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Getting the best workers to stay

With signs of hope in the U.S. job market and many employees restless in their jobs, companies need to think about how to keep their best workers. Yet employers often seem clueless, experts say. — By Jon Bonne
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With a few signs of hope in the U.S. job market and many employees restless in their jobs, companies need to start thinking about how to keep their best workers from leaving. How an employee feels about his workplace can be key to whether he stays, but on that point employers often seem clueless, human-resources experts say.

Three types of employees are likely to quit: Those already set to go, “high risk” workers contemplating a job search and so-called trapped employees — those who’d like to leave but can’t. Those who have made up their minds to leave are essentially a lost cause, but companies can often work to keep the rest.

According to International Survey Research, which polls employees about their views of the workplace, corporate leadership is the biggest concern for those tempted to leave. When companies offer sweeping, generic statements of goals and values, employees often shrug. Rather, workers really just care about how those goals impact them personally. A company might commit to customer satisfaction, but if workers don’t see it reflected in their daily tasks — or feel they’re being given pablum from above — they sense a disconnect and can bristle.

“That’s when a lot of folks start to become disengaged in the company,” says Patrick Kulesa, global research director at ISR.

They disengage in different ways, though. In two case studies, ISR gauged employees’ attachment to their job by asking whether they had thought of leaving and whether they would stay even if they got a better-paying offer elsewhere. While trapped employees said they would gladly take the other job, they also had little intention of leaving. Flight risks were just the opposite: They said they planned to leave — yet they had little desire to take a better gig outside the company. And while trapped employees often complained about overall company strategies, flight risks took issue with a lack of personal rewards for their own contributions to larger goals. It wasn’t about pay — it was a deficit when it came to their perception they were being treated fairly and were appreciated for their work.

Turning to the data
Fixing the problem presumes employees will tell you what’s really bothering them. The heads of Mercer Human Resource Consulting believe something else is needed to understand what motivates employees, and for the past 10 years they have gotten clients to turn over human-resources data on employees — who was hired, who was promoted — which they analyze and model, searching for patterns. They argue in a new book, “Play To Your Strengths: Managing Your Internal Labor Markets For Lasting Competitive Advantage” (McGraw-Hill, $24.95), that many companies simply don’t understand their internal work structures and therefore are ill-prepared to reward and retain their best employees.

The notion of an internal labor market has long been established in modern economics. Just as in the overall labor market, companies have their own work structures and methods for dividing tasks across the workforce. The Mercer team, a mix of economists and organizational psychologists, wanted to understand the dynamics of those internal markets — to find out how employees were utilized and when they made career-changing decisions. Those moments of change, they believe, are crucial to understanding how a company works.

“There is the equivalent of the dollar trail,” says Haig Nalbantian, a principal at Mercer and co-author of the new book. “For employees, it’s the critical events in their work life, like the decision to stay or leave.”

For example, Nalbantian and his team studied FleetBoston’s problem with employee turnover. After workers complained about pay and a heavy workload, Fleet tried to ease stress and boost salaries — without success. Employee data showed pay made little difference in whether someone left; what really impacted turnover was whether an employee’s supervisor had left within the past year and whether she had been recently promoted.

Let 'em stay, let 'em go
Mercer also believes companies need to assess the value of turnover, which can help maintain a sharp labor force. Many firms want employees with broad, transferable skills; a programmer or accountant might be able to apply those skills almost anywhere. But in industries that require specific employee knowledge — high-tech manufacturing, for example — too much turnover can be devastating. Companies need to determine when keeping an employee from leaving exceeds the cost of training someone new. And it’s essential to find out which employees are your most vulnerable links in upholding corporate values.

The answers can be surprising, especially in an outsourcing-happy world. Some of firms’ most important value comes from workers who deal with customers — those often at the bottom rungs of the corporate ladder.

Mercer’s study of a major bank, First Tennessee, showed that raising customer reps’ average length of service by just one year could increase revenue and market share. And Marriott found it could shuffle managers between properties with almost no disruption in business because the moves both advanced managers’ careers and filtered knowledge throughout the company. “We don’t think enough organizations get to the point of evaluating, ‘Where does the real value come from in our workforce?’” Nalbantian says.

In part, they believe, that’s because most companies use outdated economics that view labor merely as a cost base — all those “Employees are our No. 1 asset” slogans aside. Nalbantian argues it’s necessary to restack the labor side of economic equations, using “human capital management” that values skill and experience rather than simply tallying up costs of hiring, training and benefits.

At the same time, they have little use for benchmarking: companies expending time and spending money to measure themselves against others. While a competitive view can help, the Mercer team suggests companies should stop asking “What works at GE and Microsoft?” and start asking “What works here?” (Their choice of MSNBC’s two parent companies was presumably incidental.)

A broader view
As for keeping the best and brightest from leaving, ISR’s Kulesa acknowledges it can be difficult to identify precisely who is a flight risk. At best, companies can improve how their values are spread — both personally and company-wide. Even if the top of the ladder gets the message, it may be garbled in translation as it passes down the chain. “It’s often a communication breakdown,” he says.

The Mercer folks advocate even broader changes. While companies often scramble to address a specific problem, Nalbantian says, the best changes come as “interventions” that change specific long-term policies. By contrast, simply reacting to what employees tell you can prompt an endless response loop that leaves you vulnerable to the whims of the external job market. For example, companies’ frenzy to hike pay and benefits in the late 1990s may have been temporary insulation from job churn, but then the economy soured and many employees were trapped in overpaid, unpleasant jobs. Corporate culture often went untended while managers dealt with employees’ short-term desires.

Of course, some employees simply need to go. But the tendency to cull underperformers can miss an undercurrent of systemic problems. Though many underperformers are trapped, ISR found trapped employees are just as likely to perform well. Kulesa warns against haste. “They could be developmentally stars for you later on,” he says, “if you could re-engage them, if you could recommit them.”

Nalbantian also warns against targeting individuals too quickly. A employee’s history of poor results may signal something wrong, but it has to be weighed against coworkers’ performance and checked against the possibility they were mistrained or were managed into failure. “If you don’t change the underlying system that created this outcome,” he says, “you’re just going to get back to where you were.”

This story was originally published Oct. 8, 2003.