Chapter 19 of the New York Stock Exchange: The Entrepreneur’s Roadmap from Concept to IPO
As your startup has grown, so has your team, with the right people in place to help scale the business and expand its competitive edge. At some point, though, turnover is bound to happen. Some may be due to people moving on because of life events or to pursue other opportunities, or the firm may require a somewhat different skill set as it matures. What companies need to avoid, however, is the unexpected loss of key talent—those employees who are the strongest performers, have high potential, and/or are in critical jobs.
Retaining key talent is a major concern for both large mature companies and for newer firms and startups. Across the board, the war for talent in critical areas, such as digital technology, is becoming fierce. Looking ahead, the outlook for the labor market will keep talent retention on the workforce radar. The widespread prediction is that talent shortages will likely increase well into the next decade, which could limit the ability of some companies to expand. Where talent shortages become acute, companies’ very survival could be jeopardized in the face of intensifying global competition. According to the Bureau of Labor Statistics, longer-term labor shortages may result from slower population growth, increasing specialization and technical demands of jobs, Baby Boomers retiring, a lack of experience among Millennials to advance into more responsible and demanding jobs, and increasing global competition for talent.
Individuals with scarce and mission-critical skill sets and expertise increasingly will be in demand as organizations compete for talent just as they do for market share. Key talent disproportionately contributes to organizations’ current performance, and these individuals are also likely to assume future leadership positions. Thus, losing them has a major impact. Consider the estimates that suggest the cost of employee turnover ranges from 50 percent to 200 percent of the employee’s annual salary, depending on the type and level of job. When highly valued key employees are lost, costs escalate considerably since their contributions are greater than those of typical employees, and they are more difficult to replace.