How to Retain Employees: 13 Practical Takeaways from 5 Case Studies
It’s something that keeps good leaders up at night:
Are my employees happy?
Will my top performers stay?
What more could I be doing to keep them?
Learning how to retain employees is a top concern for today’s CEOs and HR pros … and for good reason.
According to a 2014 attrition survey by consulting firm Mercer, voluntary turnover is up 5% since 2011. Job-hopping, it seems, is increasingly becoming the norm, thanks in part to a workforce comprised of more and more Millennial workers, who are likely to have twice as many jobs over their lifetimes as baby boomers.
This trend is only amplified in a recovering economy, where workers can change jobs with more frequency and fewer consequences.
All this turnover, of course, is expensive. A study from the Center for American Progress found that the average cost of replacing an employee was about 21% of her salary.
As important as turnover is, you’d think there would be a plethora of great advice on the subject. But we’ve been underwhelmed by the information out there explaining the ways to retain employees… most of it vague, abstract, and frankly, not very useful.
That’s why we’ve compiled the following five case studies, highlighting examples and takeaways from the companies who are winning the war for talent and getting the retention question right — so you can see what REAL retention strategies look like in ACTION, and adapt them to the specific needs of your company.
Case Study #1 Netflix
Over the last decade, Netflix has rewritten the rules in the cable, video rental, and VOD spaces. Disruption, you could say, is in their DNA.
So when Patty McCord, the company’s first Chief Talent Officer, arrived at the company, she refused to take a business-as-usual approach.
Her novel yet practical style sent a shockwave through the business world, and the culture deck that she developed alongside Netflix CEO Reed Hastings has been hailed as a defining document of Silicon Valley.
Here’s what Netflix taught us on how to retain employees:
Takeaway #1 – Take care to only hire “A” players by focusing on character in the hiring processTake care to only hire A-players by focusing on character in the hiring process Click To Tweet
According to tradition thinking, your organization will always be stratified – there will be a small group of “A” players (high performers who provide the bulk of innovation and results), a large group of average performers, and another small group of poor performers who will either have to be replaced or will leave due to lack of engagement.
McCord asked, if we know how much more value they provide, why hire anything other than “A” players?
Identifying these “A” players in the hiring process is a challenge, but Netflix found that the key was to focus on character as much as skills or experience.
McCord and her team took great care to only hire mature, “fully formed adults” who put the success of their teammates and the organization before their own.
For McCord, hiring top-talent constituted the ultimate perk.
“The best thing you can do for employees—a perk better than foosball or free sushi—is hire only ‘A’ players to work alongside them,” she wrote in the Harvard Business Review. “Excellent colleagues trump everything else.”
This insistence on surrounding top talent with other top-talent is a key driver in the company’s above-average retention rate.
Takeaway #2 – Treat employees like adultsTreat employees like adults Click To Tweet
According to McCord, the best thing to do once you hire fully formed adults… is to treat them like adults.
In practice, this means an expense policy that’s just five words long (“act in Netflix’s best interest”) and things like unlimited vacation time, which sends the message that Netflix trusts their employees to do the right thing for the business. Most recently, the company garnered international attention by offering salaried employees up to a year of paid paternity leave.
Above all else, it’s this insistence on treating people like trusted partners – something unthinkable in the command and control management styles of days past – that has contributed to Netflix’s above average retention rate.
Takeaway #3 – Develop great managersDevelop great managers Click To Tweet
All effective retention strategies must include a plan to develop great managers.
After all, managers are the direct link between the C-suite and the rest of the org, and are responsible for executing leadership’s strategy and vision. Good managers aren’t necessarily star performers – they are leaders first, and doers second.
At Netflix, leadership emphasized the importance of team building above all else.
“We continually told managers that building a great team was their most important task,” McCord wrote in HBR. “We didn’t measure them on whether they were excellent coaches or mentors or got their paperwork done on time.”
Case Study #2 – Whole Foods
Whole Foods is the gold standard when comes to retention rates in the grocery business, an industry that’s traditionally fraught with high turnover due to long, at times unpredictable hours and a perceived lack of growth opportunities.
A study led by graduate students at Johnson and Wales University identified the main drivers of Whole Food’s impressive retention stats. Here’s what they concluded.
Takeaway #4 – Create a values-driven cultureCreate a values-driven culture Click To Tweet
According to the researchers, it all starts with CEO John Mackey, who combines elements of the service- and values-leadership models with Japanese management philosophies to arrive at a style that emphasizes a sense of purpose.
In his oft-cited blog post “Creating the High Trust Organization,” Mackey makes the case that modern businesses need a higher purpose, in part, to help galvanize employees around a common cause. With 50% of employees feeling they have different values than their employers, it is vitally important to establish a set of company core values that employees can get behind.
Mackey codified Whole Foods’ purpose in the company’s core values, which include “Support Team Member Excellence and Happiness” and “Serve and Support Our Local and Global Communities.”
It’s this sense of purpose – which permeates the ranks and aids in decision making process from the highest to the lowest level – that helped attract the right fit for the organization, and therefore helped lead to the company’s low employee churn.
Takeaway #5 – Empower your team in the decision making processEmpower your team in the decision making process Click To Tweet
Another key takeaway from the research – individual employees at Whole Foods are given far more credence than those at most companies, certainly more than those at other grocery chains. This is accomplishment mainly through the company’s unorthodox, egalitarian corporate structure.
There are no bureaucratic hierarchies at Whole Foods. Employees are divided into teams and empowered to interpret the company’s values and make most corporate decisions on their own.
“Whole Foods is a social system,” Mackey explained to Fast Company in 1996. “It’s not a hierarchy. We don’t have lots of rules handed down from headquarters in Austin.”
It’s a democratic system that requires consensus in order to function, a style influenced by Mackey’s affinity for Japanese management schools of thought. While this inevitably slows down the decision making process, the culture of ownership and investment it creates far outweighs any operational inefficiency it might cause.
Takeaway #6 – Let your employees be their true selves at workLet your employees be their true selves at work Click To Tweet
Think back to the first time you walked into a Whole Foods. You might have been taken aback by the workers’ appearance:
No uniforms. Bohemian clothing. Lots of tattoos.
The word “hipster” may have even entered your mind.
While the workers’ heterogenous attire might seem like a minor detail, it actually reflects a core tenet of Mackey’s management philosophy.
In decades past, there has been an arbitrary distinction between our “professional selves” and our “actual selves,” the implication being that we behave artificially at work, and authentically in our private lives. This distinction extends to all aspects of culture and identity, including our language, dress, and grooming.
Mackey’s innovation was to obliterate this distinction, and to encourage his employees to express their authentic, true selves at work. This is particularly daring in the retail food service space, where employees frequently interact with customers and risk undermining the integrity of the brand.
By design, this allows for a level of personal autonomy that extends to dress and free expression. The researchers cited this autonomy as a key driver in employee satisfaction and Whole Food’s exceptional retention rate.
Case Study #3 – Clif Bar & Company
Emeryville, California’s Clif Bar and Company is an inspiring success story with humble beginnings. The multi-million dollar business was built on a product that founder Gary Erickson dreamed up while riding his bike, and a prototype that he made in his kitchen – certainly no small feat.
But the company’s biggest accomplishment might be their astounding 97% retention rate. (And no, that’s not a typo.)
The Awesome Office podcast recently sat down with Clif Director of People Learning and Engagement to crack the code on Clif’s extraordinarily low level of voluntary turnover.
Here’s what they learned:
Takeaway #7 – Create a culture of ownershipCreate a culture of ownership Click To Tweet
In 2000, Erickson and his wife and co-owner Kit Crawford were toying with the idea of leveraging private equity to buy out an existing partner and prevent the company from being acquired by a multinational corporation.
But something didn’t feel right to Erickson. Deep down, he knew that the private equity deal didn’t align with the company’s mission and values. Ultimately, Erickson pulled out of a nearly final PE deal and opted for employee stock option program (ESOP), which had the added bonus of providing a sustainable benefit for employees and that was more consistent with the company’s core values (know as the five aspirations – sustain Clif’s people, business, brands, community, and the planet).
The ESOP helped build a culture of ownership that keeps employees invested in the success of the business and creates a personal, emotional connection to the company that few others can recreate – hence Clif’s astronomical retention statistics.
Takeaway #8 – Invest in personal(ized) growth and developmentInvest in personal(ized) growth and development Click To Tweet
Smart companies know that people are their most important asset, and that investment in personal development is an investment in the longterm health of the organization.
But Clif’s approach to develop is a cut above, focusing not just on a development plan that would benefit the company, but one that supports the individual’s goals as well.
As Freitas told the Awesome Office show earlier this year, Clif works with employees to develop personal values, and then create a personalized growth and development plan that enables employees to live those values in their careers.
Guided by the company’s “Five Aspirations,” she also helped launch Clif Bar’s Sustainability Benefits Program — an initiative that helped the company earn numerous workplace awards, including ‘best place to work’ nods by Fortune and Outside magazines — but more importantly, rewarded employees for actions that were consistent with the company’s values.
Takeaway #9 – Leadership must walk the walkLeadership must walk the walk Click To Tweet
Perks are certainly a factor in retention, but sometimes unspoken cultural norms or unwritten rules prevent employees from taking advantage of them, and therefore undermine their effectiveness as a retention strategy.
As Freitas told, the Awesome Office Show, the key is to get buy-in from management. Simply put, employee perks won’t get used unless upper management make a conspicuous effort to participate in them.
Case in point – Clif CEO Kevin Cleary’s office is right next to the gym. Not to prevent employees from spending work time at the gym, mind you. To make sure they are.
At Clif, employees are encouraged to work out at the company’s state of the art onsite gym, and are even paid up to two hours a week to work out. Cleary wants to see employees in there, making use of the facilities, and making a commitment to their health. More often than not, he’s alongside them, getting his daily workouts in.
It’s this demonstration of long term commitment to a culture of health and wellness that inspires Clif employees to stay year after year.
Case Study #4 – Scopely
Los Angeles-based mobile gaming studio Scopely is known for its fun, irreverent culture.
What do we mean by fun?
Well take their now infamous recruitment campaign, “the most interesting engineer in the world,” which enticed engineering candidates with lavish perks including a tuxedo, sex panther cologne, a spear gun, a year’s supply of beer, and the kicker, $11,000 in cash… wrapped in bacon.
That should give you some idea.
The strategy has paid off, as the company has been a veritable hit factory, cranking out six #1 games in a row, including The Walking Dead: Road to Survival, Yahtzee with Buddies, and Disco Bees.
Here’s what Scopely can teach you about retention:
Takeaway #10 – Celebrate anniversariesCelebrate anniversaries Click To Tweet
The solution? Engage employees around yearly milestones. True to form, Scopely celebrates anniversaries with hilarious, often absurd gifts, including custom made samurai swords and one of a kind oil employee oil paintings that are hung around the office. This novel approach to anniversaries has helped Scopely keep the talent they need to consistently produce top-selling mobile games.
The solution? Engage employees around yearly milestones.
True to form, Scopely celebrates anniversaries with hilarious, often absurd gifts, including custom made samurai swords and one of a kind oil employee oil paintings that are hung around the office.
This novel approach to anniversaries has helped Scopely keep the talent they need to consistently produce top-selling mobile games.
Takeaway #11 – Failures are your friendFailures are your friend Click To Tweet
The surest sign of a toxic culture is one in which employees never fail.
The reason: a lack of failure means your employees are too afraid to take the risks that are necessary in order for your organization to grow.
As their former General Manager and current advisor Jason Weiss told the Awesome Office show, failure isn’t just tolerated at Scopely, it’s celebrated.
At the end of each week, the company holds a “Fail of the Week” session, during which a member of each team shares their most epic failure and what he or she learn from it.
The point isn’t to call out people’s mistakes, but to acknowledge failure’s critical role in the growth process, as well as share the lessons learned from the experience.
Case Study #5 – Amazon
Lastly, we turn to a company who’s culture you might not want to emulate.
This year Amazon made headlines and ignited a national debate after a New York Times expose uncovered what they called a “bruising” company culture at the e-commerce giant.
According to the article – which spoke to dozens of former and current employees – the defining characteristics of the Amazon experience was intense pressure, unreasonably high expectations, and constant back stabbing from colleagues.
And while CEO Jeff Bezos and other executives dispute the Times’ depiction, their high employe churn rate seems to support the claims made by the employees who went on record. According to a survey conducted by Payscale, the median tenure at Amazon is just one year.
If you care about keeping your top performers, heed these lessons from Amazon’s retention missteps.
Takeaway #12 – Cultivate a culture of cooperation, not mistrustCultivate a culture of cooperation, not mistrust Click To Tweet
According to the Times article as well as subsequent employee commentary, the culture at Amazon was viciously competitive.
One of the biggest factors was the company’s Anytime Feedback Tool, a communications platform that enabled any employee to provide feedback about colleagues directly to that colleague’s manager — anonymously.
The AFT was created to collect both positive and negative feedback, but because all Amazon employees are ranked and the bottom of the ranks culled, the tool was often used by cutthroat employees to sabotage one another.
Very often, this negative feedback was used as the basis for withholding promotions and other benefits, without the employee ever being able to defend herself from her accuser. This contributed to an overarching atmosphere of fear and mistrust, and was cited as a major factor for the company’s high employee turnover.
Takeaway #13 – Don’t rely on “golden handcuffs”Don’t rely on golden handcuffs Click To Tweet
In what’s a rather conventional retention strategy, Amazon offered employees stock options that vest after a period of years, usually three to four. Employees, the theory goes, will stick around at least enough to see their stock vest, during which time you can extract enough value out of them to make the relationship worthwhile.
(Compare this to Netflix’s stock plan, which empowers employees to choose a compensation mix that includes stocks that continually vest.)
But as a Buzzfeed News piece points out, the vesting strategy seemed to have little effect on employee retention at Amazon. The average employee lasts just one year.
The lesson? The so-called “golden handcuffs” can’t compensate for a toxic culture.
As you can see, effective employee retention strategies come in all shapes, and will look different depending on a variety of factors including your industry, the size of your organization, as well as its culture and demographics.
However, certain themes appear over and over again, including trust, collaboration, values and purpose, personal development, and authentic communication. Use these ideals as a guiding principle when developing or refreshing your retention strategy.
Which of these examples resonate with you? What does your company do differently to keep its top talent? Let us know in the comments below.