The Psychology of Employee Retention

http://www.romymisra.com/the-psychology-of-employee-retention-all-about-stories/

by romymisra • 14 years ago

71 30 14 years ago

nhashem• 14 years ago

This is a great point, and I wish some of the executives as my previous employers understood this. For awhile, things seem great. The company has a core product that is showing great growth. That in turn leads to even more ambitious goals. The value from the above allows the company to offer generous perks. Life is good.

Then what happens? The core product begins to plateau. Executives begin to abandon long-term, ambitious projects, in order to squeeze more juice from the lemon to hit quarterly goals. Finally, perks are cut because it's just way too lavish to have free soda when you're only growing profit 33% year over year instead of 100%. As the OP indicated, the employees are no longer left with any stories. You may still enjoy your day to day work, you may still be well compensated in terms of salary. But without that intrinsic motivation, it's only a matter of time before your enthusiasm flags and you're looking for another job that can offer you what you had before.

For company leaders, products plateau and nobody is successful all the time. But goals and perks are under their complete control, and especially for the latter, it usually requires only as nominal amount of money. It can mean all the difference in retaining your talent during bumpy times, or having everyone abandon ship because they feel abandoned already.

btipling• 14 years ago

I never understood perks. I work where I work because I like the people, the technology, and the product in that order.

The lack of money and success create anxiety, but an abundance of these in terms of what an employee can hope to achieve do not influence my decision about where I work.

As for perks, I don't care about trivial asides that people think up in order to retain talent. This is an artificial device that will not stop the bleeding. Don't waste your time doing this if it's something you have to think up in order to achieve yet another metric. If you're going to do something fun do it because you want to do it because you yourself would enjoy it and know that at least a few of the others on your team would too. But then you're not doing it for retention, you're doing it because you want to.

Bottom line is if the factors don't add up, an employee will leave, but things like people, technology and product are what candidates should consider before they join, and they're not likely to change much over the duration of an employment, so if someone is leaving, they probably didn't know what they were getting themselves into, something big changed, or they think they are really failing.

Or maybe they just found a new thing that interests them, in which case let them go.

BadassFractal2• 14 years ago

Same here. There's no amount of ping pong or free soda that will make me put up with a bad team, bad management or lack of purpose I can care about.

I also hope that a good PC with good monitors and a decent desk and chair should not be considered part of the perks.

rdl• 14 years ago

Perks which improve my productivity are things I care about (good computer, ability to get needed books and other resources, functional IT support, fast Internet connection, private office when/if desired, wfh when optimal, comfortable chair, easy commute/parking). For most of those things I'd trade $1 in salary for $0.50 or less allocated to them optimally. Not having to deal with admin stuff like expense or hour tracking is worth $5 in salary for $0.50 in benefit.

Free food, on site gym, nice offices, etc I'd trade at a discount to salary, like$1 in salary for $2-3 in perks.

rprasad• 14 years ago

[Reply to the dead comment; you need to be logged in witht showdead to see it.] Benefits in kind does not refer to work equipment, since those aren't things you get to take with you--the company owns that stuff, you just get to use it. Benefits in kind means something like receiving a personal laptop on company dime that you can take with you even if you leave.

yannickt• 14 years ago

Your post reminded me of an article Steve McConnell wrote in 1996 about consulting at Microsoft.

"While Microsoft was still involved with OS/2, the OS/2 development group requested that the company install a washer and dryer in their building so that they wouldn't have to go home to do their laundry. Although the group never got its washer and dryer, the message was clear: this team wanted to work. It didn't ask for promotions, more money, bigger offices, or fancy carpet; it asked for management to remove every conceivable roadblock so that it could concentrate on shipping a product."

Source: http://www.stevemcconnell.com/articles/art05.htm

Perks are an effective retention strategy only if they enable an already motivated employee to get more work done. And for the employee to be motivated, the work has to be rewarding.

SatvikBeri2• 14 years ago

The perks are largely about (1) having something cool to talk about, and (2) feeling respected. Perks aren't the only possible way to achieve these but they're a good indicator.

With my friends I can't talk about the details of the awesome technical projects I'm doing at work-they won't find it interesting. But I can talk about how fun it is that we have tons of autonomy, about 30 different board games in the office that we play at lunch every day, a beanbag chair we can use for naps, and have a foosball table.

DanielRibeiro2• 14 years ago

Github recently shared some of its secrets on this topic[1]:

"We've gained 100+ employees in two years and we've never had anyone quit. That won't last forever, but I think it's a good indication of the type of company we've built. There are certain things you can do to retain employees, and by worrying about employee happiness you'll ultimately create a much better product."

[1] http://zachholman.com/talk/how-to-build-a-github

BadassFractal2• 14 years ago

Sounds a lot like Guy Kawasaki's MAP: Mastery, Autonomy, Purpose. From http://hiring.monster.com/hr/hr-best-practices/workforce-man... :

"First, the most powerful way to enchant employees is to provide a MAP. “M” stands for mastery -- that is, a way to master new skills on the job. “A” stands for autonomy -- so that employees can master new skills while working autonomously and not be micro-managed. Finally, “P” stands for purpose. Employees love to master new skills in autonomous positions while working towards an organization with a high purpose such as making the world a better place."

DanielRibeiro2• 14 years ago

That actually comes from Dan Pink[1]: http://www.youtube.com/watch?v=u6XAPnuFjJc

[1] Also a book http://www.amazon.com/Drive-Surprising-Truth-About-Motivates...

SatvikBeri2• 14 years ago

...and this framework has been around even longer than that, although the vocabulary has typically been "Autonomy, Competence, and Relatedness": http://en.wikipedia.org/wiki/Self-determination_theory

pif• 14 years ago

The most important part for me, as an employee, is what I do at work. More than how my company changes the world, I'm interested in what I'm asked to change in the company. And, rather than than a project like: "Here are the specs, when will it be done?", I prefer a lot: "Here is an idea, do you think it can be done?".

poezn• 14 years ago

In my opinion it's a mistake to come up with perks just so you can tell the right story. In his most recent book Clay Christensen describes what makes you love your job better than anything else I've read. He distinguishes between motivators and hygiene factors (mainly citing Frederick Herzberg's research): "Motivation factors include challenging work, recognition, responsibility, and personal growth. Motivation is much less about external prodding or stimulation, and much more about what’s inside of you and inside of your work." On the other hand he lists hygiene factors: "status, compensation, job security, work conditions, company policies, and supervisory practices." (from http://www.fastcompany.com/1836982/clayton-christensen-how-f... and his book). You can pile up perks as much as you want; they just serve as hygiene factors. As long as your motivators are not met, a high retention quote is wishful thinking. HR departments at bigger startups (and bigger perks) know that all too well.

At the end of the day you don't work for the big colorful slide at your office, or Whiskey Fridays, or your favorite 80's arcade video game. Cynically speaking, these are just there to make your long work days a bit sweeter.

So what's left for startups to retain their top employees? It's figuring out what truly motivates them. This takes a lot of hard work, empathy, and will. It's a long term investment. As such it might not pay off in the short term, but it might well give you in return the high retention rate you're looking for.

Knighty• 14 years ago

Absolutely, people have been studying motivation theory for decades. Making up 'stories' might help, but without any supporting evidence or research it seems mostly like pseudo-science to call this the 'Psychology of retention'.

For instance, how many people did he poll? Where did they work? Are they representative of the startup phenomena as a whole? What question was asked and what were their verbatim responses?

DigitalSea2• 14 years ago

You know what's great for employee retention without sugar-coating it? Pay your employee's correctly (you can't expect talent for peanuts), don't make them feel like they can't leave at a normal time, treat your employees with respect, offer a clear path of progress in the company (where you are now, where you could be) and one of the most important: innovate and excite.

dhimes• 14 years ago

It turns out, remarkably, that intrinsic motivation is far more powerful that extrinsic motivation. The intrinsic motivation comes primarily from enhancing a sense of self-worth. Good things: employees learning new things (skills and knowledge), employees allowed to self-direct (micro-managers sap morale), employees feeling a sense of challenge (tasks not trivial, but also not impossible and progress being made), employees having a sense of purpose, and employees being recognized for their contributions.

I don't have my source, sadly. It was probably and article in Harvard Business Review.

yesimahuman• 14 years ago

The "respect" aspect isn't touched on much in these comments. It's shitty when your boss belittles your team in front of guests and makes you feel like you're all his "peons." No perks can fix that kind of disrespect.

DigitalSea2• 14 years ago

I worked at a place like that once, they churned through so many system administrators especially and in the end found themselves in a situation where they were finding it hard to get system administrators and after all of that eventually fired the manager who had single-handedly damaged the company by that stage it was too late. So respect is something I definitely agree a company and its higher-ups should possess.

lars512• 14 years ago

This article is really about the importance of the stories people tell themselves, stories which explain how what they're doing now fits into some greater purpose in their life.

Basically, it argues that as an employer, you can help people craft these stories by trying to get people on board with the company's main goal, or else to help people feel unique and interesting to others through a company culture with strong perks or curious features.

This is really about career development too. Not so much in the sense of onward and upward, but in the sense of helping people feel that this aspect of their life has meaning and direction.

Tichy• 14 years ago

What about "teams"? I have come to the conclusion that "team spirit" and so on are also main strategies to make people stick to crappy jobs. Case in point: soldiers - I think being a soldier is probably one of the worst jobs ever (simply because you have a high risk of being killed on the job), yet people stick it out for the sake of their mates. Or mining - doesn't sound very attractive, but apparently actual miners love the companionship. Personally I have also frequently delayed quitting a job for too long because I didn't want to disappoint my colleagues. In the end I should probably have inspired them to leave, too... (I know, that is just an anecdote, but still).

michaelochurch• 14 years ago

"Advertising is based on one thing, happiness. And you know what happiness is? Happiness is the smell of a new car. It's freedom from fear. It's a billboard on the side of the road that screams reassurance that whatever you are doing is okay. You are okay." -- Don Draper

I think that this quote hits on what most people want out of their careers. It's not about million-dollar salaries or being the boss or "changing the world". It's about validation. People are only happy in their careers when they feel that what they've accomplished, relative to their level of ability, is socially acceptable. Ambitious people, almost by definition, want to Get Out of middle-class mediocrity, but that doesn't mean everyone has to get rich. Being respected and famous or well-connected is enough for most people, but most people don't even get that. The present-time proxy is prestige and visible progress toward getting there. If you have a job at Google or Goldman or DE Shaw-- any job-- that's being on the putting green as most people see it, but if you're not a brand-name company you have to keep reaffirming to your people that you're capable of providing a ticket out of Blahville.

Startups give a reprieve from the traditional metrics. You don't have a lot of money right now, but that's OK, because it's part of the process and the story. No one has heard of your company, but that's OK, because people will. They're very good at making people feel OK about what they're doing based on the promise of future wealth and prestige. And because we're in a bubble, startups are prestigious even among a crowd that (a) has no business being involved (e.g. MBA-culture carpetbaggers who become founders on account of VC contacts rather than ability) and (b) would usually find them risky and a bit undignified. So right now it's fairly easy for a company to just say, "We're a funded startup" and become prestigious overnight.

The ivory tower is phenomenally good at creating this validation: the money isn't there, but "prestige" is. If you're successful in academia, you will legitimately feel like you're living the best possible life-- a "life of the mind". Finance can do the same thing: sure, there are people making $200,000 per year from lifestyle businesses in Madison rather than working 90 hours per week and living in a Manhattan shoebox, but you, the IBD analyst, are just 4 short years away from getting face-time with Fortune-500 CEOs. When a work culture develops the attitude that people outside of it are failures (cf. academia, high finance, "biglaw") that's usually for the purpose of keeping people captive. VC-istan is playing the same game, exaggerating the difference between the life of a "corporate drone" and what it offers. (Note: if you're not VP or higher in the startup, your work experience will NOT be higher quality than the corporate-drone life, the differences will be shitty health benefits, no name on the resume, a lower salary, and no severance if you get fired or the startup tanks.)

People tend to leave their jobs when they feel they can do better, because the stakes of the career game (even up to what kinds of opportunities your kids have and whether they'll be taken seriously by the world rather than being another generation of middle-class meat for society to process) are so high that it's just not acceptable to have an outcome below one's ability. You don't have to take the highest-paying opportunity at each juncture, but if you aren't re-evaluating every year or so whether you're at the best opportunity possible for your age, experience, and economic environment, you're at risk of falling behind, being labelled a B-player, and never catching up.

Most of these perks that seem like bullshit are actually about this validation effect. No one ambitious would tolerate, after 5 years at a job, having to ask permission to call a work-relevant conference a business trip (and be reimbursed) or being turned down on an attempt to start one's own project, but no one is going to expect to have that kind of support from the first day. People want autonomy and resources, in the long term, and the perks are a proxy: if they have nice pens, Macs, and free dinner on Day 1, they feel more confident that the company will provide the resources to really accomplish something and to live well by Day 1001.

crixlet• 14 years ago

salient points. thanks!

VLM• 14 years ago

Most posts have been citations of authorities, or anecdotes WRT to perks and stories.

Could I break the trend and make a simple request instead?

"Make it a gift not a reactive response to bad news".

I've never worked startups or dotcoms so all the perks I've experienced have been in response to low scores on morale surveys and similar situations. Frankly if morale is low due to terminal mismangement the only thing that makes morale worse is "pop corn machine" or "mandatory PR kickoff meeting after hours" or "offsite meeting" or "casino night" or "barbecue lunch day" or "pizza day". Please find out why it sucks and fix it, don't just simply buy a popcorn maker machine and call it good.

"Oh, so the problem is the boss couldn't lead starving wolves to raw meat but he can't be disciplined because he's on his boss's golf team, well I know lets have casual dress monday just this one time, I'm sure that'll make everyone happy and productive"

It gets to the point where if you hear about a team doing a "perk" thing you automatically start wondering how they screwed up or whats wrong.

"That dept is having free pizza day at lunch today" "Oh no, that's terrible, I thought they were doing OK, whats wrong?"

eavc• 14 years ago

I would suggest those who are interested in the literal psychology of employee retention do some reading of the academic research on the subject.

There's an interesting review of the literature about job burnout, for example, that was published in the Annual Review of Psychology in 2001.

http://igitur-archive.library.uu.nl/fss/2006-1104-200110/mas...

I know that psychology isn't held in as high regard around here as the harder sciences, but as much anecdote about the laws of human behavior as there is on HN and in the startup scene in general, I'd think there would be more interest in what science has to say.

ruswick• 14 years ago

They are forgetting the most powerful story of all:

"I am making a lot of money."

dagw• 14 years ago

Most of my friends are making more than I make, and I still wouldn't trade jobs with most of them.

viscanti• 14 years ago

"I am making ENOUGH money" is important, and different for everyone, but it's not enough to retain top talent. There will always be someone willing to throw more money at a great employee. Basing any retention policy on salary (beyond making sure the salary is "enough") is doomed to fail.

For startups, equity is a big motivator, because the employee has some level of control over how the company does. This allows the employee to dream of the perfect beach house somewhere, that if they work hard enough, they will be able to get. Even selling that dream isn't enough to keep the best talent. There needs to be a good team in place, and tasks need to be delegated in a way that employees are constantly challenged and rewarded by being able to build awesome things. If those aren't in place, no amount of equity or salary is going to make things better.

curtin• 14 years ago

formal dress up days

For me, that would be opposite of a good retention strategy.

thaisan• 14 years ago

Great point. I think having a story is spot on. It's why founder's myths are so enthralling to all of us and why having a concise and digestible message is so important to a company. I work in the hiring space and I've come to believe that recruiting is really the same thing as selling... It's the same idea pitching your company and product to VCs or selling your product to consumers. In all these cases, people want to know where they fit into the tapestry - why should they buy your product, invest in you, or join your team?

Point 3, "These make for a unique story. A unique cult to want to be a part of and more importantly tell people about." is also really interesting. The companies with the best recruiting and team-dynamics are those that harness these inclusive, cult-like cultures. You can see it everywhere, in little things like team t-shirts, quirky events, or big things, like cult-leader CEOs.

enraged_camel• 14 years ago

I think perks matter if and only if they reinforce an existing positive culture.

For example, I work for a medium-sized software company where employees tend to be fairly athletic. We have groups of runners, surfers, soccer players, tennis players and softball players. We have a licensed yoga instructor come in twice a week for yoga lessons (paid for by the company). We even have a group of people who participate in sailing races every week on the CEO's sail-boat. This aspect of our culture makes it very easy for new hires to quickly make friends and feel like they have become a part of the company. Also, all of these sports are fully sponsored - all sport-related expenses can be reimbursed.

Last year, management approved building showers on the first floor of the building for the sole purpose of making it easier for lunch-time runners to clean up before going back to work. The effect was immediate: many more people started running at lunch time, as they no longer had to worry about being sweaty and stinky after lunch. The showers themselves are a very small perk, but they reinforce the perception that management cares about and supports the active lifestyles of employees.

I somehow doubt having a "Whiskey Fridays" would have the same effect, as we don't have many heavy-drinkers at our company. But one of my friends works for Zappos (based in Las Vegas) and I'm told that everyone there drinks at work. Makes sense, since it's Vegas.

The Psychology of Employee Retention

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