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Knowing How to Keep Your Best and Brightest

March 27, 2001
Related Topics: Behavioral Training, Retention, Featured Article
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James Daniels, a hot shot software developer for a small engineering firm insuburban Minneapolis, says he could leave his job today and have offers rollingin by week's end. "I've done it before," he says. "It's done allthe time."

    He's not just another young workplace egomaniac. The 27-year-old computerexpert simply recognizes his opportunities. It's an enviable position to be in.But for HR departments, the high demand for skills such as his is a royalheadache. On any list of disturbing workforce problems, today's shallow laborpool is certainly one of the most troubling.

    Even as the once-roaring economydescends from a pinnacle of prosperity -- and some companies have been forced todismiss large numbers of employees in headline-grabbing layoffs -- the jobmarket continues to be strong for the well educated and tech-savvy. Given thisreality, skilled workers like Daniels are very much in demand, and enjoy plentyof opportunities to jump ship.

    People are changing jobs in record numbers, a fact that is fueling thehighest turnover rate in 20 years. The Bureau of Labor Statistics reports thatthe typical American worker holds nearly nine different jobs before age 32.Granted, that estimate was compiled last year, when the economy showed no signsof slowing. But don't be fooled, experts warn. No company, large or small, NewEconomy or faltering economy, is unaffected by an ongoing turnover epidemic.Consider this: 53 percent of U.S. workers surveyed at the beginning of this yearsuspected that at least a mild recession was imminent. Yet, 88 percent felt assecure in their jobs as they did a year ago. A study of 1,000 full-time workerscommissioned by the online recruitment firm Headhunter.net found that 78 percentwould take a new position if the right opportunity came along, and 48 percent ofthose who are employed are looking for new jobs.

    For job hunters, Strong Investments economist Jay Mueller says, "thepillars of support remain in place, and the long-run outlook for the U.S.economy is still favorable."

    That said, it's important to note that some degree of turnover is inevitableand can even be positive. It may open doors for promotions and the recruitmentof new talent. Excessive staff losses, however, inevitably prove disruptive andcostly. Employees are expensive to replace, and customer service and companyperformance are hard hit by unexpected staff changes. Much of this is due to themounting importance of industry-specific knowledge that people acquire whilewith a company.

    What's at the heart of all this? The answer is surprisingly simple.

    While fair compensation and opportunities to advance are always importantfactors, most people decide to leave a company for another reason: bad bosses.In recent interviews with 20,000 workers who just left an employer, the SaratogaInstitute in Santa Clara, California, found that poor supervisory behavior wasthe main reason people quit. A recent Gallup Organization study based on queriesof some 2 million workers at 700 companies found the same results. It's not somuch opportunities for raises or promotion through the ranks that keep employeeshappy. The length of an employee's stay is determined largely by hisrelationship with a manager.

    "People do not leave companies. They leave bosses," says BeverlyKaye, president of training firm Career Systems International in Los Angeles andco-author of Love'Em or Lose 'Em: Getting Good People to Stay (Berrett-Koehler1999).

    She and other workplace analysts say that companies in need of a retentioninjection must focus on making work interesting and building strong, flexible,attentive managers. They insist that such advice comes from legions ofdissatisfied working Americans. Daniels, the software developer in Minneapolis,is just the kind of example they point to. "I've worked at six differentcompanies in six years since college, and every time I left, the last straw hadsomething to do with my boss being completely oblivious to the problems hispeople were having."

The role of HR

    HR's role in sorting through this maze, experts advise, is to get managers totake responsibility for retention. That, of course, is much easier said thandone. A labor market low on skilled workers -- at least when compared to demandfor the technically astute -- has managers so strapped for talent that theyhaven't the time to worry about recruiting and retention. Most would ratherattack the retention front by increasing salaries or offering the latest perks,from signing bonuses to vacations and concierge services. Those are all finerecruiting tools, observers say, but when it comes to turnover, they are onlystop-gap measures.

    So how can companies retain workers and, by extension, increase productivityand boost the bottom line? Help people feel at home by fostering personalconnections to the company, including customized responsibilities, long-termlearning opportunities, and plenty of informal feedback.

    Accomplishing this almost always begins with line managers.

    "It's time to hold managers accountable," says Dick Finnegan, laborconsultant and author of a yet-to-be published book, titled Taming the TurnoverBeast.

    Fortunately, observers of corporate America's talent struggles -- fromFinnegan and Kaye to academics and economists -- agree that what employeesreally want is often simple for managers to deliver.

    Take, for example, The Container Store, a Dallas-based retailer that Fortunemagazine designated last year as America's best workplace, and a winner of Workforce's Optimas award for general excellence. It's practicing what itpreaches when it comes to training and retaining employees. Every first-year,full-time employee gets about 235 hours of training, provided both formally andthrough ongoing interaction with managers, who not only ask what their peopleneed to do their jobs well but also regularly assess how to provide necessaryassistance.

    Guided by what its executive leadership calls a "do-unto-others"business philosophy, The Container Store's more than 2,000 employees thrive inan environment that ensures open communication throughout the entire company,including regular discussions of store sales, company goals, and expansionplans. Couple that with the extensive training programs -- customized bymanagers to meet individual skills and job functions -- and team-based incentiveprograms, and it's easy to understand why turnover here is about 20 percent.That's a fraction of the turnover at most retail operations, which rangesbetween 80 and 120 percent.

    And The Container Store, which already has dozens of operations locatedacross the country, touts the rewards of a happy workforce. It plans to openthree new locations this year and to capture sales of more than $240 million.

    "With the labor market as it is, keeping people happy, keeping them onstaff, that's crucial," says Container Store spokeswoman Audrey Keymer.

    The movement's success stories aren't limited to industries historicallyplagued by high turnover. Financial-services giant American Express Co. lastyear unveiled a plan to double its cadre of analysts and financial advisers toroughly 20,000 in the coming decade. In the face of such massive growth, HRexperts at the New York-based company, often hailed for its focus on promotingfrom within its own ranks, began training managers how to become mentors toemployees whom the company views as "up-and-comers." The idea is tobolster the development of prized recruits before they go looking for suchnurturing elsewhere.

    At Autodesk Inc., a San Rafael, California-based software developer, HR andtraining specialists recently designed an online retention workshop to helpabout 300 managers become skillful career advisers. The managers were taught howto discover employees' personal career goals. With this information, managersand their charges can create a specific development plan -- with target dates --that appeals to the company and its workers.

    There is another obvious but effective way to encourage managers to reduceturnover: Tie their compensation to it. Reward them with bonuses for keepingturnover low. Penalize them when attrition soars. It's a tactic that soundspromising, but it has yet to receive widespread attention. Most managers areweary of agreeing to connect their own pay to the whims of others.

    Nevertheless, more and more companies are recognizing that retention is up tomanagers. This realization is gaining momentum because most retention strategiesare simple and inexpensive to implement.

A matter of survival

    The question today is, will the trend decline before it has a chance to showsome long-term results? Most experts agree that, even though the economy isslowing, there's ample reason to stay focused on retention.

    A closely watched forecasting gauge, the Blue Chip Economic Indicators, ispredicting that the economy will grow by just 2.6 percent this year. That's theweakest expected performance in a decade.

    "It's like a car going 60 miles an hour and then suddenly slowing to 20miles an hour. You haven't crashed, but you really feel the deceleration,"says Randell Moore, company executive editor.

    But he is quick to balance the assertion by reporting that the overwhelmingmajority of the 50 top economists surveyed by his organization believe that afull-blown recession will be avoided, and the overall job-market will weatherthe current storm.

    Most people are aware that they could lose their jobs at a time of sizablelayoffs at places such as Lucent, General Electric, and DaimlerChrysler. Yet,relatively few people fret over whether they can find new jobs. More areconcerned about keeping pace with technological change and taking advantage ofopportunities in New Economy companies that are still transforming workplaces.

    Sure, people worry about finances and job security. But not in the same waythey did in the 1980s when large numbers of people lost jobs as many Americanindustries reorganized to combat foreign competition. Nor do they worry in a waythat mirrors the early 1990s, when many more employees were bombarded by roundsof downsizing in an effort to create efficient and "lean" workforces.

    Today's constant turnover is in many ways a reflection of the impatient,freelance spirit common among many young, well-educated members of the140-million-strong labor force.

    For HR specialists and managers, that means one thing: harnessing that spiritremains a major concern and a top priority.

    It isn't always easy, of course, to convince managers to support newretention programs. Some say they lack the influence to reverse turnover trends.Others believe that it will eat up too much of their time. But if HR can givethem a place to start, nudge them in the right direction, and show them thatkeeping key talent is largely within their control, managers will begin to seegenuine results. By joining forces with their best people and finding themmeaningful work, growth opportunities, and the chance to be part of a team,managers can become better bosses and hold on to their talent.

    It's an issue of survival that's not likely to fade away. As advances intechnology make all companies increasingly more equal, staremployees become the all-important tiebreaker. "In most companies nobodymanages turnover," Finnegan says. "If it's going to be done, it has tobe the managers who do it. And HR can be the one to show them how."

Workforce, April 2001, pp. 57-60SubscribeNow!


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