Retaining Key Talents
A
number of factors have been put forward as important in affecting employee
retention, namely financial rewards, career development opportunities, job content,
social atmosphere and work life balance.Competitive financial packages can
signal a strong commitment on the part of the company and therefore can elicit
a strong reciprocal commitment on the part of the employees.
Compensation expert Edward Lawler in his 1990 book Strategic Pay maintains that
“organisations that have high levels of compensation have lower turnover rates
and larger numbers of individuals applying to work in them”. Besides economic
security, financial rewards also have a social meaning, with one’s salary level
providing an indication of his or her status the organization and in society.
However,
there are challenges in using financial rewards as a recruitment tool. For
example, a 1987 study by the Institute of Employment Studies revealed that only
10% of people who had left their employer gave dissatisfaction with pay as the
main reason for leaving. Another compensation expert Greg Smith in Here Today,
Here Tomorrow asserts that “money gets employees in the door, but it doesn’t
keep them there”.
Money is therefore a necessary, but not sufficient condition for employee
retention. The problem with using financial rewards as the key retention tool
is that one will always be vulnerable to the possibility that their competitors
will be able to offer a better package and thus lure away the best employees!
Training and career development opportunities are also considered as one of the
most important factors affecting employee retention. An organisation that seeks
to strengthen its bond with its employees must invest in the development of
these employees. This not only involves the creation of opportunities for
promotion within the organisation, but there should also be opportunities for
training and skills development that enhance employability internally and even
in the external labour market. Another important category of retention factors
relates to job content, more specifically the provision of challenging and
meaningful work. It has always been argued that people do not just work for the
money, but also to create purpose and satisfaction in their life. If work
mainly consists of routine-based performance of tasks, the likelihood of
demotivation or turnover will be relatively high.
Organisations that think carefully about how to structure jobs and related
tasks in a meaningful way will certainly affect their retention rates positively.
Initiatives aimed at enhancing the intrinsic qualities of a job are the most
popular type of retention practices for knowledge organisations of today.
The work environment and the social ties within this environment is another key
retention factor to be considered by employers. Loyalty to the organisation is
fast becoming a thing of the past, being replaced by loyalty to one’s
colleagues. Enhancing social networks for staff is an effective means of
retention. Social contacts between colleagues and departments are an important
factor for retaining talent. If an employee decides to leave your organisation,
make him or her feel that they have lost a social network! This can be achieved
through the creation of a positive social atmosphere by stimulating interaction
and mutual co-operation among colleagues through long service award ceremonies,
employee-of-the-month awards, company-sponsored sports teams, company parties
and many other initiatives.
Organisations
that allow employees to strike a meaningful balance between obligations at work
and obligations at home are more likely to “lock” these employees than those
organisations that believe work-family conflict is an illusion. Human resources
departments must therefore be innovative and come up with policies that improve
the work-life balance [1].
Retention
has a direct and causal relationship with employee needs and motivation.
Applying a motivation theory model, such as Maslow’s Hierarchy of Needs, is an
effective way of identifying effective retention protocol. Each of the five
tiers of Maslow’s hierarchy of needs relates to optimal retention strategy.
Since Maslow’s introduction of his motivation model, organizations have been
employing strategies attempting to stimulate each of the five humanitarian
needs described above to optimize retention rates. When applied to the
organizational model, meeting the self-actualization and esteem needs of an
employee tend to correlate to better retention. Physiological, safety, and
social needs are important as well, however, and must be addressed to better
the work environment. While implementing a retention strategy is ideal,
successful satisfying all five needs of employees is not only difficult, but
also expensive. That being said, managers who attempt to maximize employee need
coverage tend to be more concerned with employee satisfaction.
Homegrown firm Marico, which makes
Parachute coconut oil, does not keep a muster to monitor employee walk-ins at
work. If an employee takes a day off, he or she is not marked absent. Nor is
the employee required to file a leave application. Like Marico, many other
companies have struck out the system of casual leave (CL) and sick leave (SL)
from their leave calendars. Hindustan Unilever, Asian Paints and Jyothy
Laboratories are some of the other companies which do not follow a CL/SL system
and believe in empowering employees to manage their work schedules to meet
their targets. This trend can be observed in industries like FMCG and financial
sector, where employers are concerned about the end result and perhaps it helps
in employee retention as well. Such initiatives have a positive impact on the
productivity of employees who can manage their work schedules better in
addition to attending to family needs[2].
A sense of belonging is an internal
push that is predicated upon the ability of the organization to provide an
employee with job satisfaction and a friendly working environment. Management
should create a work environment in which employees feel free and are treated
with dignity in order for them to be affectively attached to the organization.
People who identify with and are more committed to the mission and values of
the organization are likely to stay even when better job opportunities exist
elsewhere. Managers should create a friendly work environment, a good public
image and an organizational culture with a sound financial base that will hold
them out as one of the best organizations to work for. Such a corporate image
presents an effective tool in attracting and retaining talent.
Indian organisations are exposed
to three critical talent risks, according to a recent Ernst & Young survey.
The first is employability risk, or attracting the right talent for the right
role. Despite being labour surplus, there is an apparent talent inadequacy in
comparison to the business growth that is transforming the industrial
landscape. The numbers thrown up by the survey show that about 80% of the
Indian workforce does not possess identifiable marketable skills; only 25% of
professionals are considered "employable" by multinationals and the
difficulty of employers in India to fill job vacancies has increased to 67% in
2011 as compared to the data from past years. The second is attrition risk. In
spite of early warning signals indicating an impending slowdown, most
employment metrics continue to indicate that the war for talent is still
fierce. This risk is not just restricted to losing talent but additionally,
organisations have to absorb the attrition costs. This has led to several
organisations continuously strengthening their internal HR processes to hold on
to their critical people and create a war-chest of talent. The third talent
risk is that of increasing employee costs. The double-digit salary hikes being
continuously provided for the last few years are forcing organisations to build
stronger mechanisms to keep employee costs under control. In terms of
addressing the risk of attracting employable talent, many organisations from
across sectors are exploring opportunities such as tying up with educational
institutes to introduce curriculum aligned to the requirements of the industry,
adopting government-owned Industrial Training Institutes, setting up large
training infrastructure and creating a network of trainers to build skills
internally, inducting students as interns to enhance their practical exposure
needed before joining the industry, etc.
For managerial talent, companies
are ensuring they identify a set of management and engineering institutes and
run a focused and continuous campus brand-building programme to be able to
attract the right talent. Many organisations are also experimenting with
channels such as the social media to reach out to their target talent audience.
Organisations are devising
retention strategies by understanding and answering certain key aspects about
their target talent, first being "who" they want to retain. Secondly,
"what" are the components that employees perceive as important to
stay in the organisation.
Organisations are continuously
identifying the requirements of their key talent and aligning their HR
practices to enhance the value proposition they provide to employees in those
specific areas, typically identified as: role, career, benefits, compensation
and culture [3].
The $8 billion Essar group has
for the first time in its history offered employee stock options (Esops) and
stock appreciation rights schemes (Sars) to the top leadership team comprising
269 people from its listed as well as unlisted arms. The group is adopting
these retention methods during a slowdown, a phase it considers an opportunity
to create efficiencies [4].
Metal and mining companies are
offering stock options as a tool to reward and retain senior management staff
in difficult times, something the IT firms did all this while. Jindal Steel
& Power Ltd and Visa Steel are some of the companies, apart from Essar
Steel, that have given out employees stock options (Esops). It's only recently
that steel companies are exploring the Esop route [5].
A study the
Ron Volper Group conducted, in 2011, across a range of industries, confirmed
that the number one reason for "unforced turnover" is employee
dissatisfaction with their compensation. Moreover, 80 percent of employees who
voluntarily left their company took a higher paying position with another
company.
Here's how
you can use your compensation plan to retain and motivate employees and up your
sales in a down market.
1.
Pay employees salary and incentives. The companies with the highest
employee morale and productivity pay a mix of salary and incentives. The salary
compensates employees for performing all the tasks required of them and
provides them with a consistent income. The incentive (which can be commission
for salespeople and a bonus for others) motivates them to meet and exceed their
goals and gives them the opportunity to increase their earnings.
Pay
employees the salary portion of their compensation monthly or bi-monthly. Pay
employees the incentive portion of their compensation as soon after they meet
their goals as feasible. Thus, quarterly incentive payments are usually more
motivating than annual payments and monthly incentive payments are often best.
2.
Keep the incentive part of your plan simple. The test of a good
compensation plan is that the incentive part measures no more than two to four
performance factors, and all employees can accurately explain the plan in the
time it takes to walk from the front door of your office building to your
receptionist's desk.
3.
Establish SMART goals. SMART goals are: Specific, Measurable,
Ambitious, Realistic and Time-bound.
For
salespeople, that means establishing monthly and annual revenue goals and/or
goals for opening new accounts. For other customer contact people, establish
goals for the ratio of customer compliments versus complaints, and/or the
number of customer complaints they resolve on the first phone call. For
employees in accounts receivable, consider basing goals on how much outstanding
revenue they collect against specific targets. For those in manufacturing,
consider basing goals on the number of products they manufacture free of
defects.
While it's
okay to pay a small part of the incentives based on the team's overall results,
most of the incentive should be based on individual results.
4.
Determine what your competitors are paying. One way to attract and
retain top employees-and keep them motivated is to pay them as much or more
than your competitors. Every few years, you should determine what your
competitors are paying and adjust your compensation plan accordingly. You can
do this informally by asking employees with other companies that you interview
about their compensation plan, or more objectively by hiring an outside
consulting firm to benchmark your plan against others and advise you on how to
adjust it.
5.
Modify salaries based on employees' geographic location. While the
incentive plan for employees working in different cities should not change, you
should adjust the salary portion to reflect the local cost of living, so as not
to penalize employees who live in more expensive cities.
6.
Use merit increases to reward top performers. In a misguided attempt
to keep all employees happy, many companies misallocate the funds they budget
for annual merit increases by giving all employees essentially the same merit
increases. Your first priority should be to retain and motivate star employees,
your second priority to retain and motivate satisfactory employees. Therefore,
award the largest salary increases to your stars, much more modest increases to
satisfactory performers, and no increases to employees whose performance falls
below expectations.
7.
Provide employees with non-financial rewards. Besides cash, employees
are motivated by other forms of recognition and rewards. For example, consider
establishing an annual trip to reward employees who have achieved certain
annual goals. Besides increasing motivation, company-sponsored trips build
camaraderie and teamwork. How you train, develop and manage your employees also
drives retention and performance. However, paying them as well as you
realistically can — based on their performance — is one of the best ways to
heighten their motivation [6].
Companies
around the world are cutting back their financial-incentive programs,
but few have used other ways of inspiring talent. A recent McKinsey
Quarterly survey underscores the opportunity. The respondents view three
noncash motivators—praise from immediate managers, leadership attention (for
example, one-on-one conversations), and a chance to lead projects or task
forces—as no less or even more effective motivators than the three
highest-rated financial incentives: cash bonuses, increased base pay, and stock
or stock options. The survey’s top three nonfinancial motivators play critical
roles in making employees feel that their companies value them, take their
well-being seriously, and strive to create opportunities for career growth.
These themes recur constantly in most studies on ways to motivate and engage
employees [7].
Employees, especially those with
esteem and self-actualization motives want to be appreciated and rewarded, not
necessarily with money, but openly acknowledging their achievements and
contribution. Accordingly, motivation is founded upon satisfaction derived from
a sense of achievement, recognition for achievement, responsibility and
personal growth. A critical retention motivation for key employees is the
visible appreciation of their contribution to the organization and respect for
their skills. Management should, as part of its organizational culture,
institutionalise the practice of appreciating and rewarding individual
employees with outstanding performances that are above set standards or when
valuable suggestions translate to increased productivity or profitability.
Organisations
often adopt e-Learning when they are looking to decrease training costs. This
is particularly true of organisations that have a large or geographically
dispersed workforce. Many organisations,
especially multi-nationals, are now using social networks, blogs, online
communities, gaming and other collaborative learning technologies to create
learning as well as comfortable work atmosphere and incentive for attracting
and retaining talents. This results in better productivity and positive mood in
the work place. Staff with tight schedules can nowadays roam the intellectual
world courtesy of the internet and can foster passions or update skills instead
of committing themselves to a strict academic timetable [8].
Training and development
opportunity strongly influenced retention amongst employees. For employees to
be effective in the performance of their jobs, they must be constantly trained
and developed. Employees perceive investment in their training and development
by employers as a strong sign of commitment on the part of management to retain
them.
Motivating
employees is a constant task that requires an understanding of employee
psychology, as well as
an understanding of individual motivators. The key to
motivation unlocks human potential. To be effective,
managers need to
understand what motivates employees within the context of the roles they
perform. Of all the functions a manager performs, employee motivation is one of
the most complex management issues they face. As employees find an outlet for
their creativity and satisfaction with their work, the work they perform
becomes a more important part of their life. As a result, employees become more
productive and experience higher rates of satisfaction with their employment. In
the past, managers assumed incorrectly, that all it would take to motivate
employees is to pay them more. It is conceivable for an organization to have
more employees than a competitor yet produce less and have disgruntled,
low-output employees even though the organization is paying their employees
more than the competitor. The research has clearly shown that increased
motivation and satisfaction can increase worker output. Organizations are
beginning to understand that they are able to motivate increased productivity
and employee satisfaction by means other than financial incentives. The
foundation of good human relations, the interaction between employer and
employees and their attitudes toward one another, is a satisfied work force.
Job satisfaction is the degree of enjoyment that people derive from performing
their jobs. Satisfied and motivated employees are more likely to have high
morale, loyalty and commitment. As a result, they tend to be more dedicated and
make larger contributions to the initiatives and goals of the organization. An
organization’s level of understanding of how to motivate its employees can be
considered directly related to the level of employee satisfaction and retention
at the organization.
To
keep employees and keep satisfaction high, organizations need to implement each
of the three Rs of employee retention: respect, recognition, and rewards.
Respect
is esteem, special regard, or particular consideration given to people. As the pyramid shows, respect is the foundation of keeping employees. Recognition and rewards will have little effect if organizations don’t respect
employees.
Recognition
is defined as “special notice or attention” and “the act of perceiving clearly.” Many problems with retention and morale occur because management is
not paying attention to employees need and reaction. Recognition is an
important factor for retention.
Rewards
are the extra perks offered beyond the basics of respect and recognition that make it worth people’s while to work hard, to care, to go
beyond the call of duty. While rewards represent the smallest portion of the retention equation, they are still an important one [9].
How to Keep Your Top Talent from Being Poached
- Identify
your top talent.
This might sound like common sense, but most companies neglect this simple
step. If you can identify a core group of individuals that are top
performers, you can then work on a plan to keep them.
- Learn
what’s important.
Once you’ve identified your top performers, take the time to find out what
they value. We tend to assume all employees value money the most,
but that may not be the case. Many people value growth opportunity,
training, schedule flexibility, etc. more than money. Use one-to-one
reviews or surveys to discover what’s really important to your employees.
- Value
your team.
If
your team feels undervalued, they will leave. Show your team that
you care, reward hard work, celebrate achievements, and make sure your teams
understands they are a valuable part of the company and essential to
continued success.
- Understand
there is no one-size-fits-all solution.
One
of the most important things to consider is that there is no magic bullet
when it comes to employee retention. Different employees will value
different things. What’s important is that you take the time to
determine what your team does value, and create an environment in which
they can thrive [10].
