Employee retention

Employee Retention

“Homo Economicus”
– You are Sacked!

Joachim Skura, HCM Sales Development @JoachimSkura


Gone are the days when the bottom line was the driver behind human capital management

In any organization, many senior decision makers tend to focus on bottom line results – cutting costs and driving growth. This makes sense but there is a danger in allowing ‘homo economicus’ to be our only guide through business.

‘Homo economicus’ embodies the single-mindedness of those who take economic decisions based only on the need to cut cost and maximise profit. While seemingly rational, this approach can be too basic and such tunnel-vision must not be our only way of thinking. Business school teaches this rational ‘minimax’ principle but irrational behaviour can be found in the real world more often than the rational – especially where people are involved. So, if businesses want to have a real impact on their biggest asset, their people, they need to take irrationality into account.

 So, if businesses want to have a real impact on their biggest asset, their people, they need to take irrationality into account.  

Governments understand an effective approach to economic planning must take into account a wide range of factors, many of which require investment in the future without immediate return, such as funding for schools and education.

Businesses must take a similar approach if they are to be successful in the long term. A business only prospers and moves forward through its people. The challenge for the business is multi-faceted. It needs to make the right decisions regarding recruitment and then retain the best of its talented staff. To do the latter it must understand employee needs and how effectively HR supports and provides for them.

We need to investigate, understand and distinguish between correlation and causality where human behaviour is concerned. “Educated guessing” can be a fast track to bad decisions and a failure to correctly invest in employees can be damaging.

A good example of “educated guessing” is around the assumptions commonly made about younger employees, particularly ‘Millennials’ and their well-documented proclivity to move on if other options appear more attractive.

In the face of those assumptions it may be tempting for a fatalistic attitude to prevail; for organizations to make an educated guess that their younger workers will churn more quickly. But this can merely make for a self-fulfilling prophecy. 

It does not need not be the case and in many instances it clearly isn’t. Of course many young people churn – and always have - but the statistics clearly show many do not. Yet the focus is on those who do and the damaging assumption they were always going to.

 But if a business is resigned to losing people it probably will, not least because the ‘homo economicus’ in the boardroom may be refusing to invest in those people based on an erroneous assumption they will leave whatever the company does.  

Some businesses may be blinded by the correlation and its adherence to their assumptions, without investigating the cause. But if a business is resigned to losing people it probably will, not least because the ‘homo economicus’ in the boardroom may be refusing to invest in those people based on an erroneous assumption they will leave whatever the company does.

Every single business needs to get smarter about assessing whether it is doing the right things to keep the right people.  Educated guesses are not enough and the instincts of ‘homo economicus’ must be tempered by the understanding HR can bring.

HR needs a well implemented Human Capital Management (HCM) system that can identify where the business needs to develop talent and act as a nexus for managing that development. It should also provide businesses with insights based on detailed analysis of how HR measures affect employees.

Making any vision of business growth a reality requires a long term view of recruitment and retention that is supported by a commitment to investing in people, even if that jars with the ‘homo economicus’ way of managing a business.


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