HOLDING ON TO THE BEST AND BRIGHTEST

It's important to build sustaining value in your organization

By Rich Ream
Managing Partner- RMC Associates
Appeared in Information Today

When the stock market is in turmoil we often tend to question our investment strategies. Fortunately, we're good researchers and can take comfort in the fact that there appears to be a consensus in terms of how to manage through difficult times. It seems that the process of doing great fundamental research up front, asking really good questions, evaluating and comparing potential investments, and picking wisely is still a sound strategy. In addition, there's overwhelming advice suggesting that the key to long-term positive returns is to hold quality stocks for the long haul. The less churn in your portfolio, the better its performance.

I'll bet you can tell where this is headed. The process of building sustaining value in your own organization is remarkably similar to successful investment. This column will focus more on employee retention than on the front-end activities I've covered in previous columns. However, since the price of a poor hire is so costly, and the only thing more scarce and rare than ability is the talent to recognize ability, here are a few quick reminders:

  • Experts estimate that some 85 percent of job failures are directly related to mismatches of culture, including attitude and other interpersonal or "soft" skills. Interviews should be equally centered on four critical areas: skills, competencies matched to tasks, career ambitions, and work habits. The tendency is to focus on the first two areas and steer clear of the last two. Big mistake.

  • Conduct multiple interviews. Let's suppose you're looking for a researcher who will support both marketing and bench chemists. Make sure that you get involvement in the interview process from these constituencies.

  • Interview the candidate over the phone. Today, everyone must have good phone skills.

  • Practice full disclosure. When candidates become finalists, encourage them to talk with anyone in the organization and be sure you've told them everything they need to know to make an informed decision. No skeletons, no closets.

  • Don't be shy about asking the tough questions. Some examples are: "Why should I hire you?," "Why do you want this particular job at this specific company?," and "Can you describe a time when you were given a task with specific instructions and chose a different approach?"

Employee Turnover

Getting the best talent and fit is a big part of the job, but the bigger challenge is managing an organization that retains its top performers. Last year, an average of 16 percent of a company's employees chose to leave that employer. Compounding the turnover dilemma is the trend in organizations to disperse work teams and develop virtual teams. People in these environments tend to share less and rely on technology to network instead of using their own interpersonal network. Although the slowing economy could result in fewer employee-initiated departures this year, keep in mind there's always a strong market for your best employees. 

In addition to the very real loss of your own productivity when faced with the departure of your best and brightest, there's a substantial cost to the organization. The most common industry standard for calculating the cost of replacing an employee is 1.5 times his or her current salary. So if you lose an experienced information professional who's salaried at, say, $55,000, your total cost to rehire for the position will be $82,500. This can include direct costs such as salaries, recruitment fees, use of contract employees, and the price to advertise for the opening-as well as indirect costs such as loss of productivity, the time you spend interviewing, etc. Also, keep in mind that the cost of acquisition is at the current market rate, which is often higher than the salary of the employee who left. Some studies suggest that 3 times the departing employee's salary is more realistic. 

The flip side of this is that companies attuned to the wishes of today's demanding employees do seem to enjoy a clear, bottom-line advantage over their rivals. Consulting company Watson Wyatt Worldwide graded 405 publicly traded companies on such employee-centered practices as flexible hours, good training, and collegial interpersonal relations. Companies with the best practices had an average 103-percent 5-year return to shareholders, while those with the fewest such practices provided a 53-percent return.

What's a Body to Do?

First, recognize that there are two distinct realms of responsibility here: the organization's and the individual's. Both need to come from the perspective of what people want from the workplace today. Keep in mind that benefits are increasingly the same, pensions/401(k) plans are all portable, and it's becoming increasingly difficult to differentiate in terms of traditional incentives. To retain top performers, organizations need to supply-in addition to fair compensation-such things as:

  • A friendly, affirming work environment

  • The ability for people to move around the organization

  • An appetite and agility for continuous change. Learning in the new economy is inseparable from work. It's the process from which all knowledge is generated, transferred, and put into action.

  • The sharing of important organizational information at all levels

  • Erring on the side of generosity when offering pay increases. Never let pay be an excuse for an employee's departure.

  • Thinking outside the box. Providing professional coaching from a certified outside source-such as CoachInc.com-for both new hires and existing managers is becoming a sought-after benefit. What makes this so attractive is that it benefits the individual and the organization equally.

  • What do you need to do? Fortune magazine recently found that "inspiring leadership" and creating a sense of purpose were among the leading reasons people forego attractive offers and stay put. It's often said that people don't leave companies, they leave managers. So here are some things for you to reflect upon:

  • Are we having fun yet? Take this to a positive place. Ask your employees how work could be more fun. 

  • Recognize that reshaped organizations will have fewer leaders at the top and they'll no longer be the only repositories of organizational knowledge and wisdom. Encourage and nurture leadership throughout your organization. Support individuals who form relationships with "leader coaches" regardless of job title or status.

  • Ask yourself often what value you add, especially to those who choose to work for you.

  • Handle conflict in your organization in a proactive, open manner. Dynamic tension can be a positive force; openness is essential.

  • Make sure your top performers know you'll go to bat for them and that you're there to help resolve tough situations.

You Can't Win Them All

You can learn a great deal when respected employees resign. First and foremost, don't accept the resignation as inevitable. Let them know how important they are to your organization and your team and then ask open-ended questions, such as:

  • What's enticing you away?

  • What's missing here?

  • What would you like to do more/less of?

  • Is it just a matter of money or something more?

  • Can we do something to fix "it"?

If none of the above leads to a change, then graciously say goodbye. Acknowledge the contributions made and wish him or her well. The employee who parts on good terms can be a strong ambassador for you and your organization. As they say, "It's a shame to have endured the test but missed the lesson."

 

This article has been reprinted in its entirety from the April 2001 issue of Information Today with the permission of Information Today, Inc., 143 Old Marlton Pike, Medford, NJ 08055. 609/654-6266, http://www.infotoday.com.