Hire Well, Treat People Right and You Too Can Have 100% Retention

I was recently asked the question, “What should I do to keep an employee that has quit from leaving.”

I was happy to answer the question because I have a perfect batting average as CEO of keeping employees from quitting.

That’s right. 0.00%.

Employees, in my experience, have usually made up their mind when they resign. It’s become an emotional issue, and it’s very difficult to overcome emotion. Thus my perfect batting average.

My view is simply, “Don’t let employees get to the point where they want to quit.”

Treat people well, have a great culture, give people exciting work, and employee retention goes way, way up. Here’s how we did at my company:

We unabashedly stole our company culture from Netflix with a little bit of Zappos and Sandy Koufax thrown in.

We were thieves and robbers, but I’d like to think we were just being smart.

I’ve always felt you can take inspiration from many different sources, not just from your industry.

I was fortunate to be exposed to Reed Hastings’ (CEO of Netflix) wonderful culture manifesto right after we started operations, and many parts of it resonated with me. I shared it with our executive staff, and they liked it as well.

How do Zappos and Hall of Fame baseball pitcher Sandy Koufax fit in? We’ll get there. For now let’s focus on the six things we stole, er, borrowed from Netflix.

I want to emphasize again that I think Netflix’s culture is fantastic, but these six things really stood out to us:

1. Adequate performance gets a generous severance package.

Nothing kills a company quicker than mediocre coworkers, and this is especially true at a start-up where there is tremendous pressure to hire key personnel. Think about a 20-person start-up with one bad employee.

That translates to 5% of your workforce being ineffective, so that one person can really wreak havoc. Hiring mistakes will happen, and you need to take quick action. That being said, handle these terminations with class and grace.

2. Brilliant jerks.

Diverse styles are fine as long as the person embodies the company values. It’s easy to tolerate jerks when things are going well, but things don’t always go well. One jerk, especially in a small start-up, can destroy a company.

Hiring pressure can push you to hire a jerk, and you will likely regret it. We did hire a couple of jerks along the way. Shortly thereafter, they were given a generous severance package.

3. Responsible people thrive on freedom, and are worthy of freedom.

The natural tendency of all companies as they grow is to create more rules and procedures. RESIST IT AT ALL COSTS!

Instead, make the bold decision that Netflix made to increase employee freedom (shown brilliantly in slides 43 and 55). We did, and it paid off for the team. Do it and your team’s motivation will go up big time.

4. There is no vacation policy, or said another way, take as much vacation as you want as long as you get your work done.

You’re worried about abuse, of course, and you’re right. There will be abuse if you haven’t hired the right people.

Hire the right people and this policy is self-correcting. By the way, a hidden benefit is that you don’t have to financially reserve for vacation when you go to a no vacation policy.

5. Act in the company’s best interest.

The executive staff had a vigorous debate about enacting a rigid expense and travel policy. Again, the worry was abuse.

Our theory was that it’s self-correcting. Employees that continually abused the policy would be given a generous severance package.

I do remember one employee who tried to expense a one-mile car trip to interview a candidate. Can you imagine receiving a $0.55 expense report? I couldn’t. We talked about it in our staff meeting, and one of his peers set him straight.

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6. No fixed (raise pool) budgets.

You have to look at what the market is for a particular role every year. For example, if the salaries for senior design engineers go up 15% in a year, we would increase the pay of senior design engineers commensurate with the market.

We quickly gained a reputation for fairness by working this way. Employees knew we rectified any pay inequities, and it helped build employee loyalty and employee retention.

Okay, so you want to know how Zappos and Sandy Koufax Fit in. Here we go.

Let’s start with Zappos, the online shoe retailer that Amazon bought. I was flying, I think, to Chicago when I read an article in American Way magazine article about Zappos CEO Tony Hsieh. That led me to buy his book, “Delivering Happiness.”

We loved Zappos’ customer service model of no scripts and letting the customer service team make the decisions, and we modeled our customer service organization after Zappos’. We regularly received accolades from our customers about our tremendous customer service.

We embraced Sandy Koufax’s “Keep it Simple” mantra. Koufax was a two-pitch, and on many days only a one-pitch, starting baseball pitcher for the Los Angeles Dodgers. Most starting pitchers throw at least four pitches. Koufax dominated baseball by honing just two.

It worked brilliantly in baseball, and simplicity in business is key to success. Take notice whenever you hear someone say, or, better yet, you hear yourself say, “It’s complicated.” It usually isn’t that complicated.

All of this is great, but there is one more thing you, as a leader, need to do, no you MUST DO, to retain employees:

You need to really care about your team.

A couple examples of how to do it right and how to do it wrong.

How to do it right: My Mom was diagnosed with cancer in 1998 when I was working for Maxim Integrated Products. Maxim’s CEO, the late Jack Gifford, made his personal physician, who I believe was a board member at Stanford Hospital, available to consult with. You bet that built loyalty.

How to do it wrong: I was working at another company as a senior executive when my daughter was born. I took a little time off to be with my wife and daughter. The CEO of this company was pissed that I took even one day off, and he made it known. Not just to me, but all the other senior executives. I left the company within a year.

By the way, my Mom is still going strong 19 years later.

I love you Mom.

This article originally was posted on Quora as a response to a question asking how to keep employees from going to the competition.

I am an accomplished high-tech executive with experience as a CEO, marketer and turnaround specialist. I have a proven track record of building and leading successful teams, developing breakthrough ideas, creating innovative products, and successfully marketing new and existing product lines.

I founded and led Touchstone Semiconductor as the CEO. I successfully raised funding during the Great Recession, built the organization, and focused the company on the growing low power Internet of Things market. Touchstone introduced more new products than any IC startup over the past 20 years. The performance improvements are breathtaking: a 10X improvement in power versus performance. Touchstone was sold to Silicon Labs in 2014.

Previously, I successfully turned around Micrel’s High Bandwidth Division. In just three years, the business progressed from the only money-losing division of Micrel to the most profitable division. Focusing on the business basics of people, process, and products, I implemented a three-phase plan resulting in a 5X revenue increase. Revenue was less than $10M at the bottom. Revenue peaked at over $50M. Gross margins improved from 40% to greater than 60%.

Prior to Micrel, I helped Maxim Integrated Products grow from $40M to over $1B in revenue during the 1990’s. I ran and set the strategic direction for many of Maxim’s business units. I founded and built Maxim’s Fiber Optic Business Unit from $0 to over $100M in revenue during my five year tenure.

I started my career as a design engineer, and I hold three patents.

I have a BSEE from the University of California at San Diego, and an MBA from the University of Southern California.