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White Paper Employee Retention

Build upon your employee talent- keep them motivated.

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White Paper Employee Retention

  1. 1. WHITE PAPEREmployee RetentionHow to Keep the Keepers and MaintainOptimal Turnover Levels
  2. 2. Employee Retention: How to Keep the Keepers and Maintain Optimal Turnover LevelsRetention is a Introductionbusiness issue and For many of the world’s most admired companies, the ability to attract and retainlosing one or two key talented employees was the single-most reliable predictor of excellence, accordingpeople can have a to Fortune magazine. And it may be the single-most important challenge of thissignificant impact decade.on your longevity or Why care about retention? Retention is a business issue and losing one or two keyprofitability. 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.2
  3. 3. Employee Retention: How to Keep the Keepers and Maintain Optimal Turnover LevelsYou don’t want to lose Uniqueness Gridyour stronger performers The “uniqueness grid” is designed to differentiate human capital and its competitivewho score high in the advantage. Or in other words, the specialized skills of your workers versus the valueleadership 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 thatto lose those who have you should not treat everyone the same way. Not everyone has the same skill set andalready demonstrated not everyone can provide the competitive advantage you need.leadership but who Differentiating Human Capitalmay only be mid-level High Professional Partners Strategic Capabilitiesperformers. 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 3
  4. 4. Employee Retention: How to Keep the Keepers and Maintain Optimal Turnover LevelsBusiness leaders think Performance Potentialabout 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 desiredactions 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 HIGH4
  5. 5. Employee Retention: How to Keep the Keepers and Maintain Optimal Turnover LevelsOne of the keys to How to treat those who leave and those who remainretention is how you The way you treat people when they leave a company – voluntarily or through atreat those who exit. It’s reduction in force (RIF) – impacts retention. In short, one of the keys to retention isnecessary to be respectful how you treat those who exit. It’s necessary to be respectful and fair, to make the cutand 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 outsideinstead of doing it your organization – are going to wonder what’s going on with your company. Youmultiple 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 5
  6. 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.6
  7. 7. About TriNetTriNet serves as a trusted HR partner to small businesses to help contain costs, minimizeemployer-related risks, relieve administrative burden, and keep focus on core businessfunctions. From routine employee benefits service and payroll processing to high-levelhuman capital consulting, TriNet’s PEO expertise is integrated with every facet of aclient’s organization. Its solutions specialize in serving fast-moving companies in fieldssuch as technology and professional services, who recognize that top-quality employeesare the most critical competitive asset.For more information, visit www.trinet.comDisclaimerThe contents of this white paper have been prepared for educational and information purposes only. The content does not provide legal advice or legalopinions on any specific matters. Transmission of this information is not intended to create, and receipt does not constitute, a lawyer-client relationshipbetween TriNet, the author(s), or the publishers and you. You should not act or refrain from acting on any legal matter based on the content withoutseeking professional counsel.© 2009-2011 TriNet. All rights reserved. All trademarks, trade names, service marks and logos referenced herein belong to their respective companies. Dec 2011.Learn more at or call 888.874.6388 Ambitions Realized