The US Economic Recovery and Dysfunctional Turnover Part 2

In a previous post, I described the interplay between talent management, retention, flight risk and current economic conditions.   My conclusion, based on a number of factors, was that an uptick in the economy will likely trigger substantial turnover.   My recommendation was that you act now to obviate that possibility through renewed attention to specific talent management strategies.  In today’s post, we’re going to dig a bit deeper into possible strategies.

We believe that talent management professionals should pursue three related strategies:

  • If you haven’t down so recently, immediately do a talent audit with particular emphasis on critical roles and skills, flight risk, bench strength, top performers, and high potentials.
  • If you can, spend the dollars today to engage and retain the team you have – even a heavy spend now will cost you far less than spending later to fill key roles.
  • If you expect losses no matter what you do, take a hard look at your sourcing, recruiting, on-boarding and training processes so that you move lots of bodies through your hiring pipe.

Given the wide diversity of employees and the unique nature of their working relationship with your company, it’s fair to assume that all of us will have some success in retaining top performers as well as some painful losses.  Absent any clear trend data one way or the other, the above strategies should be pursued fairly equally.
 
Talent Audit
We know from research we conducted last year with HCI that too many organizations know far too little about their talent.  For example, just 22% of companies captured and surfaced flight risk potential.  Only 35% of companies had a clear picture on their bench strength.  Most companies don’t include pre-hire employee data in an employee profile – if they have an employee profile at all.  Your first step therefore must be to get a clear picture of the talent you have.  By “clear picture” I don’t mean: current job role, salary, last performance review, hire date, etc….  I mean:  unique or highly specialized skills and competencies, job history, successor, career path, aspirations, flight risk, strong ties, weak ties, accomplishments, certifications, reward and comp plan, level of engagement, potential…  These are the data points that you need to know now so that you can begin to move the needle on engagement, flight risk, and retention.

Spend Now or Spend a Lot More Later
Typical cost assessments from the Department of Labor for turnover range between 25 and 400 percent depending on the job.  A company that loses 500 employees at an average salary of $75,000 and an average turnover cost of 200% is looking at turnover costs that total $75 million.  If you spend $2 million to avoid these costs, your ROI is 3,650%.  Clearly, you can and should be spending money now.  The question is “on what?”

One area is the talent audit mentioned above.  If you don’t yet have the tools and technology to answer the questions above, this would be a good time to invest.  You might also want to conduct a deep survey of your team, maybe even an organizational network analysis, to better understand the impacts of dysfunctional turnover and your current levels of employee engagement.

Of course, knowing where your risk lies is only the first step in mitigating it.  You also need to think through your risk mitigation plan.  How do you reduce your turnover risk?  Research has shown that there are several systemic drivers of engagement and motivation:

  • Compensation 
  • Engaging work
  • Self-direction
  • Shared vision and purpose
  • Opportunity to develop mastery

While most of these bullets are reasonably self-evident, compensation is not.  Multiple studies have shown that compensation strategies need to be based on the type of work you are compensating.  For algorithmic work (running a cash register or digging ditches), “pay-for-performance” strategies have been shown to motivate higher levels of performance and task engagement.  For heuristic work (programming or diagnosing a patient), pay for performance actually decreases motivation and engagement by turning intrinsic motivation into external expectation.  In other words, if you establish a causal relationship between compensation and specific work goals or outcomes, you run the risk of demotivating employees.  While this may run counter to our intuition, it’s based on well-validated research that has been proven through multiple independent experiments.

Fortunately, the research also points the way to strategies that lead to higher engagement and motivation.  Better still, many of the strategies require minimal dollars to implement.  But that doesn’t mean it’s easy.  What the research shows is that engagement comes from the work itself, the employee’s relationships with peers and supervisors, and through self-direction and the opportunity to develop mastery.  This suggests that you should invest in a few key initiatives:

  • Training opportunities for the rank and file so that they can invest in their own mastery and development
  • Training and coaching for managers and supervisors with a focus on managing through shared vision and common goal setting to create the right conditions for employee autonomy and self-direction
  • Thoughtful design of on-the-job learning experiences that stretch employees in new directions
  • Robust talent mobility strategies and policies that encourage employees to pursue new opportunities and growth within the business rather than outside it
  • Communication efforts around shared vision and common purpose so that employees have a clear sense not just of “what” they are working on but “why”
  • Solicitation of ideas and genuine responsiveness in pursuing interesting ideas that come from employees to validate their investment in organizational success
  • Explicit programs that encourage employees to be self-directed such as dedicated creativity days where employees can work on projects that they choose and with like-minded peers

Plan for the Worst
While it would be nice to think that we can staunch the outflow of critical talent in the coming year, it’s likely that most organizations are still going to see some significant losses.  Your overall plan therefore should include strategies to minimize the loss of key skills, knowledge and talent while also optimizing the sourcing, recruiting and onboarding process to enable efficient, quality hiring in response to losses.

A good talent audit should reveal key areas of weakness in terms of bench strength, unique or highly specialized skills, critical job roles, and flight risk.  By correlating these measures with high performers and high potentials as well as forecasted needs, you can create a solid picture of where your greatest risk lies which will enable you to focus your initial efforts.  In addition to the effort to retain these folks, you might also consider an effort to capture what their expertise.  Targeted programs to interview known subject matter experts, top performers, and highly specialized contributors can serve a dual purpose:  by capturing their expertise, you mitigate the impact of their loss, and by showing an interest in their expertise and asking them to share what they know, you actually mitigate the risk of loss itself.

Other areas to critically examine are your sourcing and recruiting practices.  Here are some key questions that you should be able to answer with a confident “yes.”  If not, you have work to do.

  • Can you confidently identify your best source of hire?
  • Have you profiled the skills, competencies, behaviors and job history of your top performers in critical roles so you know what an idea candidate looks like?  
  • Have you linked skills, competencies and training so that you can reduce time-to-competency?
  • Do you have standard on-boarding and job role training for critical roles?
  • Do you have efficient and well understood recruiting and on-boarding practices?
  • Are you tapping social networks to source candidates and new hires?
  • Are you tapping your employees’ social networks through referral programs?

Many of these tasks, like those identified in the Talent Audit and Spend Now sections above, can be dramatically simplified, even automated through technology.  In an ideal world, you’d already have this technology in place.  If not, the ROI case is pretty compelling and it’s a great time to put forth a case.  The economy is turning around, companies are beginning to invest again, and your organization is likely facing a very significant risk that it doesn’t even know exists.

If you agree with the above premises and recommended remedies, the path forward is clear, not just in the short-term, but the long-term as well.  The strategies and investments noted in this post are not just short-term fixes to help you avoid the risk of loss today, they are the strategies and investments that will drive higher engagement and employee motivation in your organization for years to come.

Related Thinking
The Payback from Talent Mobility
A Happy Welcome
More Humand than Capital
The $60,000 Question

Related Links
Here Comes a Turnover Storm
RSA Animation of Drive, a new book on the science and research of motivation
 

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