Impact of Leadership on Talent Retention

The costs of losing talent are hard to quantify. Whatever the precise cost to a company, in financial terms, there is no question that the damage of excessively high turnover is real. A certain amount of turnover is inevitable and even healthy!



The costs of losing talent are hard to quantify - some estimates go as high as 1.5 - 2 times annual salary. Whatever the precise cost in financial terms, there is no question that the damage of excessively high turnover is real.


Loss of productivity, impact on morale, re-training and re-recruiting costs are just a few of the factors that contribute to the disruption of a good employee who leaves voluntarily.


A certain amount of turnover is inevitable and even healthy, but given the steep costs, the question of how to avoid losing great talent is well worth solving.


Companies pay bonus and create incentive schemes, training programes, home office and office perks in an attempt to keep employees happy. But where is the biggest return on investment, as far as talent retention is concerned?


The answer may be nothing to do with compensation, benefits or perks - instead, the answer may be better leadership.


Some years ago, a Gallup poll of 1 million workers produced a clear, and somewhat uncomfortable insight: 75% of voluntary leavers quit because of how they are managed.


This is the basis for the well-known saying “People don’t leave companies, they leave managers”.


If leadership genuinely does outweigh the other factors affecting employee retention, then what does leadership mean? How should we define it?


The internet is full of inspirational quotes about leadership which conjure up warm and fuzzy images. Rather than reach for one of these, let’s look at a concrete example, involving a leader who is far removed from the grandiose, movie-version of a charismatic executive.


The example comes from the former head of Talent Acquisition at SpaceX, Dolly Singh, who published a much-shared article on Quora in which she narrated how Elon Musk’s leadership played a decisive role in the early make-or-break days of the now-famous Falcon rocket.


The article is well worth reading in full, but I will summarize the story briefly here.


The third attempt to launch the Falcon had failed. With all the press and competition watching, and the over-worked team were naturally on the edge of despair.


Musk, however, was able to turn the mood from despair to determination. He emerged from the observation room and straightaway delivered a speech to the company, in which he manifested his appreciation of the team, reassured them that he had secured backup funding for the next two launch attempts, and affirmed his personal dedication to see the project through to success, no matter what it took.


According to the article, the speech had an almost instantaneous effect. Singh added that “most of us would have followed him into the gates of hell with suntan oil after that”.


The new rocket was in place 6 weeks later, and the SpaceX Falcon entered the history books as the world’s first privately built rocket to orbit the earth.


In the commercial and industrial sector, the ongoing sanitary crisis has made the situation tougher than it has been in living memory for most employees. Arguably, many firms are in an even deeper state of crisis than SpaceX in the example above.


What the SpaceX story demonstrates, however, is what a good leader can do in this scenario. The three qualities exemplified in the speech were:


Confidence in the team


A bad leader will try to distance themselves from failure by implying that they were ‘let down’ by subordinates. In contrast, a good leader looks for the positives (in this case, the first successful first stage launch by a private company) and takes the opportunity to celebrate success, even in the midst of apparent failure.


Competence in the role


No matter how charismatic the leader may be, incompetence is hard for a team to stomach during a time of crisis and can prove fatal in real business terms. Musk’s foresight in securing backup funding not only demonstrated good judgment, but also gave genuine breathing room for the defeated team, who would need to start again from scratch.


Conviction in the mission


A leader who is friendly but who expresses cynicism or lack of belief in the future of the firm may gather supporters but will be unable to muster the dedication necessary to prevail during hard times. Musk’s promise to his team was simple and unambiguous, “I will never give up, and I mean never”.


Where does that leave the modern-day manager who aspires to the same level of leadership?


None of the three ‘C’s from Elon Musk’s speech - Confidence, Competence or Conviction - are the product of a half-day workshop but require development over the course of many projects and interactions.


Elon Musk was not pretending to be anything other than who he was at the time he made the speech. What he had achieved was a proximity to the ideal of leadership he set for himself, presumably many years ago, perhaps having witnessed it in a boss, friend or family member.


And as the ending of the story shows, with good leadership, success in the face of seemingly insurmountable odds, such as our industry now faces, is not a dream, but an achievable reality.