In our recent New Tech benchmark only 50% of employees said they thought they would still be in the company in three years time.
The general rule of thumb is that it costs 1.5 x a person's annual salary to replace them. An average New Tech company has 250 employees. Not even accounting for their incredible growth, that means 125 will leave over the next 3 years. That is somewhere north of $20m in replacement cost. Even for a startup with cash to burn, that represents LOT of money... so what can you do to keep your people for longer?
Lets start by asking ourselves the question - would 100% retention be a good thing? The short answer is no. It is great if you are doing such a good job that no one wants to leave. However, just as it's not possible to create a great brand that appeals to everyone, it's impossible to build a company that is perfect for every employee.
I was once at a talk with great turnaround entrepreneur Jerry Goldress. He asked a simple question to the room full of CEOs. What percentage of employees they would rehire if everyone had left and they could invite them back one by one?
What would you say for you company? Jerry went on to say that the average answer across thousands of CEOs was about 80%. So what are we doing with the other 20%?
Jerry went on to say there is nothing that executives can do about this alone. Instead, the only thing you can do is create a culture where everyone takes responsibility for having the right people around. Interestingly enough, employees often cite not getting rid of people that are a bad cultural fit as a reason for leaving.
Getting rid of people that are not a good fit is one piece to the puzzle, but there is another harder component if you are growing. In fast-growth companies there is a real issue of the company is growing faster than it's employees ability to grow with it. If you double your revenue in a 12 month period then you are going to need lots of people to step up. Usually into roles they have never filled before - and not all of them will ready to take that leap.
And this actually goes to the heart of how we need to focus on retention. The goal is not to keep everyone forever.
Our goal as an organisation should be to keep people for as long as what we are trying to achieve as a company fits with what they are trying to achieve as an individual.
... Plus, to recognize that it will change over time for both the company and the person.
What great companies do is turn this to their advantage. They don't want to keep someone for five years. They want to grow into a company that their best employees would join all over again.