Why Some Employee Turnover May Actually Be a Good Thing

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May 13, 2015

First of two parts

As turnover rates for employees continue to increase, there seems to be an almost universal agreement among HR and managers that “we must do something” to retain our employees.

But take a step back and think about it: Should all employees be kept or just the ones who currently and in the future produce high value?

In particular, should the employees with the most tenure be automatically kept, even though they may be expensive, and in some cases, they may be one of the primary roadblocks to corporate change?

In fact the goal is to identify the top potential issues that can be attributed to long-tenured employees.

Some of the weakest-performing companies including Xerox, General Motors, Pitney Bowes, and Kodak all have a high number of years of average employee tenure and extremely low employee turnover rates. Wal-Mart revealed the performance plateauing and the diminishing ROI of longer-tenure employees in this quote:

The cost of an associate with seven years of tenure is almost 55 percent more than the cost of an associate with one year of tenure, yet there is no difference in his or her productivity. Moreover, because we pay an associate more in salary and benefits as his or her tenure increases, we are pricing that associate out of the labor market, increasing the likelihood that he or she will stay with Wal-Mart.”

My overall message regarding long-tenure employees is simple: Don’t be naïve and assume that long tenure and seniority is always a positive thing.

In fact, it might be a good rule of thumb assumption to start with the premise that initially, a lack of tenure can certainly hurt a new hire’s productivity and then tenure may pay off between five and 10 years, but after that, performance and an employee’s ROI have a significant probability of declining.

The negative impact of long tenure

Although there isn’t much publicly available corporate research on the negative impacts of long tenure, internal research by Google found that even with all its great perks, it identified the very real “sinking effects of tenure on satisfaction.” Fortunately, it also learned “that employees who self-identify as more grateful are largely immune” to this negative effect that tenure has on employee satisfaction.

The problems associated with long tenure also occur outside of individual employee performance.

For example, one study of scientific teams by Katz and Allen showed that team performance increased after 1.5 years of average team tenure but by five years it “declined noticeably.” A study of CEOs by Luo, Kanuri, and Andrews demonstrated that after five years of CEO tenure, a “company’s performance diminishes, no matter how united and committed the workforce is.”

Avoid stereotyping and don’t put every long-tenure employee into the same category. Look at individual cases in order to find out which if any of the many negative factors listed here may apply to an individual long-tenure employee and if they do, whether they can be turned around.

And to those who worry about age discrimination, note that by “long-tenure or long-term,” I’m not in any way referring to an employee’s age (a 28-year-old employee can have 10 years of tenure), but instead, I’m focusing on their years of tenure at a single company.

10 reasons you shouldn’t keep long tenured employees

  1. Performance may decline – There is ample data showing that CEO performance can decline with tenure, and the same is probably true in many of your jobs. Whether it be obsolescence, boredom, extensive self-confidence, slowed learning, or burnout, there are many proven examples where employee performance flatlines or even declines after a certain number of years. Find out when and in which jobs where performance reaches a peak at your firm. You also have to be careful about rewarding and celebrating these individuals because of their tenure, because “years of service” and seniority systems might run counter to the “performance is everything” message that executives are trying to send.
  2. Innovation may decline – In a world where innovation may have a higher ROI than employee productivity, see if innovation declines with tenure. Seek out data to see if within your firm the rate of innovation declines as tenure increases and even if there is a point where it completely ceases. Employees may have an “innovation span,” which declines with tenure or with an increase in frustration resulting from not being able to implement new ideas.
  3. An entitlement mentality may develop – Long-tenure employees may develop a sense of entitlement and an attitude that they “have put in their time” and thus have “earned” job security and special treatment. This occurs even though they have been rewarded over time for their historical contributions. This entitlement mentality may cause them to develop a negative attitude, which may impact other employees.
  4. They may become resistors to change, defenders of the status quo – Long-tenure employees may be the strongest and most powerful resistors to major change because they are comfortable with the past. Some call them “defenders of the past.” Because they have built up power, relationships, and internal political connections, they may be the most effective blockers of change in the organization. Because they have a long history with the organization, they are often the first to bring up the excuse that “we tried that once, and it didn’t work” as a reason not to try new things again. In addition, long-tenure employees may have built up cliques and “good old boys’ networks” which may act in unison to resist change.
  5. They may be resistant to technology – In a world where technology solutions have a high impact, they may use their power and relationships to avoid or slow the uses of new technology. Even when new technologies are adopted, these individuals might not use it.
  6. They are likely to be risk adverse – They may have more interest in job security, retirement, and incremental changes, so that their decisions may be overly slanted towards low risk options. It is highly unlikely that as leaders that they will “bet the firm,” even though that may be the best option in a highly competitive world. Their unwillingness to take risks and invest in “big bets” when radical change is necessary may unfortunately cause others (especially innovators) to reduce their risk profile also.
  7. A potential decline in skills – Long-tenure means long-term employment but it doesn’t guarantee that the employee has sharp or up-to-date skills. The “you can’t teach an old dog new tricks” rule simply isn’t true, but overconfidence may lead them to fail to devote the necessary time in updating their skills and capabilities. Having long tenure but limited or no recent upward movement may mean that this individual has plateaued and that they do not have the “future skills” that are necessary for continued upward mobility. Whether the job requires physical or mental skills, it is wise for executives to assess the “career trajectory” of both long- and short-tenure employees. Employees in customer service may be the most likely to plateau in their performance and skills.
  8. They are likely to have a NIH attitude – Because they have been at one firm for so long, they may discount things that have occurred in other firms. This “but we are different” mantra may cause them to reject proven best practices because they were “not invented here” (NIH). This attitude may lead to excessive “trial-and-error learning” and the avoiding of external practices that can be adapted quickly and effectively.
  9. Group think and an internal focus may occur – Long-tenured employees may be way too satisfied with the status quo to the point where they develop groupthink. This may cause them to be inward focused and be less aware of and fearful of external competition. They may even reduce their anticipation of and planning for the many changes that are occurring in external environmental factors and the competition. If the organization itself has been around for many years and it has successfully overcome numerous obstacles, the overconfidence of long-tenure employees may cause them to influence executives and employees to the point where together they do not sufficiently fear external threats.
  10. A possible negative impact on recruiting and retention – Candidates may witness a “you are new so you don’t know anything attitude” because many long-tenure employees invariably introduce themselves with “the number of years they’ve been with the firm.” Candidates may be more reluctant to accept jobs when they encounter this rookies-don’t-know-anything attitude, and they may post their negative experiences with it on social media sites, driving others away. Recent hires will also experience this “we know better” attitude and that may force them to quit prematurely or reduce their performance and frustration. To make matters worse, when given the opportunity to hire new people, they may subconsciously hire “B players” because these lower potential individuals will be less threatening to them.

TomorrowAdditional Reasons Why Long-Tenure Employees Can Be Problematic

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