Retention is an Asset

Today’s post is by Anil Singhal, author of “The 5% Rule of Leadership: Using Lean Decision-Making to Drive Trust, Ownership, and Team Productivity.”

We live in an age of corporate layoffs. Whenever companies encounter a setback, the inevitable go-to move is to cut overhead. A challenging stock market, a significant customer loss, the retirement of an aging product line? Lay off employees. Wall Street analysts love to see it – staff cutbacks can mean a short-term boost in your stock price.

In the tech sector, getting ahead is often characterized by perpetual job-hopping in search of a better deal or a higher-level title on one’s resume. Staying at one employer for a few years is usually the exception rather than the rule.

But what if it is possible to build a company with an operating philosophy of never having layoffs and creating a work environment so rewarding that even people who leave to pursue a new job, often as not, come back?

I will make a pragmatic case not just against layoffs but for a commitment to hanging on to your employees in good times and bad. I’m basing it on my experience of running a company for thirty years, from founding to more than one billion dollars in sales without having a major layoff… and keeping my best employees for decades—and that’s through some of the toughest times the tech sector has experienced.

No one would ever call me a saint or a moral philosopher – and I’m not going to make the case that not creating the dislocation and pain of lay-offs is the right thing to do (though it is) or blithely acquiescing to the chaos of “endless employee turnover is inevitable” (it isn’t). But I am a pretty good businessperson if a bit of a maverick. The contrary side of my nature has kept me from going along with the accepted way of running a company, including using layoffs or accepting endless employee departures as a standard business tool.

What I’ve learned over the decades is that there is always some external force beyond a company’s control that can be blamed for its inability to hold on to employees – especially valuable, veteran employees. But if that is the case, why do many admired companies manage to keep their employees for decades, during good times and bad, in cutthroat industries, without losing them or forcing them into layoffs? How did these companies manage to transform employee retention into their own growth engine? Into an asset as important as their products or their customer base?

Here is the rarely admitted truth: keeping your employees is always an internal problem, not an external one. You choose to indulge in layoffs, or you acquiesce to losing key employees. Neither is inevitable. Further, regarding retention, if you are currently worrying about losing your best employees to your competitors, you already have a severe problem.

Why? Because your worry is disguised by knowing that you may not be creating the best work environment for your people.

Companies that enjoy high employee morale don’t worry about retention. They know they have it. If your employees are happy—and, more importantly, feel empowered with control over their livelihood—they aren’t going anywhere. That’s how retention becomes its own engine: if you are doing everything right for your employees, they aren’t sending out resumes.

Consider the alternative. By the time you realize that a valued employee is preparing to leave, it is essentially impossible to convince that person to stay, short of buying them off or promoting them. All that does is award the most brazen with advancement and teach everyone else that this is the route for higher pay. A great company is built on fairness, not upon unequal application or who has the loudest voice.

If you do not exhibit trust in your employees and convince them that you are treating them fairly every day in every corner of your company, with every single action, you will never be able to truly deal with the challenge of retention. Employees do not quit because circumstances have temporarily changed for the worse. They quit because they’ve long since decided that they will quit if they face one more setback. And by then, their unhappiness will have infected those employees around them.

Fairness has two components. First, it is the employee’s (not management’s) perception of being treated fairly. That comes from establishing rules of action and executing them evenly—not rewarding some (superstars, veterans over newcomers, or those who are the loudest) at the expense of others. Second, it is personal liberty. Everyone wants control over their life, and when they sense they have lost that control, they search for a way out.

Absolute fairness means giving every employee the same opportunity to succeed.

When employee departures rise to an unusual level, companies blame external forces. But that is rarely the case. Beyond average turnover from personal life changes, many employee exits are likely a measure of how fairly a company treats its employees. People stay where they are valued.

Anil K. Singhal is the co-founder and CEO of NetScout, a software developer that makes products to help customers monitor the reliability and security of their business networks. He is the author of the best-selling book, The 5% Rule of Leadership: Using Lean Decision-Making to Drive Trust, Ownership, and Team Productivity.

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