Bill was bragging about his company’s low turnover. “The lion’s share of our employees have been with us for over ten years! We seldom have to hire anyone new for our plant. That continuity is one of our competitive advantages.”
In general, he is right on. The cost of low retention is extraordinarily high. The cost of constant recruiting and training, loss of institutional knowledge, and overall feelings of instability can easily be higher than a company’s profit margin. However, there are a few dark sides to low turnover.
One of the most obvious is that the average age of the work force gets a year older every twelve months. Eventually the entire workforce gets ready to retire at the same time. Less obvious is that the average compensation of each employee increases every year. While it is true that often there is a productivity gain to match the higher compensation, that productivity can derive from each individual developing such a unique skill set that it is impossible to replace them when they eventually leave the company.
Another issue is that anyone who does join the company doesn’t have any promotional opportunities. “The only way I can get promoted is for someone to die” is a common lament in situations like this.
A stagnant workforce also tends to become locked into processes and technology that are increasingly outdated. One of our clients who did technical writing, for example, had a cadre of writers who insisted on using typewriters instead of computers. The quality of their work was outstanding. They were incredibly productive, in their writing at least. However, the organization couldn’t keep up with their competitors, who utilized the most current publishing technology.
The greatest issue, however, is a pervasive attitude that things were better in the past. I’ve seen a growing sense among the workforce in low turnover companies that management is somehow abusing them. “I didn’t have to pay for healthcare five years ago. I didn’t have to run as many machines. I didn’t …”
We all have a tendency to romanticize the past. I for one, have nothing but warm memories of my Army basic training. One can develop a biased view without a steady influx of new employees sharing just how tough it really is out there.
The ideal workforce is one that is diversified in age, culture, and experience. Couple such a workforce with a proactive delegation strategy that continuously develops and crosstrains people. Ideally, you will continue to maintain high retention with innovation driven by fresh blood.