Retention – a KPI worth retaining?

by Viv on October 18, 2007

Retention is always seen as an important Key Performance Indicator for professional services firms. Retention’s status is reinforced by The Lawyer publishing a survey showing retention rates amongst the top law firms (15 Oct). The firms may get bragging rights according to whether they’ve gone up or down the league table, but is retention really such a good thing to be measuring?

On the plus side, retention is a straightforward measure to calculate. Potential trainess could be forgiven for thinking that high retention is a good thing (certainly firms seem to trumpet this if they can), but high retention rates could imply that there’s a lack of development opportunities that translate into finding a better job once qualified.

The main drawback of retention is that the measure itself is not particularly meaningful – is retention of 80% good news or bad news? – difficult to tell… If retention is too high, the best people will get frustrated by the lack of promotion opportunities and leave, if retention is too low, staff will get demotivated by the sheer amount of work expected of them.

Time for a dodgy analogy: if you were to think of a firm as a car, retention is analagous to the air pressure of the tyres. If the pressure is right, the car will perform best, if is too low the car may skid (lose ability to get to its intended destination) or if it is too high, do long term damage to the car. Just as the ideal level of air pressure will vary from car to car, driving conditions and the kind of journey that is being planned, the ideal level of retention will vary from firm to firm.

Sometimes Partners will ask L&D departments to justify the value that they add in terms of how your activities actually contribute to retention. For the reasons above, this is almost pointless. Rather than looking at the raw retention data, it is worth asking the more sophisticated question of: “Is the firm retaining the right people?” and hence what L&D is doing to help managers achieve this.

Another case for that golden question: “Ok, so what would success look like?”

{ 2 comments… read them below or add one }

Adrian Priddle November 5, 2007 at 1:13 pm

Oh come on Viv, retention has a few basic, some even measurable, benefits. Firstly the high costs of qualified recruitment that both accountancy and legal firms currently pay. Secondly the fact that when you do attract somebody from another firm they are invariably a smaller firm and therefore there maybe a training cost associated with quality. This two measurable benefits leave aside the intangibles re morale, culture etc. Firms can rarely achieve the retention rate they seek so how can their air pressures be too high?

Retention is a key business measure because essentially this firms key asset is people and generally businesses seek to either maintain or sell assets, not let them leave.

The danger for me is how easily this number is manipulated, for example if you retain someone, does that include those that are seconded to other businesses or different parts of your business? – these seem rarely to return to their place of origin.

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Viv November 5, 2007 at 1:27 pm

Once again, I think Adrian & I are violently agreeing. Retention is generally a good thing, for many of the reasons mentioned. As someone who many years ago found himself in an audit department where retention was too high in the grades above me, I know the pain that is having a department shut down as the “air pressure” became too high. My problem with retention as a KPI is that it is rarely understood well enough to appreciate its double-edged nature.

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