The Best Way to Reduce Employee Turnover
As soon as you hire a new talented employee the clock starts ticking. Talented employees are forever being enticed with other job offers, so if you're not able to keep them happy, motivated, and engaged with their work, that clock runs out and they're out the door for a new job.
But it doesn't have to be this way. Reid Hoffman, the co-founder of LinkedIn; Ben Casnocha, an entrepreneur and co-author with Hoffman of "The Start-up of You"; and Chris Yeh, co-founder and general partner at Wasabi Ventures, write in Harvard Business Review about the importance of speaking honestly with your employees about their career goals, how they are feeling in their current role and what changes they desire, and what offers they are entertaining.
Usually, once an employee tells you they're interviewing, your relationship with them begins to deteriorate. "It's a self-fulfilling prophecy: once an employee has gone far down the road with another potential employer, it's hard for her to maintain a positive relationship with her current company," Hoffman, Casnocha, and Yeh write in HBR. "Neither manager nor employee necessarily wants the current employment relationship to end, but because of the lack of trust and honesty, that's precisely what becomes likely to happen with talented employees."
To reduce surprise resignations and turnover, check out Hoffman, Casnocha, and Yeh's suggestions:
The Right of First Conversation.
Hoffman, Casnocha, and Yeh came up with a procedure called the "Right of First Conversation" (punning, of course, on the contractual Right of First Refusal). In it, your employee can speak frankly with you about wanting to explore their career options without getting fired. "If an employee decides she wants to explore other career options, she commits to talking with her current manager first, so that the company, if it so desires, has the opportunity to define a more appealing job or role," the three write. "This doesn't mean that the employee informs her manager every time she receives a call from a headhunter--this kind of disclosure would be onerous for both employee and manager. Rather, the employee should initiate a conversation when she is seriously considering alternate job offers or career paths."
The employee should also reach out to you when she feels her current role and duties don't fit, and explain if there's no change, she would start looking for another employer. This isn't a legal binding agreement, but rather an alliance of trust. If it's violated on either side, it becomes a breach of trust.
As the boss, you have all the power in the relationship. So it's up to you to build the necessary trust for The Right of First Conversation to work. Hoffman, Casnocha, and Yeh write that you need to say, "We don't fire people for talking honestly about their career goals." You have to mean it and never go back on your word. "Once employees believe that the company will live up to those words, managers can point out the benefits to the employee of granting them the Right of First Conversation," they write. And remember you need to honor your end of the deal, and be honest and trustworthy throughout the process and never become vindictive. "In a high trust relationship, a manager will not reactively denigrate competitors or 'say anything' to keep an employee," the trio writes. You have to be able to give truthful advice on the opportunities at your company and at others.
Match or exceed offers.
If your employee is the type of talent you cannot lose, this agreement gives you time to change their position, match or exceed offers, or change what needs to change in order to keep the employee. "An employee who provides advance notice allows the company the time necessary to explore and develop more possible options and offers," Hoffman, Casnocha, and Yeh write. "If the company has weeks to match or exceed an offer from a rival, it has a much better chance of pulling together a counter than if it only had twenty-four hours to respond."
If they leave, keep the relationship.
Turnover is part of running a company. You cannot hold it against an employee who takes another opportunity, especially if it fits her personal, financial, or intellectual needs. The most important part of the Right of First Conversation is that you've built a relationship founded upon trust and honesty. Since you have had advance warning, you've had the time to change and you've had the time to prepare. Now, it's time to foster a long-term relationship with an alum instead of splitting up amid recriminations and pointing fingers.
This may be totally different from what you're used to--but that's the idea, Hoffman, Casnocha, and Yeh write. "The Right of First Conversation represents a major departure from business as usual, but that's precisely the point. The lack of trust between employer and employee is costing both parties. Adopting the ROFC helps both parties build trust and a longer, more fruitful relationship," they write.