Given how job tenure has plummeted over the years, I have a hard time believing this is accurate. Does anyone know a place where retention efforts come anywhere close to hiring efforts?
If it truly were more expensive to hire than to give raises, more firms would be giving raises.
I don't disagree but the real world is more complex. Recruiting is an entire department in most companies that have a vested interest in hiring from outside. They will pull all strings to keep getting money for hiring.
Corporate structures are really inefficient
There's an additional problem that firms are caught in a game theoretic trap. If you're the only firm providing stability, your investments in that in the short term might make you less competitive on pay, which means you'll train up people who might leave seeing higher pay elsewhere. So stability investments might be rational in the long term, but because of market conditions you get killed in the short term, and you end up tempted to abandon your strategy after a few bad quarters where it looks like they aren't paying off.
You're contradicting yourself here. Above you were saying that the way to keep employees is to give them proper raises, and thus enhance stability. How come greater stability equals less competitive pay?
If you spend money internally on promotes, you'll have less money to compete in the market for new hires. Therefore you might get some indicators that things aren't working, for example you might lose out on desirable candidates in the short term. Also retention might be a lagging indicator, because maybe some of your people already have their foot out the door, so it may look like people are continuing to leave in response to the old incentives before they realize things have changed.
Ideally you exist in an organization where everyone is on the same page about your strategy and anticipates those kind of negative indicators, but maybe understanding is fragmented and a bunch of stakeholders push back when they see those negative signals.
Why would that be the case? We already established that the company would pay industry level salaries to new hires and existing employees alike. Moreover, because you have less turnover, you need to hire less, so you have less wasted money on hiring and training.
All in all, I just fail to understand why companies don't value existing employees more. I think it's the fact that they take advantage of people's aversion to change and interviews. They rely on people NOT going to interviews.
Maybe it's like in the prisoner dilemma: you can't go lower than the market peak because no-one will come to you, even if you offer more on average than the industry average. This way, we reward the job hoppers with the peak salaries. Peak salaries means over time the average goes up too. I guess it's how free markets operate.
This has always been known. There simply was less demand for the labor that some workers were selling to get meaningful pay raises. Now that those supply and demand curves are shifting, especially in favor for those at the bottom of the pay scale, they have the option of selling their labor at a higher price.
I am curious how it turns out in the next few decades as lower birthrate effects cause younger, lower paid workforce numbers to decrease. Especially if it is not offset by labor from immigrants.
That's some crazy long time for becoming productive. Do you have any examples of the kind of projects where this would happen? As a freelancer I expect myself to be productive within a week, preferably from the second or third day onwards with smaller tasks. May be that I'm finding just easy projects.
The article doesn't address pay as a way to increase engagement—and thus decrease attrition. Indirectly, the article suggests that increasing pay wouldn't actually have that much effect, with the real benefit coming from managers "who give workers a sense of purpose, inspiration and motivation to perform".
Mathematically, you would need every 2% of average "retention" raise to yield a 1% drop in retention rate to break even, notwithstanding that 18% productivity drop.
Put another way, it's not about employees being commodities. It's about (generally) pay-for-retention programs NOT ONLY failing, but in the worst case negatively affecting those people who are engaged by forcing them to continue to interact with disengaged people who decided to stick around a little longer.
Maybe this is true of everyone and simply less documented. Silicon Valley has hijacked “disruption” but in many ways the old definition still applies to the same people. Tom was a disruptive influence so when he demanded a raise we let him go instead.
How does that follow? It certainly seems that spending $9K/year or less compared to coughing up 3 to 10 times that to hire proves that attention to retention is nowhere near that given to hiring.
Companies are either making a near universal error that has been well publicized at this point or the number is wrong and hiring is nowhere near that expensive.
Amazon is a very data driven company. But they have no problem churning through people like crazy. They are a company with hire to fire, so if hiring an SDE cost $50,000, they are letting managers spend 50K to fiddle with attrition stats.
Amazon delays equity a lot, so it may look financially sensible to churn through people.
Beyond that though, companies make plenty of universal errors. Can you think of any other errors the -average- company makes, that may cost them money?
I can see equity being a reason for Amazon, but it is hardly just equity granting companies that are this way.
But retention also isn't an easy metric to solve for. It's not "just do X and watch that number improve". The closest thing companies do is throw money at people, but that only works if you're so far higher than the rest of the market that people are looking at a massive paycut if they go somewhere else, and that still is only one data point affecting those averages. Certainly, no company that I left could have kept me by throwing $9k more at me; I made more than that with every company change I made, let alone what actually caused me to start looking in the first place.
Retention and engagement are hard, complicated problems. The mindset that employees are interchangeable cogs with no real needs of their own—particularly psychological needs that have anything to do with the workplace—is still a very strong one in every sector of the American workplace. Even for those companies where management, as a whole, does genuinely understand that it benefits everyone to have engaged employees, if you ask 10 people "how do you keep employees engaged?" you'll get 12 different answers.
We're still just a few steps away from tenant farmers, sweatshops, and company towns. The fact that there's research that shows spending on retention is massively more effective than spending on hiring will take generations more to actually catch on amongst the American executive class...unless we can manage to pull together a serious union renaissance and demand the better conditions that will actually help everyone.
1) Just like in Sales, on average it is cheaper _and_ marginally more profitable to retain an employee than to recruit a new one. This includes cost to recruit, interview, onboard, etc.
2) The exceptions here that throw off the average are those companies with strong inbound hiring pipelines (ex: Amazon will never have a shortage of applicants) that reduce the costs of recruiting + interviewing, and retaining high performers (e.g.: the cost of losing an upper-decile performer is much more significant.)
I imagine that if there was a law that said companies could write off half or more what they spend on employee retention and development, you'd see Amazon and others put a lot more money that direction.