Why Employee Retention Should Be Your Top Priority Over Recruitment

If you’ve read my book, Great CEOs Are Lazy or followed this blog for a while; you know how much I value recurring revenue. When a business focuses on acquiring and retaining new customers long-term, it generates tremendous value. This principle applies equally to talent management—the more you focus on retention and reducing employee turnover, the stronger and more valuable your organization will become.

The Real Problem: Retention, Not Recruitment

For the past few years, one of the most considerable constraints facing almost every business has been filling open positions with people with the right skills to do the job. The competition for talent has been intense, and based on the shifting demographics, it promises to continue for years to come.

That means it’s become more expensive in terms of time, money, and effort to convince talented people to join your organization over someone else’s.

Let me share an example. I recently worked with a CEO who was scrambling to fill dozens of open positions requiring specific skills. He hired multiple recruitment firms to widen the search. However, the company had an 80% turnover rate—equivalent to fast-food industry standards. Skilled employees stayed for an average of just 15 months.

It became shockingly clear that the real issue in this company wasn’t recruitment. It was retention.

Plugging the Leak

I share this extreme example to help connect the dots to my earlier point about how companies can approach their talent in the same way they might embrace recurring revenue. Rather than continuing to invest enormous sums of money in replacing lost talent, the opportunity is to understand better why people are leaving—and change things in ways where they want to stay instead.

If you’re losing employees faster than you can replace them, you’re effectively pouring water into a leaky bucket. No matter how much effort you put into recruitment, you’ll never get ahead.

Consider this:

The cost of replacing an employee typically equals one year of their salary.
For senior-level or highly skilled roles, the costs are even higher.

If you want to maximize your investment in talent, you must identify and fix the reasons employees are leaving.

Why You Should Implement These Retention Strategies

Consider how much it costs to hire an employee, especially if you rely on a headhunter or recruiter for help. Rather than investing more resources in recruitment, take a hard look at why people leave. Conduct exit interviews, analyze trends, and ask tough questions:

Is there a lack of alignment with the company’s mission or culture?
Are employees dissatisfied with their compensation, workload, or leadership?
Are managers properly trained to support and retain talent?

The point is that you need to double down on your efforts to improve your retention rates by solving what problem or problems are causing such high turnover.

How Recurring Revenue Logic Applies to Talent

Businesses with a recurring revenue model understand that retaining customers is the key to profitability. Acquiring a customer is costly, so keeping them long-term is the goal. The same logic applies to talent:

Hire smart: Invest in employees who align with your vision.
Retain well: Ensure they stay by creating a culture of growth, satisfaction, and purpose.

Retention vs Recruitment: The ROI Advantage

Retention delivers tangible ROI. Improving your retention rate reduces hiring costs, boosts team productivity, and fosters a stronger company culture.

Imagine the impact:

Employees stay longer, gaining institutional knowledge and becoming more efficient.
Recruitment costs drop as your company becomes an employer of choice.

Shifting the focus to retention can dramatically increase your organization’s overall value.

Real Results Start with Retention

I’m working with my CEO client I mentioned earlier to solve his retention crisis. By reframing the issue—focusing on retention over recruitment—we’re addressing the company’s biggest constraint.

While the process takes time, we know that improving retention will unlock massive growth and value.

Key Takeaway

If your organization struggles with high turnover, the solution isn’t to hire faster. It’s to retain better. Prioritize retention by fixing internal challenges, and you’ll see long-term gains in productivity, culture, and profitability.