Don’t Underestimate the Value of Employee Tenure | Harvard Business Review

This research examined the impact of employee age and employee tenure (time with an organization) on business performance. The researchers measured business performance for 23 organizations—across various industries— in three ways” 1) financial (e.g., revenue growth, profit), 2) operational (e.g., error rates, speed), and 3) customer reactions (e.g., referrals, retention rates). The findings show that “Employee age has no impact on business performance, whether performance is measured by financial, operational, or customer outcomes. Tenure, however, has a significant positive and sometimes very sizeable impact on financial performance and operational excellence.” One implication of this research is that well-managed employee tenure (retention) can create economic value for an organization and provide a competitive edge. The rationale for this implication is that firm-specific human capital— knowledge, social networks, mastery, and know-how generated through the experience of working in one organization with its suppliers, customers, technology, proprietary processes and intellectual capital, and one’s co-workers—is built over time through tenure (years of service) with the employer. Given this research, it will be interesting to see the extent to which human capital disclosures of public companies — governed by the SEC — report trends in employee tenure (and the implications of those trends) as part of their disclosures. As a supplement to the HBR article, here is the academic research version on which the HBR article is based.