Don’t Optimize For Tenure
Written by Blake Turner, Head of Engineering at Bench.
The upside of turnover and how to maximize employee ROI
“Hey, do you have some time to chat? Kinda urgent.”
It’s a message that puts a brick in the gut of any manager who reads it. Frequently, it’s followed by a quick sit down where a team member informs you that they’ve made the very difficult decision to leave your company. It hurts. You like this person, and they probably like you. You’ve invested a lot of time and energy into them, and replacing them is going to be a lot of work. You do what you can to keep them, but in general, the decision is made before the conversation starts.
And that’s okay.
In tech, people leave. Our team members have recruiters hitting their LinkedIn multiple times per day. It’s almost more work to not respond. Every company that is hiring seems to be in hyper-growth, working on greenfield projects, with a bank account overflowing with VC cash. There are opportunities to start companies, to build teams, to join a group of all-stars — you name it, a recruiter has written it. In this ferocious market, one can understand the pattern of applicants spending just one year at every previous job: it’s the fastest way to get big pay increases, and after a year, there are significantly greener fields than the one you came to plow.
Knowing this, it’s very tempting to spend energy trying to figure out how to hack this system and become an organization with above-average tenure. But is this a worthwhile pursuit? What sacrifices would you need to make in order to raise the average? Can you guarantee that keeping an employee for an extra year or two is the best use of your capital? What happens to morale if you make a commitment to average tenure that you can’t meet?
My recommendation? Let go of tenure as a metric. It is not, in itself, valuable. The goal of this post is to help managers accept turnover as a reality so they can focus instead on ensuring that they get value from every hire, every day, for as long as it makes sense for both parties.
A bit of backstory
I began writing this post during a spike in turnover in engineering at Bench, shortly after I took over the organization. I needed to rebrand what was happening in order to eliminate worry within the team that we were in a crisis. I gave the first draft of this post as a quick whiteboard session during an all-hands meeting, which was generally well-received. The spike in turnover ended. We backfilled the roles, and I put this post on the backburner.
Looking back, if I’m going to be totally honest, I didn’t publish this post because I was still terrified of turnover, and I worried that it would give people permission to quit. Instead I buried it (and my head) in the sand, and hoped for the best.
Then we had another spike a few months later. This one hit me hard, personally. The anxiety that I had buried from the first turnover spike came back with teeth. I lost a lot of sleep. I started looking at every engineer, asking myself “what can I do to keep them?” I would get a jet of adrenaline every time a team member would ask for a moment to chat. It was not healthy, or fun. I eventually made it through this period first by asking for help from my boss and colleagues, and then by focusing my efforts on what I could control: the quality of my team’s experience, not the length of it.
What follows is an attempt to share what I learned through these two difficult events. So, here goes.
The upside of turnover
There are some who argue that Silicon Valley’s success is due in part to the fact that so many of its employees have experience working at other companies. With each job, they learn new ways of solving problems, collect cultural best practices, and build strong networks. In their next role, they can talk about how things were done at Company X, and how Company Y tackled a similar issue. In the best case scenario, only the best aspects of old jobs are promoted in new jobs, which makes the entire ecosystem stronger. If we embrace this concept, the hamster wheel of hiring and onboarding can be reenvisioned as a flywheel for ideas that strengthen our organizations.
This is, of course, ridiculously optimistic, so let’s ground ourselves for a moment. To start, acquired institutional knowledge alone isn’t a good enough reason to hire someone. Next, our orgs will only benefit from this knowledge if a) the people we hire are actually able to impart it, b) they stay long enough to do so, and c) our existing teams are receptive to it. This means we need a good hiring process, a compelling value proposition, and a culture that strives for excellence.
In short, if we have the right environment, we can get huge value from people who have worked at multiple other companies. But to create the right environment, we need the right people, and as we’ve already bemoaned, they tend to leave before we’d like them to. So how do we make the most of the time they’re with us, and maybe even increase that time while we’re at it?
First, we’ll look at employment as an investment, and then discuss the manager’s role in maximizing return on it.
Visualizing employee ROI
As engineering managers, we use the capital available to us to hire people to deliver software that advances business goals. Each team member is an investment, and we don’t start seeing return on that investment until they have provided value that equals the cost to hire and train them. If the new hire leaves before this point, we’ve invested poorly. If they leave just as they finish their payback, it’s a wash. After payback, every day they work represents a return on our investment in them.
Consider the graph below. In this graph, growth is the slope of each line, and total value is the area below each line. The blue line is a made-up person with a moderate growth trajectory. The red line is another made-up person who provides 50% more value each month. Let’s assume they have the exact same starting salary, and that the cost to hire and train them is equivalent to a total value of 200.
Because the red employee provides more value more quickly, their payback occurs earlier, in this case at 8 months versus 9.5 for the blue employee. After payback, both grow, but because the red employee’s growth is faster, she provides significantly more total value over a two-year period (in this case, 1.5 times as much).
We also need to consider that employees expect to be rewarded with salary increases for the value they provide. Let’s look at value per dollar for the same two employees, factoring in the ubiquitous 1-year raise. The blue employee gets a lukewarm 5% bump, and the red employee gets the 20% increase they have earned.
The dotted lines represent value per dollar with no salary adjustments, and the solid lines represent value per dollar with salary adjustments. Note the dip in the red line at 13 months, when the increase takes effect. After this point, the two solid lines are significantly closer together than the two dotted lines. The red employee is still an obviously better investment, but their increased salary has tempered their ROI relative to the blue employee.
Maximizing employee ROI
I’ll be honest. You aren’t going to be able to plot the value your team members provide over time. The visualizations above aren’t about scientifically measuring growth-rates, they’re simply a way of showing how critical growth is to maximizing employee ROI. In any graph you can imagine, fast growth will make an investment have great returns. Here are three ideas to help you achieve it:
1. Facilitating growth is the most impactful thing a manager can do
As managers, we are tasked with both hiring people who have high growth potential and with creating an environment where they can grow quickly. Do not underestimate how hard this is. We need to set clear criteria for success, provide coaching (both formally and in-the-moment), create opportunities for advancement, and encourage risk taking with resilient infrastructure and a blameless culture. We need to genuinely care about the success of each individual, and commit deeply to their growth both inside and outside of the office. We need to know their personal goals, and understand how their employment fits into them. We need to sell them on how they can contribute to and benefit from the company vision, while also providing an endless stream of interesting problems to solve. Consider writing down your employee value proposition, and sharing it widely. Hold yourself accountable to it.
2. Employees who grow quickly deserve higher compensation, and we have every right to expect more from them when we give them a raise.
The second graph showed a mitigated ROI on the high-value employee because their salary increased. This holds true if the raise was given purely for retention purposes. If instead we couple a pay increase with an expectation increase, we can motivate the employee to provide significantly more value than they would’ve within their original expectations. Growth comes from doing hard things that are outside of our comfort zones. Keep pushing. People love to be challenged.
3. Growth inflection points are full of opportunity and risk
When a growth slowdown occurs, productivity is hit, and there’s also an increased chance of the employee leaving the organization. We need to be aware of these events, and ensure that we’re doing everything in our power to reinvigorate growth. There are many, many things that could cause a slowdown, but I’ll call out a couple that I’ve seen.
First, team members who experience periods of fast growth are often on teams that make that growth possible, usually while working on a dynamic, interesting project. Eventually, every project winds down into something resembling maintenance mode. This is a period of retention risk. It is on us, as managers, to find a new project for the team, expand the scope of the project, or re-organize the team entirely. High-performers aren’t interested in full-time maintenance. I’ve learned this the hard way. Find them something challenging to sink their teeth into, and they’ll reward you by leveling up.
Second, it is common that growth slowdowns can be due to personal circumstances. Health and family are the most important things in life. Do what you can to build enough trust with your team members so that they feel comfortable telling you about their personal struggles. Then, when they do open up, do everything you can to support them. There may be a temporary productivity hit, but the goodwill you get it return is more than worth it. Psychological safety is a critical part of growth and the success of teams, and it starts with deeply human connections.
Don’t optimize for tenure, optimize for value
People will leave, usually for reasons that make perfect sense. It’s 100% okay. Accept that they will, and don’t let it distract you from making the time that people spend with you as valuable as possible. Then, when they leave (which they will), instead of asking what you could have done to keep them, ask yourself if the investment you made in them was a good one. Learn from it, good or bad, and use that knowledge to make a great next hire. Who knows? This one might even stay a little longer than the last.
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