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When a really good employee leaves, I think our natural instinct is to look at the money.
They got a better offer.
Someone was willing to pay them more.
We couldn’t compete.
And sometimes that’s true. If we’re significantly underpaying someone compared to the market, we’re creating a reason for them to look somewhere else.
But when we reduce regretted turnover to compensation, I think we miss the bigger problem.
Because the research on why people leave organizations is pretty consistent. Pay matters, but it is rarely the primary reason good people walk out the door.
They leave because of the person managing them.
They leave because the work isn’t good anymore.
They can’t see where they’re going.
They don’t feel like what they’re doing is recognized.
Or they just don’t like the culture they’re working in every day.
And that’s a much harder problem to solve than simply increasing someone’s salary.
Regretted Turnover Usually Starts Before Someone Resigns
This is the part I think owners need to pay attention to.
By the time someone gives notice, the problem probably didn’t start that morning.
Think about what happens when someone has a manager who challenges them, develops them, recognizes what they’re contributing and treats them fairly and consistently. They might still get approached by another company. They might even get offered more money.
But leaving gets harder.
There’s something they’re giving up.
Imagine working for a manager who’s absent. Or inconsistent. Maybe they treat people differently depending on the day. Maybe there’s no real development happening and no clear path forward.
That employee doesn’t need another company to create the problem.
We’ve already created it for them.
The competing offer just gives them somewhere to go.
That’s why regretted turnover is so easy to misdiagnose. We see the offer that pulled the employee away, but we don’t always see everything that made them willing to listen to the offer in the first place.
Your Managers Have More to Do With Regretted Turnover Than You Think
We’ve all heard some version of the idea that people don’t leave companies, they leave managers.
There’s a reason it keeps coming up.
The quality of someone’s direct manager has an enormous impact on whether that person wants to stay.
And for founder-led companies, I think this becomes especially important as we grow.
At some point, we aren’t managing everybody anymore.
Other people are.
Which means the experience our employees have inside the company is increasingly being shaped by the managers we’ve put between us and them.
We can have a culture we care deeply about. We can want people to grow. We can believe we recognize good work and treat people fairly.
But if the manager someone works with every day doesn’t do those things, what we believe at the top doesn’t really matter to that employee.
Their experience of the company is their manager.
That’s the tension.
We tend to think employee retention is a company issue. In practice, regretted turnover can be a management issue happening one relationship at a time.
Regretted Turnover Isn’t Just a Compensation Problem
None of this means compensation doesn’t matter.
It does.
If someone is significantly below market, we’ve created the conditions for departure. Eventually they’re going to realize what their work is worth somewhere else.
But there’s a big difference between making sure someone is compensated appropriately and assuming compensation can fix everything else.
It can’t.
More money doesn’t give someone better work.
It doesn’t create a development path.
It doesn’t make an inconsistent manager consistent.
It doesn’t make someone feel recognized.
And it doesn’t repair a culture they don’t want to be part of.
We can keep throwing money at regretted turnover and still lose good people because we’re treating the symptom instead of looking at why they were willing to leave.
The Management Layer Is a Retention Investment
This is where I think founder-led businesses need to look at the problem differently.
We spend a lot of time thinking about who we’re hiring.
Maybe we need to spend just as much time thinking about who is managing the people we’ve already hired.
Because if management quality affects retention, then selecting, developing and performance-managing our managers isn’t just an HR exercise.
It’s a retention investment.
We need managers who challenge people without grinding them down. Who develop people instead of simply giving them more work. Who recognize contribution. Who are fair. Who are consistent.
And we have to hold managers accountable for that.
That’s especially important as the business grows beyond the founder.
We can’t personally create a great working experience for every employee forever. Eventually, other people have to carry that responsibility.
Which means the quality of the management layer starts determining the quality of the company people experience.
And that brings us back to regretted turnover.
When a great employee walks out the door, asking whether we paid them enough is fair.
It just shouldn’t be the only question.
Who managed them?
Were they growing?
Did they know where they were going?
Did they feel like their contribution mattered?
What was it actually like to work here every day?
Those questions are harder because the answers may point back at us.
But I’d rather find the management problem while the good employee is still sitting in the building than explain their departure after they’re gone.
Justin D Maxwell provides family office and investment bank services to the lower midmarket to founders who want 8 or 9 figure net worths. You can learn more here: www.justindmaxwell.com or take our free assessment here: https://fielding.global/articles/diagnostic.html