Ch. 3 Keeping the Best

1. Ch. 3 Keeping the Best

2. I. HIRING AND RETENTION • A. Two Sides of Same Coin • B. First Class Human Assets = First Class Firm • C. Challenge: keeping star human assets • Other firms try to hire your best people • Higher pay • More authority • More appealing work • Examine own benefits for competitiveness • D. Plethora of Benefits to Retain Employees • Office of Retention • Work-life balance programs • Casual dress; Child care; Foosball tables • Bring dogs to work • During recession difficult

3. II. RETENTION MATTERS • A. Converse of Turnover • Turnover: voluntary and involuntary • Most companies turnover: 15-50% • B. Growing importance of intellectual capital • Industrial Age: machine most important assets • Knowledge Era: intellectual capital is competitive edge • When employee leaves • Lose accumulated knowledge • Competitor now has that knowledge • C. Link between employee tenureand customer satisfaction • Satisfied employees create satisfied customers

4. D. High cost of turnover • 1. Direct expenses • Recruiting • Interviewing • Training • Signing bonus • 2. Indirect costs • Workload • Morale • Customer satisfaction • 3. Opportunity costs • Lost knowledge • Work doesn’t get done • 4. General employee turnover cost: 1/3 of salary • 5. Managerial/professional cost: 1-2 times salary • 6. Cost of losing highly effective employee higher

5. E. Retention and the Service –Profit Chain • Model that links employee satisfaction and retention • 1. Customer loyalty drives profitability • A 5% increase in c. loyalty can boost profits 25-85% • 2. Customer satisfaction drives customer loyalty • Very satisfied customers 6x more likely to repurchase than satisfied customers • 3. Value drives customer satisfaction • Insurer that provides special services has high margins • 4. Employee productivity drives value • Create value per employee for shareholders, Nucor • 5. Employee loyalty drives employee productivity • Replacing sales rep with 8 years experience cost $432,000 • 6. Employee satisfaction drives employee loyalty • 30% dissatisfied employees intend to leave; 10% satisfied • 7. Internal quality drives employee satisfaction • Service workers like empowerment

6. F. Turnover Isn’t All Bad • Eliminate hidden costs • Mediocre or incompetent people • Poor decisions: $1.2 M per year • Poor morale • Positive impact on business • Creates vacancies to move good people up • Bring in new people with new skills • III. WHY PEOPLE STAY • A. Minor Reasons • Job security • Work-life balance • Recognition • Flexible hours • Belonging

7. B. Major Reasons • Pride in organization • Respected supervisor • Fair compensation • Affiliation • Meaningful work • C. EVP: Employee Value Proposition • To be attractive, job must have • Exciting work • Great company • Attractive compensation • Opportunities to develop • More perks won’t make a difference • Be prepared to change fundamentals: strategy, structure, culture, leaders

8. IV. WHY PEOPLE LEAVE • A. People Leave When 1 of above 5 is Absent • B. People Also Leave • Company’s leadership shifts • Conflict exists with immediate supervisors • Close friends leave • Unfavorable change of responsibilities • Problems with work-life balance • C. Managers and Supervisors Are Key • Bad manager can neutralize retention scheme • A few rotten apples can spoil the barrel • Research: C performer managers • Lower the bar • Hire other C performers • Talented people leave

9. V. MARKET-WISE RETENTION • A. Identify Individuals Who • Provide leadership • Create excellent results • Valuable new ideas • Require little supervision • Facilitate work of others • Information transfer nodes • Unique knowledge • Could do firm harm if left • B. Identify Employee Segments • Most essential • Create disruption when leave • Most costly to recruit and train • Control firm’s link to customers

10. C. Compensation • Low rating for retention • Viewed as indication of what firm thinks of you • Not a reliable motivator • Pay raises – temporary performance boost • Pay premiums for hot skills • Reduce premiums as skills available • Use performance evaluation to decideraises • D. Job Redesign • Identify elements that create satisfaction • Identify elements that cause dissatisfaction • Split off or outsource unwanted tasks • Need to add something back? • How to handle objectionable tasks? • Which costs more: job redesign or turnover?

11. VI. GENERAL STRATEGIES FOR RETENTION • A. Keep As Many People As Possible • Get people off to good start: right assignment, orientation • Bosses whom people respect • Share information • Autonomy • Challenge people to stretch • Be flexible • Job design to encourage retention: not repetitive, isolated • Identify potential defectors early • Retention-oriented manager

12. B. Tips for Detecting Potential Defectors • Change in behavior • Coming in late or leaving early • Decline in performance • Sudden complaints • From someone who hasn’t been complaining • Wistful references to other companies • Higher pay at other companies • Withdrawal behavior • From someone who used to join, stays out of groups • Talk about “burnout” • If see this behavior • Talk to employee, ask questions • Work together to retain employee

13. VII. THE ROLE OF WORK-LIFE BALANCE • A. Core Element of Employee Satisfaction • Balance requirements of work and personal life • No more long days, paltry vacations, bad hotels, week-end emails from boss • B. Can Be Win-Win • Clear about job priorities and personal priorities • Schedules and assignments satisfy both • Support employees as wholepeople • Experiment with how work getsdone

14. C. Tips on Work-Life Balance • Give employees specific goals, greater autonomy • “You are responsible for achieving ___. Develop a plan for doing that.” • More attention to results than how • Know employees personally • Civic obligations? • Children, aging parents? • Other skills benefit company? • Find new ways to do jobs • Ideas come from bottom up • Cost saving • Efficiency • Substitute teleconferencing for trips • Outsourcing

15. D. Telework • Work done in locations other than regular offices • 20 M employees in US • Cost savings • Real estate • Greater productivity • Greater employee loyalty • Lower turnover • Employees balance work-life • Survey: teleworkers put in more hours • AT&T: $25 M saved in real estate costs • Questions • Which jobs are appropriate for telework? • Legal, technical issues? • Supervise teleworkers? • Promotions?

16. Telework good when • Committed to new ways of operating • More informational than industrial • Dynamic, nonhierarchical, technically advanced • Not command driven • Willing to invest in tools and training • Set clear goals: monitor progress in short stages • E. Flexible Work Schedules • Reduced time schedules: children and school • Seasonal schedules: tax season • Compressed schedules: 40 hours M-Th • VIII. SUMMING UP • High turnover creates high replacement costs • People stay where respect boss, pride in company • Leave when boss changes, conflict, tasks change • Retain those who truly add to org. • Enhance work-life balance