Employee Retention - Getting it right

Changing times needs different strategies to engage and retain key employees. Organizations adopt different approach towards managing talent and working towards improving deliverables for business profitability. 

Mckinsey study shows that too many companies approach the retention of key employees during disruptive periods of organizational change by throwing financial incentives at senior executives, star performers, or other “rainmakers.”The money is rarely well spent. Many of the recipients would have stayed put anyway; others have concerns that money alone can’t address. Moreover, by focusing exclusively on high fliers, companies often overlook those “normal” performers who are nonetheless critical for the success of any change effort.

Some of the key observations are:

Find the “hidden gems”

Once HR and line managers have generated a thoughtful and more inclusive list of key players (usually 30 to 45 percent of all employees), they can begin to prioritize groups and individuals for targeted retention measures— 5 to 10 percent of the workforce.

The key is to view each employee through two lenses: first, the impact his or her departure would have on the business, given the focus of the change effort and his or her role in it; and second, the probability that the employee in question might leave.

Mind set matters

One-size-fits-all retention packages are usually unsuccessful in persuading a diverse group of key employees to stay. Instead, companies should tailor retention approaches to the mind-sets and motivations of specific employees (as well as to the express nature of the changes involved).

Retention is about more than money

Executives mustn’t view employee retention as a one-off exercise where it’s sufficient to get the incentives packages right. Rather, best practice approaches build on continuous attention and timely communication every step of the way to help employees make sense of the uncertainty inherent in organizational change.

Ultimately, what many employees want most of all is clarity about their future with the company. Creating that clarity requires significant hands-on effort from managers, including the ongoing work of tracking progress so that companies can quickly intervene when problems arise.

Targeting retention measures at the right people using a tailored mix of financial and nonfinancial incentives is crucial for managing organizational transitions that achieve long term business success; it’s also likely to save money.

Talent hiring and retention

Interesting thoughts by Sullivan in his recent article on employee retention.Folks who are focusing on the monetary aspect of the new job are more likely to quit in near future even if you have hired them at a higher than market levels salaries.

Incidentally, individuals hired from executive search firms can fall into this "money first" category. If they left the last job because an executive search professional presented a "better money" offer, don't be surprised when they leave again when the next executive search professional calls with slightly more money to offer.

This makes me wonder, what is the validity of employee current salary as an indicator of his actual competency level?

Sometimes recruiters and head hunters even create a “Talent vacuum” in the market for certain niche skills. This talent vacuum is especially seen in the Senior and middle managers levels as employees are not always on move and tend to be little reluctant to switch jobs easily. However thanks to the marketing skills of our head hunters and the growing talent crunch one always tends to get what he aspires for.

Growing salary levels for a role create a bigger pressure on current employers and most likely a less competent person (as per the role requirement) will fill the same role at a similar or even higher salary level. This creates a vicious circle in talent market and the salary levels head north due to this trend in war for talent. Talk to any seasoned recruiter today and he will tell you how they moan the fact that majority of decisions regarding change of job has to do with the high pay packages.The focus has sihifted from role and job content to the salary components and benefits,perks which the new job may offer.

As a HR professional you often wonder is this shift due to markert factors ,peer pressure,or just changing times.

How long this will trend will continue?

What about the “hiring philosophy’ ?

Perils of talent crunch

ET reports on the talent crunch at the CEO level in India Inc.

“Few candidates allege that search consultants aren’t being transparent enough, luring them into assignments that were very different from what they were told. “I met a company on a search consultant’s insistence, and they made me an offer I couldn’t refuse. Now I find that my job is half of what I was promised. I told the headhunter, ‘You are just a bloody broker’,” says a stung candidate. But is there an honest broker? “It’s an oxymoron. To what extent you can be an honest broker while you are selling a job — that’s often the deciding factor,”

Some clients allege that headhunters also try and push the candidate’s compensation higher, so they get a higher cut — a headhunter usually receives up to one-third of the annual package, bonus included. Some firms are said to take on a mandate and pocket a first retainer – one third of the annual salary for the position — even when they know they don’t have the expertise and bandwidth to complete a search successfully, says a headhunter: “For some it’s a free for all, grab all you can. Even some of the big firms are indulging in this behaviour.” But for now the hunt is on.

The current market trend clearly indicates that there’s dearth of capable leaders at the top. India Inc. has not been able to keep pace with the growth and develop leaders and adopt succession planning successfully. The fallout is that too few candidates are being chased for various openings. This has also lead to some unfair and unhealthy practices as recruiters are over promising and candidates having multiple offers are bargaining hard, what it means is that higher salaries, higher perks but not necessarily the best fit for the job.

Offshoring in Reverse

There’s always this great debate on the outsourcing of jobs to India and other Asian countries from US and European countries, but the times are changing and we are seeing the reverse of brain drain as Indian IT companies are hiring more locals in US. The growth of IT industry has truly lead to flattening of global talent marker as well, we now see talents across different nations are being employed by Indian MNC’s. So with the likes of IBM’s and Accenture’s ramping up fast and increasing talent strength at an all time high pace the war for talent also getting interesting.

Business week reports on offshoring in reverse.

In the past, Indian companies almost always transferred Indians to work in the U.S. on temporary visas. But now Infosys and other Indian outfits are hiring aggressively in the U.S. The Indians are recruiting a combination of fresh college grads and experienced vets who have worked at American companies. They're especially active at campus job fairs, and unlike a few years ago students know who these companies are and respect them. In fact, the Indian connection has become an attraction. "I thought this would be a fantastic opportunity, especially because they send you abroad for training," says Brian Oswald, a 23-year-old Rutgers University graduate with a 2006 degree in industrial engineering who joined TCS in February.

The U.S. hiring by the Indians echoes the strategy Japan's auto industry devised after soaring levels of imports sparked political outcry in Washington in December, 2000. "The Indians are doing to the world's IT processes what the Japanese did to manufacturing," says analyst John McCarthy of Forrester Research Inc (FORR). And now, like Japan's carmakers before them, the Indians are becoming major employers in the U.S. as well.

Headhunting and Talent War

ET reports on the phenomenon growth which headhunting services have seen over the last few years.

Outsourced hiring, or hiring through third party recruiters, will be an over $1 billion industry this year. And it’s growing extremely rapidly. Such hiring is only a decade old in India. It grew slowly initially, but in 2005-06, the business saw exponential growth, posting a turnover of Rs 3,922.32 crore, against Rs 630.98 crore in the year before. The industry this year is seen to be growing at about 40%. So by the fiscal-end, it would go well past $1 billion, according to a study by the Executive Recruiters’ Association (ERA).

Although there is no clear breakup of which sector would contribute to what extent, it is estimated that IT will claim the largest chunk at 30%, followed by telecom/infrastructure, retail /realty and manufacturing/utilities spaces each at 15%, ITES at 10% and others at 15%.

Clearly the boom in services and growth of industry has resulted in huge requirement at middle and senior level positions. The entry level positions are being filled by campus recruitment initiative. Headhunting services are largely being used to fill niche and middle level positions.Another report suggets that the skilled Indian professionals are finding an alternative in continental Europe. The non-English speaking countries of Europe such as Germany, the Netherlands and France are increasingly wooing Indians into their workforce.

In fact, many of these countries are trying to showcase their multicultural business environment to attract global skilled workers. “Holland, for instance, is very comfortable for an international skilled workforce since English is a business language,” says Dirk Bakker, president of the India Netherlands Business Association.

So the indicators are clear that the war for talent is truly global in nature.