By Michael W. McLaughlin
Cracking the employee-retention code is certainly more complex today than ever before. But one thing is certain—the companies that effectively identify and pay their best performers, listen with open ears, and act consistently will win the retention battle. They’ll keep those the company really needs from taking a walk to the competition.
Whether the cause of a resignation is the search for stability or the promise of a better opportunity, the effect is just as devastating: a highly talented individual departs and an operational void emerges.
Some HR professionals suggest that for every highly talented person leaving a company, three others are preparing their resumes in the hope of finding greener pastures—or for fear of being the next to be cut. In either case, creating an environment that stems the tide of unplanned turnover should be every smart company’s first priority. In conjunction with proactive methods for keeping your best people, it’s helpful to avoid the four surefire ways to drive them out the front door.
1. Fail to identify them
Given the fast pace of work, many managers reflexively criticize poor performance more readily than they praise great performance. Similarly, some organizations let their star performers toil in quiet desperation while those who have mastered the art of self-promotion snag the kudos.
HR managers usually portray the time-honored ritual of the formal performance review as the objective, apolitical method for sorting the top performers from others. But these processes often add to the problem. Why? Because the ritual tends to be a mechanical fill-in-the-blanks exercise that people tolerate rather than anticipate.
It’s as simple as answering one question: Can your employees recite their performance goals 7, 17, and 70 days after you set them? If the answer is maybe or no, then you might as well scrap the process altogether. If what’s on that performance and goal-setting form isn’t provocative enough to command your employees’ ongoing attention, you are wasting everyone’s time.
The problem is usually not with the process itself, but with its execution. If you ask their opinions, many employees will tell you that their performance reviews lack candor, clarity, and decisiveness. A common comment after a performance review is that employees couldn’t tell whether the reviewer had praised them or hit them with a two-by-four.
It is always easier to deliver a good performance review than a bad one. But even though it’s painful for both parties, under-performing employees usually understand and accept an honest and direct evaluation. It can also be much less damaging than the alternative: demoralizing your best workers by rewarding the weaker ones.
2. Pay people for showing up
Employee compensation is the 800-pound gorilla of retention. As with any powerful weapon, though, its misuse can cause severe and unintended damage.
One common misuse of compensation is the “peanut butter” approach: salary increases and other incentive payments are “spread” evenly across groups of employees rather than clearly differentiating and rewarding the accomplishments of top performers. The predictable result is that your high-performing employees feel slighted and a larger group of employees have, in essence, received an unintended message that the company pays people just for showing up.
In contrast, retention-friendly compensation strategies provide incentives based on truly differentiated performance, not politics, self-promotion, or peanut-butter strategy.
After you identify the real distinctions between top performers and others, you must make sure that their paychecks reflect those distinctions. And everyone should know how you rated their performance in relation to that of their peers and what specific actions they can take to improve their performance and, thus, their compensation. It may sound like Compensation 101, but for some managers it is still rocket science.
Organizations where employee compensation moves in virtual lockstep create an automatic and powerful disincentive. On the other hand, truly rewarding performance achieves the opposite outcome by raising the performance bar and motivating others to exceed it.
3. Neglect turnover
At some point, it’s likely that the business environment will necessitate cutting the number of employees. But companies can reduce the severity and impact if they do a good job of managing employee turnover when times are good.
When business is strong, most managers scramble to fill new positions and plug the gaps left by people who voluntarily resigned. An often-neglected task during this period is planning for turnover of those whose skills are not aligned with company needs. That is easier said than done. Managers must deliver a rational, clear, and compassionate message when asking someone to leave his or her job. When done right, the move can be a very positive, long-term step for the individual, not a calamity.
By implementing this strategy, managers can prevent personnel problems before they become irreconcilable and foster a culture where people understand, not fear, the company’s need to continuously build and rebuild the workforce over time.
Planned turnover also sends a strong message to top performers that their contributions are recognized and that the company is dedicated to surrounding them with equally talented people. It can also raise self-imposed performance standards across the organization. Like performance-based compensation, planned turnover sharpens the overall understanding of performance standards and expectations.
4. Fail to appreciate the loyal opposition
As managers speed through their multitasking, list-driven days, it is a challenge for them to absorb and react to the insights of those closest to the action, their employees. It’s easy to confuse insight with “whining” and mistake that which promises to improve an organization for sour grapes. That’s because in too many organizations, constructive feedback isn’t actively solicited—or acted on—until a breakdown occurs.
The history of business innovation is full of stories in which seemingly small, unlikely ideas led to breakthroughs. Today’s best employees are inspired by the belief that they too can contribute to the next breakthrough. For many, knowing they could have that kind of influence is as important as a pay raise. They’re looking for an opening, a receptive forum for bringing their ideas—whether controversial or mundane—to the table and, where appropriate, seeing those ideas implemented.
Managers need to throw away the “suggestion box” and really listen, even to ideas that seem off-the-wall. Innovations are more likely to emerge from the ill-formed kernel of a far-fetched idea than from an instantly recognizable, head-snapping insight. By facilitating a meaningful two-way dialogue with people, managers can tap a deep well of creativity and, in the process, improve retention.
A Compelling Business Case
Keeping the best people demands constant, rigorous attention. But organizations with a strong track record of retaining the best are rewarded with lower recruiting and initial training costs. And the benefits extend even further, to better customer and supplier relationships, improved operations, and stronger financial performance. The business case is compelling for those at the helm to always be building the strength of their team.
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