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"A war rages in today's workplace, pitting company against company in the fight to find and keep good employees. The losses are high, and battle-weary managers are desperate for talented reinforcements. They've learned that bonuses, stock options, and other financial rewards aren't enough. To win this "war for talent," they need more.
Help has arrived in the form of Keeping the People Who Keep You in Business. This compelling new book gives readers a battle-plan for victory, offering 24 strategies for retaining valuable people. The strategies are grouped in four basic "keys":
1) Be a company people want to work for
2) Select the right person in the first place
3) Manage the joining-up process
4) Coach to maintain commitment.
These practices will help readers: Make their organization an "employer of choice"
• Clearly define the talent needed
• Make new employees feel welcomed, valued, prepared, and challenged
• Facilitate employees' career growth and advancement, and more.
Keeping the People Who Keep You in Business is also loaded with specific examples, how-to guidelines, models, and planning aids—proven tools from an expert who knows that money alone won't keep the employees you can't afford to lose."
The First Key
Be a Company That People Want to Work For
Cultures of Abuse vs. Cultures of Commitment
There are certain companies in every community that have built reputations as companies where people want to work. They have become "employers of choice"—an enviable status in today's war-for-talent economy. Some, like Hewlett-Packard, have built this reputation over many years.
Others, like the SAS Institute of Cary, North Carolina, have built such a reputation in just the past few years. Both these companies have something in common besides excellent products, they treat their employees like family and with respect, with an attitude and philosophy of nurturing and caring. What is even more interesting is that both companies have become extremely successful industry leaders, and both have built that success by investing time and money in their people.
Companies have always given lip service to the idea that "people are our most important asset." In one survey of executives a few years ago, nine out of ten told researchers that people were their company's most important asset. Yet those same executives ranked "people performance" sixth in a list of seven key issues in determining the success of their businesses. Many of these same executives are now waking up to the reality that in order to compete in the war for talent, they must finally start "walking the talk."
One notable example of an executive who woke up to the need for a new management style is Mort Meyerson, chairman and CEO of Dallas-based Perot Systems. In 1996 he wrote anarticle for Fast Company magazine, "Everything I Thought I Knew about Leadership Is Wrong," in which he confessed that he had spent years at EDS bullying his people into eighty-hour workweeks, emphasizing profit-and-loss "to the exclusion of other values" and creating a culture of "destructive contention."
Meyerson realized, after leaving EDS for Perot Systems, that continuing the same kinds of management practices in his new company would mean risking "becoming a company where the best people in the industry wouldn't want to work." Through a series of culture change initiatives, management retraining, 360-degree evaluations, greater employee ownership, and heightened sensitivity to employee lifestyle needs, he transformed Perot Systems into an organization that can compete in the war for talent.
Still, there are thousands of companies that have not adapted to the new realities. Their leaders continue to see their people as factors of production, like fuel to be burned. When they see their employees coming, they see costs—salaries, benefits, and overhead, instead of investments.
They have put their employees into a situation where they have to work at a pace that is not sustainable. They seem to have accepted high turnover as a cost of doing business. These "cultures of sacrifice" seem to be saying to their people, "Go ahead—burn yourself out, and then you can leave." As one employee joked, "My company's version of flextime is work any eighteen hours you want."
It is no joke. The percentage of U.S. employees who report that they have experienced job-related burnout rose from 39 percent in 1993 to 53 percent in 1998. In 1998, absenteeism rates, an early warning sign of turnover, hit a seven-year high, up a whopping 25 percent from 1997! The reason cited: Burnout and work-family conflicts have increased the number of unscheduled absences. This trend equates to higher rates of absenteeism, increased health care costs, lower productivity and morale, and, of course, higher turnover rates.
Many employers still have a hard time accepting that so-called soft issues really matter to employees. Yet the "war for talent" is making it harder for employers to ignore these issues. In a recent study of 3,000 workers, 56 percent of employees said their companies failed to show concern for them, 45 percent said their companies failed to treat them fairly, and 41 percent said their employers failed to trust them. Partly as a result, only 24 percent of employees said they were "truly loyal" to their employers and plan to stay for at least two years.
Employers who create feelings like these end up being chronically short on talent but often remain oblivious to the fact that they themselves have created the situation. Companies that truly regard their employees as assets in which to invest still seem to be in the minority. Those that do, like USAA, Starbucks, Men's Wearhouse, MBNA, Chick-Fil-A, Amgen, Nordstrom, and Motorola, to name a few, have some of the lowest turnover rates in their industries. By their actions, they say to their people, "We want to create an environment that attracts people, that makes them want to stay."
In his book The Loyalty Effect, Frederick Reichheld profiles companies that have worked to maintain a high degree of employee loyalty over the years as their primary strategy to maximize profits. These "loyalty leaders," as he describes them, "see people as assets rather than expenses, and they expect those assets to pay returns over a period of many years...They view asset defections as unacceptable, value-destroying failure, and they work constantly to eradicate them."
The author gives several examples of how the economics of loyalty leadership pays high dividends, among them:
* A. G. Edwards. This St. Louis-based brokerage found that four-year customer retention rates declined from 75 percent for customers who kept the same broker, to 61 percent for customers who had worked for two different brokers, all the way down to 53 percent for those who had three or more brokers.
* An auto service chain found that the top third of its stores in retention rates were also the top third in productivity, with 22 percent higher sales per employee. "Stores with 'low' turnover (100 percent on average) had profit margins more than 50 percent higher than stores with high employee turnover (averaging 150 percent)." Reichheld laments the current state of affairs, where "U.S. corporations now lose half their customers in five years, half their employees in four years and half their investors in less than one...Experience has shown us that disloyalty at current rates stunts corporate performance by 25 to 50 percent." Loyalty leaders, on the other hand, such as Lexus, State Farm, and Chick-Fil-A, are committed to "creating so much value for customers that there will be plenty left over for employees and investors." Given enough time and patience, the strategy works like this:
* Phase 1: Provide superior value proposition to most profitable, and potentially, most loyal, customers...which leads to...
* Phase 2: Business growth attracts and keeps the best employees, who take pride in delivering superior value to customers ...which leads to...
* Phase 3: Long-term employees get to know long-term customers better, learning how to deliver still more value and reinforcing mutual loyalty...which leads to...
* Phase 4: "Value proposition" is further enriched by cost reductions and quality improvements of longer-term employees, allowing the company to fund superior compensation and better tools and training...which leads to...
* Phase 5: Spiraling productivity, coupled with increased efficiency in dealing with loyal customers, generates the kind of cost advantage that is very difficult for competitors to match...which leads to...
* Phase 6: Sustainable cost advantage and loyal customers who generate the kind of profits that are appealing to investors...which leads to...
* Phase 7: Loyal investors behave like partners, stabilizing the system, lowering the cost of capital, and ensuring that cash is put back into the business to further enhance the company's value-creating potential.
Does your company's culture look more like a "culture of commitment" or more like a toxic or abusive culture that is indifferent to employee burnout and turnover? Use the following checklist to help you answer this question:
A Culture of Commitment: * Views employees as partners.
* Recognizes the human needs of all employees.
* Invests in people as the primary source of competitive advantage.
* Communicates clear corporate mission, vision, strategy, goals, and objectives.
* Commits to long-term strategy and the people needed to carry it out.
* Reward system and management styles support the mission and strategy.
* Focuses on "managing the performance contract," not controlling the people.
* Puts a premium on employee involvement in new ideas and innovation.
* Focuses on results, not on who gets credit.
* Trusts employees enough to delegate.
* Tolerates "intelligent error" and experimentation.
* Which results in:
* High-performing, confident, innovative, committed workforce.
* Achievement of company mission and lasting competitive advantage.
Cultures of commitment become "employers of choice" largely because their senior leadership teams create environments where three key retention management practices are put into place (Retention Practices #1-3). While these three practices are largely under the control of your company's senior leaders, this does not mean you cannot implement them yourself on a smaller scale within your own team, or that you cannot influence your senior leaders to start implementing them companywide.
RETENTION PRACTICE #1
Adopt a "Give-and-Get-Back" Philosophy
Workers always give to the organization or firm in direct proportion to what they perceive themselves receiving from it.—Jack Hawley, Reawakening the Spirit in Work.
Who comes first—customers or employees? Many companies that espouse the belief that the customer always come first actually abuse their employees in the name of customer service, thereby creating employees who take out their frustrations on those very customers.
Progressive companies have begun to recognize that the reverse is also true. By treating employees as number one, they are creating employees who will more happily and responsively serve the needs of customers. They have made the decision that they will give to employees in order to get something in return. This is a controversial philosophy in this age of entitlement, when employees already seem to feel unduly entitled as it is. Yet, it's difficult to argue with success.
It has been demonstrated that companies that institute practices designed to keep the workforce loyal have greater customer loyalty as well. One study reported that companies with employee turnover of 10 percent or less achieve customer retention rates 10 percent higher than those of companies with employee turnover of 15 percent or more.
Who's Doing It
Wilton Conner, owner of a highly successful printing company that bears his name, has become an employer-of-choice in Charlotte, North Carolina, because Mr. Conner cared enough about his people (and his company's long-range profitability) to adopt the following "family-friendly" services:
* On-site laundry
* Free meals in the company cafeteria
* Handyman services at employees' homes provided by company janitor at reduced rates * Nurse educators to explain health benefits
* Free English classes for non-English-speaking employees
* Van pools to help all employees get to work
These kinds of services send an important message to employees—that they are important enough to invest in, that the company cares about their welfare, that the company knows they have lives outside work and wants to make their lives easier so that they will have more energy and focus when they are at work. Employees have responded by working to help Wilton Conner create an unprecedented record of revenue growth and quality.
The Maids franchise owner in Johnson County, Kansas, Alice Errett, goes to great lengths to keep good housecleaning workers. Here a few of her retention initiatives:
* Putting a full-service kitchen in the office so that workers can fix breakfast or dinner for themselves or their families
* Setting up a bilingual library of periodicals and books for her employees to read, providing all workplace written materials in both Spanish and English
* Becoming an expert in daycare and sick-child referrals, car loans, home loans, and even bail-bond resources
* Training employees in household budget management
* Providing team-building and interpersonal skills training classes to help workers get along with one another
* Paying for her employees' flu shots and vitamins
* Subsidizing a full-size county bus that picks up fifteen to twenty workers at two locations in another county and drops them off at work
* Offering a $5 bonus to team members' paychecks for each day a cleaning team gets no complaints
"I will do everything in my power to make it possible for the people who work for me to be healthy and be here," says Errett.
SAS Institute, of Cary, North Carolina, the software development company that ranked third on the list of Fortune magazine's 1999 list of "The 100 Best Companies to Work for in America," is a prime example of how a giving philosophy can yield a high return-on-investment. SAS's strategy was to do everything it could to become an employer of choice. Here is a partial list of the benefits it provides:
* The best on-site childcare center in the state
* Workout clothes laundered daily
* Billiards, ping pong, volleyball
* Golf, tennis, tai chi, and dance classes
* Cafeteria with piano music
* Art on every wall
* Health clinic
* No limit on sick days
* Elder care coordinator
* Financial planning for college and retirement
* M&M candies distributed every Wednesday afternoon
* Company gates that don't open until 7 A.M. and close promptly at 6 P.M.
Some may call this "tree huggery." Others may react by saying that creating this sort of "employee utopia" is either unnecessary for retaining key people or beyond their company's financial means. But for SAS these practices represent an investment in attracting just the right kind of employees for implementing its business strategy. And the strategy is working.
Despite the fact that SAS offers its employees no stock options (practically unheard of in the software industry) and pays salaries that are no better than competitive, the company has achieved a 3.7 percent turnover rate, way below the 20 percent industry average. Given that SAS has 5,000 employees, that's 850 it is not losing compared to the competition
On the basis of these numbers, the company's CEO, Jim Goodnight, says the company has calculated, using an average salary of $50,000, that it is saving $67.5 million per year, which allows it to spend an extra $12,500 per employee on benefits. The company's new benefits committee meets monthly to consider new benefits, which must meet three key criteriaódo they fit the culture, do they affect a significant number of employees, and are they cost accountable?
* The Kansas City-based Hereford House restaurant also understands the economics of giving before getting. Because it knows that its more experienced servers will average $1 more per tab than inexperienced servers, it provides better benefits, insurance, and tuition contributions (up to $1,200 per year) to servers who stay at least a year.
* Steve Wynn, CEO of Mirage Resorts, has made his company one of the most innovative and successful in the hospitality industry by demonstrating his belief than high employee morale will pay off in better customer service. To back it up, he spent more per square foot to build the employee cafeteria than he did on the hotel's coffee shop, and he decorated the back corridors that employees use in the same bright and cheery colors as the guest corridors.
Benefits provided by companies in Fortune's annual list of the "100 Best Companies to Work for in America" include:
* Providing on-site dry cleaning, shoe repair, and beautician services (MBNA, Wilmington, Delaware)
* Providing $2,500 grants to support education of children adopted by employees (MBNA, Wilmington, Delaware)
* Allocating $50,000 per employee for training (Edward Jones, St. Louis)
* Giving grants of $3,000 a year per child for college tuition (Finova Group, Phoenix)
* Indexing health insurance premiums to income: The more you make, the more you pay (TDIndustries, Dallas)
* Encouraging managers, when responding to flextime requests, to "do what is right and human" (Edward Jones, St. Louis)
* Driving employees who work late into the night home by a free limo service (Goldman Sachs, New York)
* Offering free bagels and fruit every Tuesday and Thursday, plus free ice cream in the summer (CDW Computer Centers, Vernon Hills, Illinois)
* Allowing all employees to pick their own titles (Scitor, Sunnyvale, California)
* Giving employees laptops for telecommuting and keys to company buildings so that they can set their own hours (Great Plains, Fargo, North Dakota)
* Allowing employees to take twelve weeks at full pay to care for a sick spouse, child, or parent (AFLAC, Columbus, Georgia)
* Offering free prescription drugs made by the company, including Viagra and Prozac (Pfizer, New York, and Eli Lilly, Indianapolis)
* Giving new fathers and adoptive parents six-week paid leaves (Republic Bancorp, Owosso, Michigan)
* Offering "wheels on loan" if an employee's car is in the shop, "you've got it maid" discounts on maid service, and "gourmet to go" ready-to-eat meals (Valassis Communications, Livonia, Michigan)
* Providing on-site car rentals and shuttles to airport (Amgen, Thousand Oaks, California)
* Allowing 95 percent of employees to have flexible work hours and providing nap room with futons and dock space for kayaking commuters (WRQ, Seattle)
* Covering laser eye surgery (Merck, Whitehouse Station, New Jersey)
* Offering "wellness dollars" to employees who practice ten healthy behaviors (First Tennessee Bank, Memphis)
* Giving every employee a business card and a $650 ergonomic chair; allowing employees to include one nontraditional household member, including a sibling, in-law, domestic partner, or live-in nanny, in their employer-subsidized healthcare coverage (American Century, Kansas City)
* Kicking in $250 of support if an employee's child plays on a sports team (Qualcomm, San Diego)
* Providing employees with their own gardening plots on company land (Rodale, Emmaus, Pennsylvania)
* Making vacation days available on half an hour's notice (Capitol One, Falls Church, Virginia)
* Providing employees with limo service on their wedding day, plus $500 and a week of vacation (MBNA, Wilmington, Delaware)
* Reimbursing tuition costs 100 percent up to $9,600 per year (Bureau of National Affairs, Washington, D.C.)
* Providing $2,000 toward a down payment when employees buy a house in the working-class area where the company was founded sixty-one years ago (Third Federal S&L, Cleveland)
* Providing a room at the Four Seasons Hotel at no cost (Four Seasons Hotel, Toronto, Ontario)
* Granting thirty paid days off per year, along with free haircuts and manicures, two on-site gyms, an indoor lap swimming pool open all the time, and use of company jet for emergencies (JM Family Enterprises, Deerfield Beach, Florida)
* Picking up the entire health insurance premium for employees (Wegmans Food Markets, Rochester, New York)
* Offering eighteen days off in the first year of employment (VHA, Irving, Texas)
* Providing concierge services and free on-site massage (Finova Group, Phoenix)
* Sponsoring daily half-hour meditation sessions (Griffin Hospital, Derby, Connecticut)
* Creating "a city within a company"—full-service gym with personal trainers, indoor basketball court, hair salon, two restaurants, and a car wash (BMC Software, Houston)
* Having everyone, including the CEO, work in a cubicle and having no assigned parking spaces (Intel, Santa Clara, California)
* Permitting 90 percent of workers to use flextime and 30 percent to telecommute (American Management Services, Fairfax, Virginia)
* Hosting "reboot-your-mind" parties every Friday afternoon (National Instruments, Austin, Texas)
* Sponsoring an on-site clinic with seven primary-care doctors and five dentists to provide free medical and dental care for all employees and retirees and their family members (American Cast Iron Pipe, Birmingham, Alabama)
* Granting ten paid days for personal business and a week off at Christmas (Dell Computer, Round Rock, Texas)
* Allowing employees to take a break in meditation rooms or to play table tennis, pinball, or trashcan basketball; "the only dress code is that you must" (Sun Microsystems, Palo Alto, California)
* Eliminating employee premiums for health insurance (WRQ, Seattle)
* Providing free Starbucks coffee, an ultra-relaxed dress code, and generous time-off provisions (Janus, Denver)
* Creating an "e-doc" network of doctors who respond to e-mail advice seekers (Acxiom, Conway, Arkansas)
* Having an employee stock ownership plan (ESOP) to which the company contributes 15 percent of annual employee pay (W. L. Gore & Associates, Newark, Delaware)
* Offering employees free first-Friday lunches and installing a driving range behind the plant (Kingston Technology, Fountain Valley, California)
* Permitting unlimited accumulation of unused vacation time (Qualcomm, San Diego)
* Offering health club reimbursement if the employee goes three times a week (Synovus Financial, Columbus, Georgia)
* Offering two-week paid leave for new fathers (REI, Kent, Washington)
* Providing an extra paid week off between Christmas and New Year's (Lucas Digital, San Raphael, California)
* Offering six-week paid sabbaticals every four years (AutoDesk, San Raphael, California)
* Giving infant car seats to new parents (Valassis Communication, Livonia, Michigan)
* Allowing employees to use vacation condos with paid airfare (Fenwick & West, Palo Alto, California)
* Offering three weeks' vacation in first year (Capital One, Falls Church, Virginia)
* Scheduling free on-site health screenings, flu shots, and mammograms (J. D. Edwards, Denver)
* Having no assigned parking spaces, no titles on doors, and no dress code (BMC Software, Houston)
* Giving expectant mothers in their thirty-third week free parking near their offices (Bureau of National Affairs, Washington, D.C.)
* Offering full benefits, plus stock options and a pound of coffee, to any employee who works twenty hours a week (Starbucks, Seattle)
* Allowing sick days and personal days to be taken "as needed" (Genentech, South San Francisco)
* Offering free breakfast every day (Computer Associates, Islandia, New York)
* Allowing employees use of the company airplane in case of a family crisis (BE&K, Birmingham)
* Providing 100 percent tuition reimbursement with no cap (Johnson & Johnson, New Brunswick, New Jersey)
* Having a 401K plan that matches 8 percent of pay (Allied Signal, Morristown, New Jersey)
* Offering health coverage to employees who work as few as seventeen hours per week (Federal Express, Memphis)
* Providing interest-free loans of up to $3,000 to employees who wish to buy a personal computer (Harley-Davidson, Milwaukee)
* Giving lifetime medical and dental care to each employee and his or her spouse if the employee stays with the company until retirement (ACIPCO, Birmingham)
* Giving window offices to employees at lower and middle levels while managers use interior offices (Quantum, Milpitas, California)
* Reimbursing childcare fees when parents travel on business (Union Pacific Resources, Fort Worth)
* Closing doors on Fourth of July and New Year's so that all employees can spend the day with their families (Nordstrom, Seattle)
* Giving parents four hours' paid time off per year to attend teacher conferences (Granite Rock, Watsonville, California)
You are competing with companies like these in the war for talent.
The shares of public companies on Fortune's list rose 37 percent annualized over the previous three years, compared to 25 percent for S&P 500 companies, providing further proof that companies who give to their employees get returns in performance. But the real story here is that these companies are trying to help employees balance their personal and business lives and make their working lives more livable.
Copyright © 2001 Peter J. Clark and Stephen Neill. All rights reserved.
Truths About Turnover
Why Good Performers Leave
Who Are the Right People?
Keys to Keeping the Right People
Retention Practices Pre-Checklist
The First Key—BE A COMPANY PEOPLE WANT TO WORK FOR
1. Adopt a "Give-and-Get-Back" Philosophy
2. Measure What Counts and Pay for It
3. Inspire Commitment to a Clear Vision and Definite Objectives
The Second Key—SELECT THE RIGHT PEOPLE IN THE FIRST PLACE
4. Understand Why Some Leave and Why Others Stay
5. Redesign the Job Itself to Make It More Rewarding
6. Define the Results You Expect and the Talent You Need
7. Ask Questions That Require Proof of Talent
8. Give a Realistic Job Preview
9. Use Multiple Interviewers and Reference Checking
10. Reward Employee Referrals of Successful New Hires
11. Hire and Promote Managers Who Have the Talent to Manage People
12. Hire From Within When Possible
13. Creatively Expand Your Candidate Pool
The Third Key—GET THEM OFF TO A GREAT START
14. Give New Hires the Red Carpet Treatment
15. Communicate How Their Work Is Vital to the Organization's Success
16. Get Commitment to a Performance Agreement
17. Challenge Early and Often
18. Give Autonomy and Reward Initiative
The Fourth Key—COACH AND REWARD TO SUSTAIN COMMITMENT
19. Proactively Manage the Performance Agreement
20. Recognize Results
21. Train Managers in Career Coaching and Expect Them to Do It
22. Give Employees the Tools for Taking Charge of Their Careers
23. Know When to Keep and When to Let Go
24. Have More Fun!
PLANNING TO KEEP THE RIGHT PEOPLE
SPECIAL GROUPS AND SITUATIONS
Retaining All the Generations
Retaining a Diverse Workforce
Retaining Technical and Creative Talent
Retaining Entry-level Workers
Retaining During Downsizings, Mergers & Acquisitions"