This document discusses strategies for employee retention. It outlines tools to determine which employees to retain, such as a uniqueness grid to identify employees with specialized skills. It also discusses how to treat exiting employees respectfully to maintain trust with remaining employees. Finally, it recommends establishing retention policies focused on communication, recognition, and culture fit to motivate employees to stay.
2. Employee Retention: How to Keep the Keepers and Maintain Optimal Turnover Levels
Retention is a Introduction
business issue and For many of the world’s most admired companies, the ability to attract and retain
losing one or two key talented employees was the single-most reliable predictor of excellence, according
people can have a to Fortune magazine. And it may be the single-most important challenge of this
significant impact decade.
on your longevity or Why care about retention? Retention is a business issue and losing one or two key
profitability. people can have a significant impact on your longevity or profitability.
In the following white paper, we outline how managers can determine whom to
keep, how to treat those who leave and what to do to retain those necessary to the
organization.
These lessons are worth learning because:
• Most organizations don’t know who is valuable and who isn’t
• Organizations lack processes and tools to effectively restructure or downsize
• It is extremely challenging to retain and motivate the survivors
• Decisions must be made quickly
• Processes must be humane, but risk must be mitigated as well
• Resources are limited
Know who to keep and who to lose: 3 tools
The first thing to think about in figuring out who to keep is your desired attrition. Is
it ten percent? Fifteen percent? Zero? If the latter, then you need to take actions to
ensure you don’t lose anyone.
But if some turnover is OK, whom can you afford to lose? This is a more likely sce-
nario than zero, so you need to take a look at your workforce and the people in it.
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3. Employee Retention: How to Keep the Keepers and Maintain Optimal Turnover Levels
You don’t want to lose Uniqueness Grid
your stronger performers The “uniqueness grid” is designed to differentiate human capital and its competitive
who score high in the advantage. Or in other words, the specialized skills of your workers versus the value
leadership potential area, to your organization.
but you also may not want This is a relatively new concept in human resources that is based on the principle that
to lose those who have you should not treat everyone the same way. Not everyone has the same skill set and
already demonstrated not everyone can provide the competitive advantage you need.
leadership but who Differentiating Human Capital
may only be mid-level
High
Professional Partners Strategic Capabilities
performers.
Uniqueness of Human Capital
Contract Candidates Operational Partners
Low Competitive Advantage Value of Human Capital
Examples:
• You may have a person with highly-specialized skills, but these skills aren’t unique to
your business. Perhaps those are the jobs that you outsource so it doesn’t become a
retention issue.
• On the other hand, you may have a person with unique skills as well as a competitive
advantage, such as a software designer who has certain intellectual knowledge
critical to your business.
• Finally, you may have operational partners – people whose skills are less unique but
who are critical to running your business operations. They too provide a competitive
advantage.
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4. Employee Retention: How to Keep the Keepers and Maintain Optimal Turnover Levels
Business leaders think Performance Potential
about these factors – Another assessment is the “performance-potential.” This is used to look at the lead-
uniqueness, performance, ership potential of your employees – the potential to take on larger responsibilities.
potential and value – You don’t want to lose your stronger performers who score high in the leadership po-
because understanding tential area, but you also may not want to lose those who have already demonstrated
leadership but who may only be mid-level performers.
them leads to the desired
actions necessary to
“Who Must We Keep/Lose?”
properly retain people.
Likely Potential Current Performance
Bottom 10% Middle 70% Top 20%
Top - 20% “TURN” 4 2 1
Meets - 70% “ GROWTH” 7 5 3
Bottom - 10% “MASTERY” 9 8 6
Risk of Leaving
Finally, you want to take the data you’ve gathered and look at it within the matrix
called “risk of leaving.” On a simple grid you can plot those who are most valuable to
the company – high, medium, or low – against the risk of leaving – high, medium, or
low.
Bottom line: Business leaders think about these factors – uniqueness, performance,
potential and value – because understanding them leads to the desired actions
necessary to properly retain people.
Plotting Who’s at Risk
Value to Business Risk of Leaving
Low Medium High
HIGH
MEDIUM
HIGH
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5. Employee Retention: How to Keep the Keepers and Maintain Optimal Turnover Levels
One of the keys to How to treat those who leave and those who remain
retention is how you The way you treat people when they leave a company – voluntarily or through a
treat those who exit. It’s reduction in force (RIF) – impacts retention. In short, one of the keys to retention is
necessary to be respectful how you treat those who exit. It’s necessary to be respectful and fair, to make the cut
and fair, to make the as clean as possible instead of doing it multiple times.
cut as clean as possible Your treatment of the people who are asked to leave is going to be weighed by those
who remain. If you make multiple layoffs, those people – as well as people outside
instead of doing it
your organization – are going to wonder what’s going on with your company. You
multiple times. must work hard to build trust and respect among those who are left. This means not
hiding the facts. If you do, you will be found out at some point.
To prepare for a RIF, dot your I’s and cross your T’s. Have your business rationale
at hand, your selection criteria developed, your managers trained, your sever-
ance packages ready and your succession planning in place. You want to execute
simultaneously with precision but with humanity. Treat people with respect – don’t
notify them with an impersonal e-mail or conference call. Communicate openly and
truthfully.
How to structure an effective retention policy
A lot of thought goes into who gets retained and who isn’t – but remember to think
about retention policies for the long-term. Employee retention – and the intellectual
capital within your workforce – is critical to success.
Research has shown that the reasons people leave employers are very different from
the reasons they stay. The exit interviewee may say “I’ve found another job,” or “the
pay is better,” but nine times out of 10, those aren’t the reasons the person started
looking around in the first place. The reason they start looking is because they don’t
feel appreciated.
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6. Employee Retention: How to Keep the Keepers and Maintain Optimal Turnover Levels
That’s not to say pay and benefits aren’t important, but this research points to the
fact that managers’ roles in retention are critically important. There are some basic,
fundamental things that managers need to do for your organization to keep its top
performers:
• Empathize: Realize those who remain may be dealing with anxiety, confusion, grief,
mistrust, apathy and hostility. Deal with the negative emotions with empathy.
• Communicate: Provide frequent, truthful and direct communications. Provide
venues for employees to voice their concerns. Solicit ideas and opinions and
actively listen.
• Explain organizational and individual goals.
• Encourage initiative.
• Recognize performance.
Retention really begins in the hiring process. You hire not only for knowledge, skills
and abilities, but for core values and motivation, which is often just as important
as competence. Someone who’s not a good fit with the culture may end up being
rejected by the organization, or leaving.
You should also make a financial case for retention, an analysis of your turnover
costs. An easy way to calculate this: the cost for each professional staff member leav-
ing is equal to that person’s salary.
If you have 10 professionals each making $50,000 a year, that’s $500,000 in turnover
costs. For non-professionals, the rule of thumb is to take half the salary.
With those estimates in mind, make your financial case: Is it worth investing $50,000
or $25,000 in a program to reduce turnover? Is it worth investing in ways to retain
your key employees?
Conclusion
When tackling the issue of employee retention, the first thing business leaders need
to clarify within their organization is: why should they care?
As we’ve seen, it has a lot to do with whom you retain and why you need to retain, as
well as the costs and fallout if you don’t act on it.
The companies most effective at retaining people are those with people at the top
who understand this is a business issue.
In this current economic environment, it can be even more challenging to figure out
whom to keep, how to effectively manage a layoff, and how to motivate the survivors.
But together, the organization and the HR manager can ensure they retain the right
people for long-term business success.
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