On May 4, 2010, in John Sumser, More2Know, by John Sumser

rentention-300pxThe temptation to hide incompetence with buzz words extends from business models to HR Strategies. We watch in wonder as lemmings who want a career in marketing try to talk about “modifying the value proposition”. We think this is something they do to avoid the harder work of identifying potential customers. “Modifying the value proposition” is the current code for “nobody wants what we’re selling”.

Sometimes, it seems like we’re surrounded by zombies who can only repeat what they’ve read and are incapable of independent thought. The “search” for a “business model” (which means “we haven’t figured out how to make more money than we spend”) has become the fuzzy cover-up for what, in other times, might be referred to as “failure”. The problem is roughly analogous to the old joke “we’re losing money on each unit we ship but we’re going to make it up on volume”. This latter notion can be generalized as “we’re discovering the path to profitability”.

There is an inverse correlation between college Grade Point average and tenure. That’s right, the higher the GPA, the shorter the tenure. When people talk about “retention” as an HR Strategy, this is the dynamic they are trying to fix. The “attrition” problem (which “retention” is supposed to fix) means that the really bright ones who work hard and exceed their objectives don’t stay very long. Nobody is really trying to retain the “D” students. We all secretly hope that their attrition rates will skyrocket. They never do.

Getting the high performers to stay a little longer is a resource decision. As they get better at working the culture, the value they deliver grows disproportionately to the rest of the culture. It’s tough to want to pay them directly for the value; that creates the tough managerial problem of explaining why two workers who seem to have the same job make discrepant salaries. Ultimately, the difference between compensation and performance sends the high performers elsewhere.

People leave their companies when the cost of staying exceeds the reward of leaving. Without burrowing too far into the details, cost includes a broad range of compensation variables from challenge and responsibility to actual financial gain. If a retention program focuses on the delivery of additional responsibility and challenge, it simply shortens the tenure of the high performer. Responsibility and challenge equate to additional compensation on the open market.

This raises counterintuitive questions:

– “Isn’t it better to have lots of high performers leaving faster than a few who stay for a long time?”

– “Can’t you make the case that high attrition rates are a symptom of a powerfully successful culture?”

– “Isn’t ‘retention’ an indicator of failure?”

The reason that the logic is so murky is that “retention”, like “business model”, is a code word. It means “we can not allocate Human Capital with precision” and “we don’t know exactly how long we need to keep a person with X qualities”. When you encounter a company busily working on retention programs, you are witnessing a failure of planning at a detailed level.

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