The Costs and Benefits of Retaining Employees

One of the most rewarding things that you can do in your business is building a high functioning team. 

  • High functioning teams allow you to produce bigger and better results for your customers.
  • High functioning teams create freedom for you as a leader because you know your business is in capable hands.
  • High functioning teams are created through high functioning environments that allow and support team member growth.  Creating this kind of environment feels rewarding as a leader.

Not only is building high functioning teams most rewarding, but it can also be the most challenging.  As a leader, you may find that it’s easier just to move in from an employee who is a below-average performer rather than take the time to figure out what is getting in the employee’s way and creating a plan to address those issues. While there is always a time to move on from an employee, it pays to retain your team for as long as you possibly can.

When to Move On

Before we get into all the benefits and how-tos of employee retention, I will say this, you can keep an employee too long.  There are a few areas where moving on from an employee immediately is necessary.  Instances of theft, harassment, etc. should never be tolerated in a work environment.

Beyond egregious issues, I look for two things to assess whether an employee is worth working with.

  1. Does the employee own their mistakes?  If you have employees that don’t own their mistakes, it’s tough to move forward with that employee because, in their mind, there is nothing that needs to be worked on.
  2. Are they Growing and Improving? Even if the employee’s growth and improvement are slight, there is a benefit to continue working with that employee for as long as that employee demonstrates commitment and progress to getting better.  If they start to flatten out or regress for a period of time, then it may be time to move on.

The Benefits of Employees

As difficult as it is to work with people, there is a lot of value to team building for you. Employees create leverage for your business.  As your business grows, you start to realize how limited you are in terms of time and effort.  You only have so much of either and it becomes clear that help is needed if you are going to continue to grow and progress.  Your time is valuable. At each stage of your business that value increases.

At every stage of your business, it’s time for you, as a leader, to assess what your top value activities are to your business.  As you identify those top value-producing activities, you look at the other activities on your list of things that you are currently doing and start creating a plan to delegate those to other team members. 

What’s difficult about an activity like this is that it requires you to get outside of your comfort zone and embrace new things.  This process also requires you to let go of activities that were previously high-value activities.  When faced with this, it’s easy for you to reject growth and stay in your comfort zone.  Plenty of stagnant leaders do this every year.

In addition to leverage, employees create freedom.  When I first started leading people, my goal was to be important (this wasn’t a conscious goal but was driven by a limiting belief of where my value was).  The problem with being important is that I had my hands in everything my team did.  All decisions and actions ran through me.  There is a level of success that comes from this behavior which makes it so hard to let go of.

 I finally got a clue when my wife asked me on vacation if I worked with a team of babies since they called so much.  That really pissed me off, primarily because it was spot on.  I had not given my team the authority to make decisions on their own and I was the bottleneck to success.  This inhibited my ability to have freedom as a leader.  If you can’t step away from your work environment occasionally and not have it run at a high level, what you are doing is broken.

Lao Tzu said that “a team is best where their aim is finished and their goal fulfilled, the team will say ‘we did it ourselves” This thought created an epiphany for me in how I lead, trained and delegated to my team.  The result was more freedom and less worry about what was going on in the day-to-day work.

Turnover Costs Money

Employee turnover is expensive.  Here’s an employee turnover calculator to assess how much your own turnover costs. Most calculators factor in things like the cost to hire and onboard a new team member as well as what a company potentially loses when a position in the company isn’t filled.  Besides the hard costs of turnover, this impacts the culture and productivity of the entire team.   

Think about this in terms of client/customer retention, it’s more profitable to retain an existing customer than it is to go out and find a new one. The same is true for your employees.

How do You Address Retention Issues as the Leader?

Intentional Hiring

The more intentional you are with your hiring process, the more likely you are going to bring in the kind of people who will thrive in your business.  One of the recurring issues that I see in small business is the complete lack of process that exists in most companies’ hiring.  You know that employees are a necessary driver to growth, yet you handle the process of bringing on new team members casually.  Hiring is one of the most important processes in your business.

One of the first places to start with creating intention is in making sure that you have your Core Values identified.  What are the principles that exist in your business that you never want to compromise on?  One of our Core Values is to “Be Uncomfortable”.  We want team members who are always learning and developing their skills.  We also want them to take ownership of their mistakes and see mistakes as a learning opportunity versus something that needs to be covered up or hidden.  In our hiring process, we ask questions that allow a person to demonstrate that they are willing to operate outside of their comfort zone.  

Having an intentional set of questions that you ask is also important to get the hiring process right.  I see many leaders wing it in an interview.  It’s painful to watch because they never get any real meat from the interview.  Identify how many interviews that you want to do for each position that you are hiring for.  Figure out who will be involved at each step of the way and what do you want to learn about a prospective employee at each step of that process.  Then craft your questions accordingly.

Powerful Cultures

Once you have a candidate identified, the process of assimilating them into the culture of the organization begins. 

Onboarding

The first step in this process is your onboarding process.  How you set the tone for a new team member as a leader will likely predict that trajectory of that team member’s career.  Sit down with an employee and give them a high level of what it’s like to work for your company before they agree to start working there.

This part is so important.  Where you can go wrong with this is in being too much of a cheerleader and making the job sound better than it really is.  Being realistic about the culture and the job is a great way to demonstrate authenticity as well as to paint a clear picture of what’s to come.  This means you talk about what’s good about the culture as well as some things that an employee may find challenging in the work they do for you.

If you do this well, you build trust and manage expectations.  When this is done poorly, it sets the new employee up for disappointment and erodes trust.

Performance Management

Performance management gets overlooked when leaders feel pressed for time.  Investing in your employees is one of the best things that you can do to build a strong culture that creates growth for your business.  It’s one of the high leverage activities that bring the most value to your business. When you make a team member better, that improvement impacts every area of the business that the employee touches.

Simply put, working on improving your employees shows them that you care.

Here are some simple ways to improve your team’s performance:

  1. Regular feedback:  How did your team do today? Good? Not so good?  Did you tell them? Employees want to do a good job and they want to be recognized when they do a good job.  They want to know when they aren’t hitting the mark.
  2. Annual Reviews: Done right, this is a great way to do a state of the union on someone’s career and allow an employee to share with you where they want to go in the coming year to further their career. 
  3. Opportunities for Advancement:  If your job is a dead-end, the retention of employees becomes more difficult. Even if you can’t give them a different title, you can always give an employee more responsibility.
  4. Training: Everyone needs training.  How much training depends on the team member.  Creating space for training demonstrates that you are actively invested in the people on your team.
  5. Growth and Development Opportunities:  Are you providing opportunities for your team to get training and development outside of the four walls of your organization? Putting together a growth plan is another way to expand the capacity of a team member and demonstrates a commitment to your team.
  6. Accountability: This goes hand in hand with feedback.  To create great accountability, first, demonstrate the ability to be accountable.  This means that you are true to your core value and live the things that you talk about as a leader.  Once you create credibility as a leader, creating accountability for others becomes easier.  Don’t be the leader that assumes your team doesn’t want to be accountable. They do.

One of the limiting beliefs that could get in your way of performance management is born out of scarcity.  This quote I see sums it up:

“CFO: What if we train and develop these people and they leave?

CEO: What if we don’t and they stay?”

Setting the right context and creating an environment for nurturing and developing careers is a great way to demonstrate your commitment to your team.

Your Team as an Investment

I spend a lot of time with business owners talking about how to invest their money wisely.  One of the best investments that you can make as a business owner is an investment into the careful selection, development, and growth of your team.  According to the CEO of the container store, it takes 3 good employees to replace a great employee.  Your employee can’t be great for your organization if they don’t stick around.

What would an investment in your team yield for you in terms of growth for the business, the satisfaction of your customers and freedom for you as a business owner outside of your business?

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