of what lies ahead in a great career with the company (Step 2). In return, the employee shares their excitement and expresses loyalty to the company (Step 3). The manager hands the employee off to the HR department (Step 4). The employee spends the morning signing documents and learning that they are an “at will” employee, and the company therefore reserves the right to fire them at any time.
Do you see the disconnect? Companies are expecting employees to give life-long loyalty without committing to any loyalty or security to the employee. This results in employees discussing loyalty, yet willing to leave for a better opportunity. It’s as if the entire first day is based on dishonest conversation. Employees constantly scan the market, organizations lose good people, and mangers are caught in the middle.
In the book “The Five Dysfunctions of a Team,” Patrick Lencioni discusses the importance of lack of trust, fear of conflict, lack of commitment, avoidance of accountability, and inattention to results as the five factors that break down a team, and prevent it from succeeding. When you look at the first day for an employee, the stage is set to question trust and commitment, as well as raise concerns about the other items as well. A business without trust and loyalty is a business without long-term thinking.
The rapidly expanding software and IT industry has some distinct parallels to the retail agronomy sector in that it is a highly competitive industry with far more positions than qualified candidates. Companies are willing to do what it takes to steal top employees, and turnover of the wrong employees can totally derail an organization. Reid Hoffman, a co-founder of LinkedIn, created a process that embraced this chaos and enabled LinkedIn to keep top employees for several years in a market where tenure can often be measured in months.
The team at LinkedIn was able to create a framework of trust and commitment where both employer and employee are able to keep the promises they make. They stopped trying to act like employees were family, and stopped thinking of them as free agents. Instead, each manager started treating employees like Allies on a tour of duty.
This concept of tours of duty is outlined in his book “The Alliance.” At LinkedIn, the company believes that employment is an alliance between the employees and the employer, and should include a mutually beneficial deal, with specific terms outlining each party’s commitment to the other.
It Could Work For Ag Retail
I’ll admit, the first time I heard of this concept, it seemed too sterile or structured to work in an industry where hard working people and relationships are key to success. Then I reconsidered.
What the Alliance strategy describes is an environment where employment is based on what the company can do for the employee, and what the employee can do for the company. A mutually beneficial relationship — one where the employee invests their skills into enabling the company’s success, and the company invests in the employee’s career development. In this environment, rather than the discussion of being an “at will” employee, there is a contract that specifically describes what the employee will accomplish for the company, such as establish a territory in 24 months, turn around a department in 18 months, etc.
Likewise, the employer agrees to provide the employee with specific training or experience that will provide specific benefits to their career advancement, such as leadership experience, product management experience, purchasing, etc. Rather than a long-term employment agreement, what is being signed is a one- to three-year tour of duty, with the option to assign the next tour of duty once the previous is accomplished.
The concept isn’t as far-fetched when you think about it. It leverages the reality that employees may want to leave to improve their career, and encourages them to stay by building a relationship with outcomes that make them want to stay.
Part 2 of “A New Approach To Employee Retention” will be published in November.