The cost of no retention strategy

In the age of expanding AI use and the dilution of human input to business functions and outcomes, retaining your best people has become more important than ever.

While large corporations here in Australia and overseas are shedding people as a (in our opinion) knee-jerk reaction to the forecasted efficiency gains brought by AI use and automation, we are encouraging our clients to develop considered and deliberate people retention strategies to keep hold of their best people.

No doubt you read about IBM letting go of 8,000 employees only to rehire an equivalent number less than 2 years later. However, they state that they have not rehired into the same roles. Instead, they have hired people to fulfil the roles where AI couldn't compete: software engineering, marketing, client engagement, and strategy. These roles required creativity, critical thinking, and a human touch that no algorithm could convincingly fake.

“We didn’t miscalculate what AI could do. We underestimated what only humans can do.” Former IBM HR Executive (2024)

So, when you think about this, and consider what each of your people do, you will discover that it is not just the senior people in your organisation, or the ones who are most customer-facing, that hold the relationships with clients, critical business information, connections, or a deep understanding and loyalty to your industry, brand, product, service, impact and sustainability. These key people can certainly be replaced, but the cost of training, building experience, disengaged clients, or other negative impacts may not be fully understood until they are gone.

Think about what you have invested in your people so far: not just their salary/wages, but time and money to train them; lost revenue/profit while they honed their skills in the new role; time as they learned the business, the products/services, customer likes/dislikes, built internal relationships to support and learn from colleagues. Over time they have also worked on the continuous improvement of processes and systems, they understand what works, what doesn't and why. They have probably also taken on a raft of tasks and responsibilities that are not directly related to, or expected in their role, but on which the smooth functioning of the business relies.

Of course that doesn't mean you should hold on to all your employees for ever. Supporting employees to build a career outside your organisation, or start their own venture when they are ready, can also build a different kind of loyalty, commitment, and positive feedback/referrals. The difference is, that if it is done in an open, supportive and constructive manner, it can mean that an employee's transition out of the organisation can be done in a planned manner that reduces the negative impacts of their departure.

One of our clients did not have a retention strategy.

They were recovering from a semi-recent business set-back and were in survival mode. Just getting from one month to the next seemed to be the main focus across the business and the employees could feel it. The business development/sales teams were seen as the mini-messiahs who could turn things around from a revenue perspective, which created enormous pressure for them. The operational and functional support team were largely overlooked and copped the brunt when customers complained about anything from supply timeframes, to product faults, to non-payments and anything else that didn't involve ringing the till.

There were warning signs. However, the executive leadership team failed to listen to their employees when they spoke about issues that were impacting their enjoyment in their roles, and pushing them to seek alternate employment. As a result, in the last 6 months, they have lost five [5] key people from the team, four [4] of which were in roles as people leaders. In a team of around forty [40] people split across Australia and NZ, this has made a significant dent in the operations. More importantly, though, it has made it even more difficult for them to address some of the sustainability issues they were facing.

Now the remaining team have had to fill the gaps created by the departing employees. Some have faced significant learning curves so they could step into duties and responsibilities outside their current capability. New people have joined, but to save cost, have been hired at a less competent and experienced level. This means outputs and efficiencies delivered by the prior incumbents are not maintained, and are layered with the delays any new worker faces in building up enough basic business knowledge to start productively contributing. Those who are carrying new people, filling gaps, or having to quickly learn new skills are feeling the pressure of the additional workload and it is only a matter of time before more people leave unless the executive leadership team take action.

Many businesses overlook three [3] simple ways to better engage their key people:

1. Talk to your team. Regular individual feedback sessions where you discuss: what they have achieved; what are their barriers/obstacles/frustrations; where, how, and from whom they need support; how they live the company values; and what feedback they have for their leader; will reveal a lot. If the leader engages in active listening during these sessions, commits to finding solutions to overcome obstacles and frustrations, shows genuine gratitude for the outputs and achievements of the individual and follows through with direct support, or connecting the employee with the right resources to support them; they can better understand engagement levels and flight risk. Through these conversations, trust is built and open communication flourishes so that an employee considering options outside the organisation is more likely to share their intentions than to suddenly resign.

   
   

2. Link rewards to business outcomes. Our client was willing to pay commissions to sales people who generated revenue, but did not include the functional team in any rewards-based scheme. This had a negative impact on the culture, creating an "us" and "them" mindset in the operational side of the business. The executive leadership team argued that there was no money to reward employees, or give them pay increases to match market rates, so they did nothing. But a reward scheme that comes into play only once financial targets are achieved means that no-one is rewarded unless the results come. We have seen many examples where clients have turned around bad financial situations by engaging their team to help them achieve business targets and employees have then benefited from a reward or bonus when targets are reached.

   
   

3. Development opportunities. Not replacing key team members and forcing employees to scramble to learn new skills, does not count as a development opportunity. Development does not necessarily mean moving into a people leadership role, or taking on more responsibility, it can be in the form of exposure to new experiences - projects, client solutions, negotiations, change management and so forth. Tailored career development opportunities, especially for younger workers helps them build meaningful long-term paths within the organisation. Implementing mentoring programs pairs experienced team members with new and existing colleagues to share knowledge and accelerate professional development. This also avoids key knowledge leaving with employees. Professional growth through upskilling, virtual conferences, and reimbursement for training empowers employees to continuously advance their skills.

Overall, being strategic about your current people resources, how they could be freed up to be be more effective by using AI and automation functions within your organisation is only one small piece of the puzzle. Balancing this with weighing up the impact that an individual brings not only to their role, but the business overall and the cost to replace them helps identify who are your key personnel. This is called "criticality" and can be either or both role or person criticality.

For example, an accounts payable officer is replaceable and not that critical; however, if the person in the role is the only one in the organisation who knows how to use the system that pays the invoices and assigns the costs to the correct GL codes, then this person (and/or their knowledge) becomes business critical.

You should then assess "flight risk" and "potential". The people who have not had a market adjustment in over 12 months, have had an increase in team and/or workload and/or responsibilities; those who have had a manager change; and/or those who have not had regular feedback sessions with their leader over the past 12-months, are all likely to be high flight risk (meaning they are likely to leave the organisation soon, and without warning). Potential relates to the current readiness an employee has to step into a new role that requires different, or higher level skills or responsibilities. How soon could they be ready? Immediately? 6 months? 12 months?

The best way to establish much of this information is via direct and open discussions with each team member.

Once you have the information, you can begin to formulate a retention strategy that identifies your key personnel, what you need to do to retain them and how you mitigate the risk if you can't retain them.

Need help with this? Book in for an obligation-free discussion: Book time with Martha Travis: HR Support