Award winning HR Article presented to eWIT - RETAINING BEST TALENTS (Retaining the Best) Paper presented for eWIT Excellence Awards - Mar 2012

 

Retaining the Best

 

Executive Summary

 

Indian IT sector is the fastest growing employment sector these days.  Bringing in the best to the economy and also increasing the value of human potential, hitherto unheard of in the context of Indian Economy.   Intelligence, Knowledge and Technical Know- How is valued across the globe.  Opportunities have increased and employees job-hopping have become a common phenomenon and major threat to the employers at all levels.  Here in this paper, the major issues relating to employee retention and highlighted the ways in which managers can make a difference…

Retention matters because high turnover creates high replacement costs, and is clearly associated with low levels of customer satisfaction, loyalty and lost revenues.   It is particularly challenging today due to a number of factors including aging work force, growing imbalance in the supply and demand of qualitative personnel.  In addition, today’s, workers have different expectation about work-life balance.   People stay with employers when they see the Organization as a source of pride and affiliation, good supervisors, fair compensation and work is meaningful.  People seek greener pastures, when leadership changes, conflicts arise with immediate supervisors or close friends leave, and responsibilities change in ways that they do not favor.    Managing for Retention is dealt in detail to curtail this growing menace to the organizations both potentially in terms of technical skills and right attitude skills.

 

 

Retaining the Best

 

 

Hiring and Retention are the two sides of the same coin.  They complement each other and if both are done well they produce what every company desperately needs:  first- class human assets.  Hiring success by getting the talented, hard working people brings in not just a considerable advantage over the competitors would create another challenge:  Keeping those star employees on board.  After all, if your human assets are measurably superior, other companies would notice and lure them away with higher pay, more authority and more appealing work situations-  perhaps the same inducements you used to recruit them.   We need to analyze within the organization on the defensive, employment practices, benefits and compensation schemes to determine if they are unconsciously undermining bonds of loyalty between the company and the great people who are hired.

            Retention is the challenge faced by many of the world’s most admired companies.  “War for Talent” became the scenario of many employment categories – particularly the high skilled areas such as IT, Software development, electrical engineering, accounting and finance- demand outstripped supply, touching off what has become talent warfare.

Lack of human talent is a serious concern on future growth and there is a need to pull all the stops in order to retain the most valuable employees.   Few world renowned techniques those succeeded are Work-Life balance programs, casual dress regimens, and on-site child care, sports tables proliferated, and increased responsibilities with required authority. 

            Though on and off recessions hit the high tech sector,  and ripple the economy, followed by unemployment, this phenomenon do not exist long.   Recessions don’t last forever, and most people recognize that the war of talent would heat up again once the economy got back on track.  In some sectors of the economy, the war never really subsided.  Surveys conducted over a period of time reveal that employees often get motivated by various factors that contribute to higher level of job hopping

 

Retention Matters

Retention is the converse of turnover – turnover being the sum of voluntary and involuntary separations between an employee and his or her company.   Industry-wide and company- specific measures that track turnovers rates reveal that most companies surveyed had turnover rates in the 15 to 50 percent range, though a sizeable minority enjoyed single digit turnover.

            Retention isn’t simply a “feel good” issue.  The retention of good employees matters for three important bottom-line reasons

1.     The growing importance of intellectual capital

2.     A casual link between employee tenure and customer satisfaction

3.     The high cost of employee turnover

 

The Importance of Intellectual Capital

            In the current “Knowledge Era” intellectual capital is what defines a company’s competitive edge.  Intellectual capital is the unique knowledge and skills that a company’s work force possess.  Today’s successful businesses win with innovative new ideas and top-notch products and services – all of which originate in the knowledge and skills of employees. 

People who possess the intellectual capital includes

·       Computer Programmers

·       Network and Software Engineers

·       Technical Designers and Solution Architects

·       Direct Marketing Analysts

·       Mid Level Managers- (they know whom to contact to get things done)

·       Top Level Executives – (they have business savvy and industry knowledge)

·       Strategic planning and business development professional ( they know how to do competitive and other forms of analysis)

·       Human Resource professionals ( Recruiting, employment law, compensation and other critical employee relation issues)

·       In-house legal counsel ( they understand intellectual property, securities, and other areas of business law)

Whenever employees leave, the company loses their hard-won knowledge and often expensively acquired skills.  The loss is compounded when the employees go to the competitor.  The time and money invested in training and on job skills is shared by the competitor at no cost.

Customer Satisfaction

The most important factors in business survival and growth are the customer satisfaction.  This is vital factor that forces retention to be a critical aspect.  Employees who are satisfied with their work and their company are most likes to create satisfied customers.  This is not just intuitively obvious but Research also supports this correlation.

Research findings stated that:

·       Negative employee attitudes and behaviors adversely affected the satisfaction of the customers

·       High employee turnover reduced customer satisfaction and revenues.

·       The extent to which the employees understood their jobs and company’s strategic objectives had a direct bearing on their attitudes and behaviors

Developing positive employees’ attitudes, job tenure and the financial performance develops the links between customer satisfaction and financial revenue growth.  When employees feel an attachment to the firm, they are most likely to share their positive images and feeling about the firm with the customers.  When the customer is exposed to favorable testimonials, they respond more firmly to the companies.

The Cost of Turnover

            The high price of turnover is the third major reason that retention matters.  Employee turnover involves three types of cost, each of which saps bottom-line results:

1.     Direct expenses including the out-of pockets cost of recruiting, interviewing, and training replacements.

2.     Indirect costs, such as the effect on workload, morale and customer satisfaction.

3.     Opportunity costs that include lost knowledge and the work that doesn’t get done while managers and other employees focus on filling the slot and bringing the replacement up to speed.

Employee categories such as information technology, software programming, and management consulting and public auditing routinely experience turnover rates of 20 to 25 percent.  Considering the salary levels in these fields, those rates must result in a painful financial burden for the affected company.

 

Why Retention is so challenging?

            The challenge of retaining good employees is complicated by a number of factors:

·       Demographic conditions

·       Cultural expectations

·       Upheavals in the world of work

Demographics

Demographic changes have made retention especially more challenging:

1.     The workforce overall is maturing.  The average age of employees is 35. 

2.     Economic growth is outpacing the growth of the workforce.  The US economy is growing at 2.4 percent while growth in the labor force is lagging behind with 1.2 percent only

3.     The supply of highly skilled technicians and professionals is being overwhelmed by demand – particularly in IT related fields.

The ramifications of these trends are clear: a pronounced shortage of skilled workers- and escalating competition among companies to recruit and retain those that are available.

Cultural Expectations

People’s expectations about work also strongly influence retention patterns.  Gone are the days when employees spend their entire lifetime working for one firm, except in the government services and factories it has become a rare phenomenon.   Employees, their colleagues, and companies consider one another almost as family and give each other the same dedication, commitment and support that one would give family members.  In contrast, the current culture emphasize on fast moving, and continual change- including rapid job-hopping in search of the best possible combination of work, compensation and future opportunities.   Thus, the company’s retention goals might be more or less challenging, depending on the cultural factors that shape its region’s or industry’s employment trends.

Upheavals in the world of work

            Changing economic and cultural circumstances can produce dramatic upheavals in the work world.  

§  A trend towards free agency

§  The dissolving employer/ employee contracts

§  An intensifying need for technical skills

§  A growth in internet recruiting

§  Demands for greater work-life balance

When you put these trends together, it’s clear that companies can no longer expect employees to join them early in life and stay indefinitely.  Instead, firms must actively and creatively encourage good people to stay- especially in high-tech markets.

The Special Challenge of a diverse work force

          Retention is especially challenging when the work force is highly diverse.  From age and gender, to part time, full time, ethnicity, race, sex, physician ability – companies are both benefiting from and struggling with the differences among employees.  “One-Size-Fits-All’’ strategies for keeping good people simply don’t work any longer.  Companies can best improve their retention rates by crafting creative, specialized strategies for each major segment of the work force.

The contingent work force

           Members of the Contingent Work Force- part timers, contractors, and temporary employees – offers some important advantages, as well as difficult challenges for Managers and HR departments.

Primary advantages include

§  Flexibility

§  Affordability

 Challenges include

§  High Turnover

§  A lower degree of loyalty to the firm and its products

§  A growing demand for the same benefits that regular employees receive such as satisfying work and career – development support

Young Workers

            Younger workers – primarily those in their twenties – bring energy – freshness, and state of the art technical knowledge into the firm’s work force.   These workers pose some difficulties:

• Career paths and taking jobs that will help them advance to the next jobs
• Comfortable with rapid change and flat management structures than are older employees
• Want their employer to define a career ladder for them

 

The following four strategies can help:

1. Understand their background, and customize their work accordingly
2. Include professional development in your value proposition to this  group
3. Lead through learning and developing new skills
4. Seek independent, continuous feedback from all employees

Female Employees

            Many corporate women are discourages by the “glass ceiling” that blocks their advancement.  Others want or need more flexibility than their employers can provide.  Still others – like their male counterparts – have developed Business concepts that they would pursue as individuals than as employees of some faceless corporation.  The resulting “brain drain” carried a heavy price.  

The four strategies that can help:

1. Analyze the current situation:

                  Identify the upper management positions occupied by the women and those who are in pipeline.  Talking to these women is find out what’s important to them and then finds ways to meet their needs.

2. Eradicate ‘invisible’ barriers to women’s success:

                  Take a hard look at the corporate environment.  Barriers to female success can be subtle- but very real.  Identify high-potential women and given them equal access to career enhancing opportunities:  line positions, skill-building opportunities, special project assignments, committee leadership and appointment to high visibility teams.

 

3. Cultivate support throughout the organization:                    

                  Supervisors should be made responsible for meeting the company’s gender equity goals.  Assign an ombudsman to handle any bias incidents

4. Promote the understanding that women’s ways of managing are good for business:

                  Specifically, numerous female entrepreneurs offer more flexibility, understanding and an open management style- all of which can give their corporation a vital competitive edge. 

There are many ways to address the gender concerns in the workplace.  No matter how you choose to do so, communication, creativity and a proactive approach will help

Race, Ethnicity, Sexual Orientation and Other Differences:

      Human beings have a long history of treating one another unfairly because of differences- whether the difference is race, ethnicity, sexual orientation, physical ability or another characteristic.  Many people have suffered discrimination in the workplace – sometime covert, sometimes open- if they didn’t fit in with what others thought of as the “mainstream” culture.  This kind of unfair treatment carries a high price of businesses.

      Companies can’t afford to neglect the talent found among people who are “different”.  “Every talented employee counts and finding ways to keep them simply makes good business sense. 

 

 

Why People Stay

People stay with a company for many different reasons, including job security, a work culture that recognizes the importance of work life balance, recognition for a job well done, flexible hours, or a sense of belonging.  However, in cultures in which it’s assumed that people may freely change jobs, the major motivations for staying are:

Pride in the Organization: 

People want to work for well-managed companies headed by skilled, resourceful leaders who have clear vision of the firm’s future, and who can devise powerful strategies for success, and who can motivate others to realize that vision.

A Respected Supervisor: 

Even more important is the employee supervisor relationship.  People are more likely to stay if they have a supervisor whom they respect and who is supportive of them.

Fair Compensation:

People also want to work for companies that offer fair compensation.  This includes not only competitive wages and benefits but also intangible compensation in the form of opportunities to learn, grow and achieve.

Affiliation:

The chance to work with respected and compatible colleagues is another element that many people consider essential.

Meaningful Work:

Finally, people want to work for companies that let them do the kinds of work that appeal to their deepest interest.  Satisfying and stimulating work makes all of us more productive.

As said, it is that if companies want to be more successful at attracting and retaining talent, they should evaluate and strengthen their value propositions to employees:

“To create a compelling employee value proposition, a company must provide the core elements that managers look for- exciting work, a great company, attractive compensation, and opportunities to develop.  A few more perks, casual dress code, or more generous health plans won’t make the difference between a weak EVP and a strong one.  If you want to substantially strengthen your company’s EVP, be prepared to change things as fundamental as the business strategy, the organization structure, the culture and even the caliber of the leaders”.

 

Why People Leave

People also leave organizations for many different reasons, but primarily because one or more of the above conditions was either absent at the beginning or has since been eliminated.  For example:

The company’s leadership shifts:  

Either the quality of the top management’s decisions declines or new leaders – whom employees don’t yet trust or feel comfortable with – take the helm.

Conflict with immediate supervisors:

People may also leave when their relationship with their bosses becomes stressful or problematic and they don’t see any other options in their company.

Close Friends leave:

One or more colleagues whom an employee particularly likes and respects leave the firm, thus taking away an affiliation that is very meaningful to that employee.

An unfavorable change of responsibilities:

A person’s job responsibilities change so that the work no longer appeals to his or her deepest interests or provides meaning or stimulation.

            Perhaps the number one point to keep in mind when thinking about why people leave is this:  People most often leave for the wrong reasons.   That is, they leave without really understanding why they are unhappy or what opportunities to improve things may exist within the company.   Thus they jump from company to company, making the same mistake each time. 

 

Managing for Retention

There are few ways by which managers can keep as many good employees as possible.  Below given is the list of few ways that will cover most of the bases.  

1. Get people off to a good start:    Getting people off to a good start begins with hiring people who are suited to their jobs and making sure that they understand what they are getting into.  A good start also begins with a new employee orientation that makes them feel welcomed and part of the group

2.  Create a great environment – with bosses whom people respect:  Managers often assume that company policies and corporate culture determine the working environment.  They do, to an extent.  But policies can be circumvented. In any case, the atmosphere in a department or unit is more important to individual employees than the culture of the corporation as a whole.  Bad bosses are not conductive to a great environment.  If the managers are repellent, count on every employee with marketable skills to leave.  In the end, its better to replace bad managers and supervisors than to replace an endless stream of employees.

3.  Share Information:   Freely dispensing with information – about the business, financial performance, about strategies and plans- tells employees that you trust them, that they are important partners, and that you respect their ability to understand and contribute to the business as a whole

4.  Give people as much autonomy as they can handle:  Many people enjoy working with a minimum of supervisors.  So give people as long a leash as they can handle.  Doing so will make them happy and make your job as manager easier. 

5.  Challenge people to stretch:  Most people – particularly the ones you want most to retain- enjoy a challenge and the feeling that you’ve entrusted tem with bigger responsibilities than they had a right to expect.   So put the people you want more to retain into jobs that will make them stretch- and give them the support they need to succeed.

6. Be Flexible:  Flexible work arrangements are highly successful in retaining employees.  Virtual teams, flexible work plans and telecommuting are effective in boosting retention.  Managers can allow on-the-spot flexibility, letting employees rearrange work to care for children, keep doctor’s appointment.  Today employees value that kind of flexibility highly.

7. Design jobs to encourage retention:  Nothing is more soul deadening for an intelligent contributor than a job that is too repetitive, too isolated, insufficiently challenging, or downright unpleasant.  So if you are unacceptable high turnover is a critical job category, take a good look at what you’re asking people in that job to do everyday.  Steps can be taken to cure the turnover problem through job redesign: adding variety to a repetitive job, engaging isolated employees in occasional team projects, upping the challenge and so forth.  

8.  Identify Potential defectors early:  Great work environments and great jobs are a matter of opinion; what challenges one person may terrify another.  You won’t know how well you are doing on either score unless you ask.

While you are at it, get feedback on your performance as a manager.  Arrow Electronics uses a “360-degree feedback” system, monitored by a CEO to determine whether its managers are actually providing the feedback and coaching that they should.

9.  Be a retention-oriented manager:  Never forget that part of your responsibility as a manager is to assure proper staffing in your unit.  Retaining good and excellent performers is part that job.  So it is important to check on the ways of managing people and scheduling the work flow. 

Bibliography /References:

Harvard University case studies and books

Economic Times Reviews.