When Good Employees Turn “Bad” – The Challenge of Employee Tenure

12/19/16 1:39 PM / by Eric Liebross

Eric Liebross

Did I get your attention with this title?

In reality, good employees don’t turn, “bad”, but in a lot of cases, they can outgrow the roles that they are performing in your organization.  Employee tenure, without professional growth and development, can hurt an organization, both financially as well as operationally.  And you’re not doing your employee any favor either, if he or she is doing the same job for many, many years.

when-good-employees.jpgIt is important to truly understand the work being performed in your organization and the people performing it.  It is critical to understand the activities being performed in your organization, and whether the roles that are in place (and their compensation) match these activities.

Often, you may have highly transactional activities supported by higher level resources, meaning that you are going to be over-paying for the work being performed, and certain functions are going to be more transactional and should require lower cost resources with less management involvement.

Conversely, you want to have the more higher value work being performed by your higher value (and higher paid) employees.  This is where tenure comes into play, and the question of whether tenure is a good thing or a bad thing?

I was actually asked his question by a client recently, and my answer was, “It depends.”  Clearly, it’s good to have an organization where people have a lot of experience and knowledge of the business and its operations, but without properly utilizing these people you may be over-paying for the work being performed.

When you have high level employees performing transactional work, and you adjust their roles to the level of the work being performed, it can be very costly.  And when you have highly tenured staff performing transactional work, you are also over-paying for the work being performed, because you are giving these people raises every year.  COLA’s add up after 10-12 years.

In this scenario, not only are you overpaying for the transactional work being performed, you are also not getting the most out of your higher skilled, more knowledgeable employees; and you likely have a stagnant, less motivated (and less productive) workforce.  Tenure works when the business operations supports effective career pathing and professional growth, and doesn’t when the people are just getting paid more over time to do the same job.

But is employee tenure that much of an issue in today’s world?

We hear stories of the transient nature of millennials; those people between the ages of 25-34 who have become the foundation of the workforce as the baby boomer generation slowly fades into retirement.

Surely, tenure is less of a concern, as these young people bounce around from job to job, seeking more interesting (to them) work and a better “Work/Life Balance.”  Right?

The Department of Labor publishes an annual report on employee tenure and found that in 2014, the average tenure was 4.6 years.  And the Millennials?  The average tenure of employees ages 25-34 is only three years, so it seems that there is an impact, right?

Well the DOL has been publishing this study since 1983 and in 1983 the average tenure of people ages 25-34 was…..THREE YEARS!  Nothing has changed.  It’s more about young people finding themselves and their careers than it is about millennial’s lack of commitment and focus.

So the issue of employee tenure is not going away, and if you have good employees you want to keep them.

You should look to maintain the focus and motivation of your better employees by giving them more challenging and interesting work to do.  If you are going to pay them more (remember, COLA’s, etc.), you may as well get more value from the work they perform.

You should also look to refresh the people performing transactional work by moving out the better ones and replacing them with less experienced (and lower cost) resources.  Transactional work needs to get done, but it doesn’t typically require the knowledge and experience of a highly seasoned employee.

The outsourcing of these types of activities provides value at both ends of the spectrum to an organization.  On the one hand, you will get the work done at the lower cost structure found in an offshore or nearshore model; and the work will be performed by people who are more interested and motivated to do it

At the same time, the retained work in your organization, will be more core, more structure and more specialized, requiring the skills, experience and capabilities of higher paid, longer tenured employees.  And they will be more interested in staying with the organization and doing the work that is required of them.

Higher production and lower cost?  Higher value and professional growth?  Tenured employees motivated and focused?  Sounds like a win-win scenario to me.

Eric Liebross

Written by

Eric Liebross

Eric Liebross leads Auxis’ Back Office Optimization practice, helping organizations design and implement innovative operating models, processes and technologies to achieve optimal performance within Finance, Customer Service and HR Operations. Eric’s areas of expertise include Shared Services Strategy, Nearshore Outsourcing and RPA.