Your Best Hiring Strategy is a Retention Strategy

by admin on August 23, 2010

I read an article recently that said that in the three years following the end of the last recession in 2001/2002, approximately 60% of employees voluntarily leaving companies were high-level performers. This does not augur well for companies as we begin to emerge from the current recession, which is infinitely more severe than the last. There are numerous reasons for driving high-performing employees from their organization, a few significant ones being:

A.  Disenchantment with how they were treated in tough times given the disproportionate contribution they made relative to mid- and low-level performers—in short, they’re not engaged.

B.  They’re highly sought after candidates and are thus aggressively recruited.

C.  They don’t believe there are positive and rewarding career and growth opportunities ahead.

Before we explore these reasons more closely, let’s consider the negative impact on your organization. While it is true that as employees leave your company others join, this game of career “musical chairs” is one of business’ costliest.

Attrition costs are estimated at $100,000 plus per employee for mid-level to senior knowledge workers (a conservative figure). This includes the organizational knowledge that departs with the employee, the cost of recruitment, decreased productivity until the position is filled, training the new employee, etc. Yesterday I spoke with an executive that told me her group was currently experiencing 34% turnover—in a tough labor market! What will the rate soar to when the job market improves? What is this costing her company?

Where employee engagement is a key focus, companies can reverse negative attrition trends. For one of our clients, when we deployed a program that led to improved communications effectiveness (employees understood and were aligned with vision and strategy) overall employee engagement increased by 10% and the number of disengaged employees fell by just over 50%. A key outcome was that attrition during that period fell from 24% to 9%. If we assume the above $100K attrition cost per top performer in a knowledge organization, in this approximately 500 person department the improvement in retention saved the company $7m. I wish I could say they paid us that much for our services, alas it was far less—but a phenomenal ROI on the cost of the engagement program we were retained to lead, not including the other benefits that accrued to the division as a result of increasing engagement.

And now back to some of the key reasons high performers leave at the first opportunity after a recession.

A. Disenchantment with how they were treated.

Two of the dumbest things I heard of an executive saying last year were, basically: “I don’t care if they’re unhappy, where are they going to go” and “They get paid to work. If they don’t like it there are people lining up for their jobs.” Unfortunately for this antediluvian cretin, performance within his organization faltered and top people have started to leave. Also, the irony of top performers is that as more and more layoffs have occurred, they’re being asked to do more and more work—precisely because of how well they’ve performed. Unfortunately, others in the organization not as skilled or hardworking have gotten off lightly. Simultaneously, wages have stagnated, bonuses have been stopped or significantly reduced (except on Wall Street which is a blog for another day) and promotions have been frozen. So where does the reward for a top producer believing in meritocracy come from? These folks are highly disengaged and, to quote my friend Judy Bardwick, have “one foot out the door.” (Read her book, “One Foot Out the Door”, it’s awesome.)

During a session I facilitated recently for a senior team focused on developing solutions to address low engagement across their division, one of the participants said we should “focus our energy on the engaged employees, because that’s where our best people are anyway.” Unfortunately it is false to assume your top performers are engaged. Indeed, quite often, top performers are less engaged as they feel the brunt of unfair treatment the most, as we’ve just discussed. Conversely, low performers may be quite engaged as they comfortably do their jobs, don’t stretch and don’t care, yet still get paid while often not being held accountable. This issue of engagement among top performers was borne out in a recent Towers-Watson survey. According to their 2009/2010 Strategic Rewards Report, top performers’ engagement levels fell by 23% in the past year, compared to a 9% decrease for all employees.

B. Highly sought after.

The thing about top performers is they know it. They’re also smart enough to know they have options—after all there are always good jobs for great people, regardless of the economic environment. So, as they’ve been experiencing a negative work environment, they’ve also been active in sowing the seeds for the future—networking, blogging, raising their profile, polishing their resumes, complaining on www.glassdoor.com, etc. Anyone that thinks recruiters haven’t been paying attention to this activity is going to be severely shocked as their best people get recruited into new positions. Those same recruiters that have been licking their wounds during the downturn are beginning to lick their chops at the prospect of another recruiting bonanza.

This too can be addressed by smart executives by focusing on employee engagement. The interesting thing about highly engaged employees is that they are significantly less likely to leave their organizations (they also are strong company advocates, put in extra effort and love working for their companies). The converse is true of disengaged employees—in fact they will often deliberately hurt or sabotage the company if given the chance to do so.

C. Few opportunities ahead.

Unfortunately when times are tough, companies slash budgets, usually in a non-strategic, across the board fashion. How creative. Often, after layoffs, among the first things to be cut are growth and development programs, including education and training. Also curtailed is investment in new business opportunities be it in R&D or new markets. As a result, ambitious employees feel that there are unlikely to be opportunities for experimentation, risk, creativity and innovation—all usually paths to career advancement including promotion. The sad fact is that top performers are more likely to get a fresh opportunity to express themselves at a new company, not to mention a greater likelihood of an enhanced position with requisite increased compensation.

The best organizations (or just those averse to the pain likely to be caused by the departure of good people) will work to retain talent by finding new opportunities for their people and investing in them now. While it may seem counter-intuitive to spend money on employees when things are so tough, the long-term upside potential is tremendous as your competitors will be playing catch up when they realize you’ve kept your best people and they’ve lost theirs—hopefully to you as word has spread that your company has a work environment conducive to employee engagement and performance.

The cliché that organizations are only as good as their people is no less true for being self-evident. Focus on your people by implementing a disciplined employee engagement program that draws feedback and insight based on their needs and perspectives, not your assumptions. A true engagement approach will provide you with a prescription to address issues within your organization’s teams, leading to a motivated workforce easily mobilized to accelerate reaching goals.

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