Four Ways to Lose Your Best People

November 30, 2001
In the face of a seemingly unending string of employee layoff announcements from companies both large and small, the business world's best people are justifiably anxious about their futures. Whether the cause of a resignation is the search for stability or the promise of a better opportunity, the effect is just as devastating: a highly talented individual departs and an operational void emerges.

Some HR professionals suggest that for every highly talented person leaving a company, three others are preparing their résumés in the hope of finding greener pastures -- or for fear of being the next cut. In either case, creating an environment that stems the tide of unplanned turnover should be every smart company's first priority. In conjunction with proactive methods for keeping your best people, it's helpful to avoid the four surefire ways to drive them out the front door.

  1. Fail to identify them
    Inadvertently, given the frenetic pace of the workday, many people criticize poor performance more reflexively than they praise great performance. Similarly, some organizations let their star performers toil in quiet desperation while those who have mastered the art of self-promotion snag the kudos.

    The time-honored ritual of the formal performance review is often held up as the objective, apolitical method for sorting the top performers from others, but these processes often add to the problem. Why? Because the ritual tends to be a mechanical fill-in-the-blanks exercise that people tolerate rather than anticipate.

    It's as simple as answering one question: Can your employees recite their performance goals 7, 17, and 70 days after they've been set? If the answer is maybe or no, then the process might as well be scrapped. If what's on that performance and goal-setting form isn't provocative enough to command your employees' ongoing attention, the process is dead on arrival.

    The problem is not with the process itself, but more often with how the process is executed. Many employees characterize the performance-review process as lacking candor, clarity, and decisiveness. A common comment after a performance review is that people didn't know whether they had been praised or hit with a two-by-four.

    It is always easier to deliver a good performance review than a bad one. But an honest and direct evaluation of an underperforming employee, even though painful, is often understood and accepted. It can also be much less damaging than the alternative: demoralizing your best employees by rewarding weaker performers.

  2. Pay people for showing up
    Employee compensation is the 800-pound gorilla of retention. It's easily, and obviously, the most powerful weapon in the arsenal. As with any powerful weapon, though, its misuse can cause severe and unintended damage.

    One common misuse of compensation is glibly known as the "peanut butter" approach -- salary increases and other incentive payments are "spread" evenly across groups of employees rather than clearly differentiating and rewarding the accomplishments of the top performers. The predictable result is that a group of high-performing employees feel slighted and a larger group of employees have, in essence, received an unintended message that the company pays you for showing up.

    Retention-friendly compensation strategies, on the other hand, center on providing an incentive based on truly differentiated performance, not politics, self-promotion, or peanut-butter strategy.

    After the real distinction between the top performers and others has been identified, that distinction must be reflected in their paychecks. And everyone should know how their performance was rated in relation to that of their peers and what specific actions they can take to improve their performance and, thus, their compensation. It may sound like Compensation 101, but for some it is still rocket science.

    In organizations where employee compensation moves in virtual lockstep, an automatic and powerful disincentive can be created. On the other hand, truly rewarding performance achieves the opposite outcome by raising the performance bar and motivating others to exceed it.

  3. Neglect turnover
    Barely a week goes by without announcements of employee layoffs resulting from unfriendly market conditions. And, of course, these announcements are quickly followed by press accounts of the human cost of the decision. Today's business environment can drive the need for reducing the number of employees, but the severity and impact can be reduced if the company does a good job of managing employee turnover when times are good.

    When business is strong, most managers scramble to fill new positions and plug the gaps left by people who voluntarily resigned. An often-neglected task during this period is planning for turnover of those whose skills are not aligned with company needs. This is easier said than done. Managers must deliver a rational, clear, and compassionate message when asking someone to leave his or her job. When done well, the move can be a very positive, long-term step for the individual, not a calamity. By implementing this strategy, managers can prevent personnel problems before they become irreconcilable and foster a culture where people understand, not fear, the company's need to continuously build and rebuild the workforce over time.

    Planned turnover also sends a strong message to top performers that their contributions are recognized and the company is dedicated to surrounding them with equally high-performing people. It can also raise self-imposed performance standards across the organization. Like performance-based compensation strategies, planned turnover sharpens the overall understanding of performance standards and expectations.

  4. Misunderstand the loyal opposition
    As managers speed through their multi-tasking, list-driven days, it is more difficult than ever for them to absorb and react to the insights of those closest to the action, the employees. Managers can easily confuse insight with "whining" and mistake that which promises to improve an organization for sour grapes. Why? Because in too many organizations, constructive feedback isn't actively solicited -- or acted on -- until a breakdown occurs.

    The history of business innovation is full of episodes in which seemingly small but controversial ideas, often from unlikely sources, led to breakthroughs. Today's best employees are inspired by the belief that they too can contribute to the next breakthrough. For many, knowing they have that kind of influence is as important as a pay raise. They're looking for an opening, a receptive forum for bringing their ideas -- both controversial and mundane -- to the table, and where appropriate, seeing those ideas implemented.

    This fosters a trend toward throwing away the "suggestion box" and really listening, even to the ideas that seem most off-the-wall. Innovations are more likely to emerge from the ill-formed kernel of a controversial idea than from an instantly recognizable, head-snapping insight. By facilitating a meaningful two-way dialogue with people, managers can tap a deep well of innovation and, in the process, improve retention.

Keeping the best people is a contact sport. Those organizations with a strong track record of retaining the best are rewarded with lower recruiting and initial training costs. But the benefits extend even further, to better customer and supplier relationships, improved operations performance, and stronger financial performance. And in today's scenario of widespread staff reductions, having fewer people at the helm reinforces the need for businesses to protect the strength of the team that remains. The business case is compelling.

Cracking the employee-retention code is certainly more complex today than ever before. But one thing is certain: the companies that effectively identify and pay their best performers, listen with open ears, and consistently act will win the retention battle. They'll keep those who run the company from taking a walk to the competition.