This “think piece” is part of a series of articles I wrote to expand your thinking about strategic HR.

If you haven’t seen it in the news lately, there has been an uproar over the practice of secret “no-recruit” agreements between major corporations. A significant number of notable firms including Google, Apple, Intel, and Pixar have been accused of restraining the movement of employees between firms. But don’t be misdirected by all of the legal issues.

The real damage that these agreements can have is on your firm’s business results, and at a large firm, these damages could reach hundreds of millions of dollars. If you work in HR or recruiting, you need to be able to advise senior managers of the unintended consequences related to these agreements. If you currently use no-recruit agreements or you are considering one, this article covers the numerous potential business problems and impacts associated with them.

Potential Problems and Issues Related to Using “No-recruit” Agreements

The 25 problems are broken into two categories, 1) ways that these agreements can hurt your firm and 2) reasons why the agreement may not even work.

Note: I frequently call these agreements “secret” because that is a goal. But with the growth of social media, they are becoming a poorly kept secret.

Ways That These Agreements Can Hurt Your Firm

• A loss of trust among employees — because of the potential legal issues, almost every firm keeps these agreements secret. However, if your firm has corporate values that include honesty and transparency, when the fact that the company is keeping secrets from employees gets out, any built-up trust will be damaged or lost. Restricting an employee’s freedom without telling them can have many ugly repercussions.
• Poorer treatment of employees may lead to productivity/recruiting problems — if the goal of the pact is reached (dramatically reducing turnover), managers and HR professionals will not have to work as hard to keep the best. This may lead to degradation in the treatment of employees and the benefits offered to them. An unintended consequence of this poorer treatment may be a measurable decrease in employee productivity, engagement, and innovation. The resulting weakened and slower improving HR practices and benefits may also harm your employer brand image and whatever recruiting you do outside of the agreement.
• Limiting new ideas and best practices — “no-recruit” pacts restrict or prevent the hiring of new employees directly from your competitors. This can severely limit the infusion of new ideas and the best practices from your competitor’s employees. And if your firm is not  No. 1 in your industry, your chances of moving up may also be restricted.
• It may restrict rapid company growth — in order for a firm to grow rapidly, it may rapidly need a large amount of already trained talent to support new products or initiatives. Unfortunately, no-recruit agreements make it almost impossible to rapidly get large amounts of ready-to-go talent from the most logical sources: your competitors.
• You are forced to hire those who are less prepared — because most of the well-trained and experienced talent will be at large firms in your industry, the agreement may force your firm to hire employees from smaller firms, where the employees are likely to be less trained and prepared. Many firms are then forced to increase their percentage of college hires because most experienced talent is restricted.
• Fewer promotional opportunities may restrict leader development – if the goal of reduced turnover is reached, there will be fewer openings for your best employees to get promoted into. This stagnation will frustrate your best and brightest, and more importantly, it will slow their development. And because you can’t recruit fully developed leaders from your competitors, you may eventually face a leadership shortage. If you want to maintain an effective rate of employee and leadership development, you will have to devote extra resources to develop a powerful development function.
• Your bad employees will stay much longer — the agreement is designed to prevent the loss of your best employees but it will restrict your weak employees from leaving also. Instead of leaving, your weak employees will continue to generate lower productivity and frustrate your top performers. Unless you develop a “no-recruit-except-weak-performers” agreement, you may have inadvertently damaged your firm for years.
• Knowledge of your customers may also be reduced — one variation of these agreements narrows the recruiting restriction to a firm’s major industrial customers. Obviously regularly recruiting away a customer’s top employees won’t win you a popularity contest. Occasionally hiring a customer’s employees may strengthen bonds, communications, and it may help you better understand the customer’s needs.
• The realization among employees that they don’t come first — once the word gets out, employees will instantly realize that all the speeches about providing employees with freedom get neutralized, because in this case, clearly the company is consciously putting itself ahead of the needs of its employees.
• Employees feeling owned — preventing other firms from poaching “its” employees sends a clear message that the company feels that it “owns” its employees. No one likes feeling “owned” and diverse employees may have an even greater negative reaction.
• Damage to your external employer brand damage – once the word gets out to potential applicants and the public, the firm’s external brand image will tank. You may also permanently anger top applicants from restricted firms when they are rejected outright for no logical reason.
• Internal employer brand damage – once the word gets out among your own employees about this repugnant practice, your internal brand will be damaged, and that may negatively affect the way that your employees respond to your customers.
• Damage to employee referral programs — if you succeed in keeping the agreement secret, your employees will not know that they shouldn’t make referrals from competitor firms. Once high-quality employee referrals go nowhere, without explanation, employees will naturally slow down their referrals from all sources.
• The best recruiters won’t want to work for you – the very best recruiters know about these agreements and most of the best dislike the thought of recruiting with their “hands tied.” And with fewer top firms to target, you will likely need superior recruiters in order to bring in the best.
• Not being able to poach locally may increase relocation costs – another variation of these agreements restricts recruiting from major firms in the same community, even if they are in different industries. Obviously when “local poaching” is restricted, more often than not you will need to hire from outside the area. Requiring more candidates to relocate will make recruiting much more difficult and costly.
• Small firms may become more competitive in recruiting — employees may become frustrated when they find that they “can’t leave.” As result, they may jump at the first chance and go to a small or less desirable firm (that is not covered by an agreement). A firm that they normally would not have considered. And if they choose, they can later move directly to a formally restricted competitor of their former firm.
• It may negatively impact government contracts – should you be found to be breaking the law, it may impact your ability to get future government contracts.
• Enforcement can be time-consuming and expensive — some of the recruiters under the agreement may not “get the message” (which occurred in the Google-recruiting-from-Apple case). As a result, executives will be forced to spend the time and the expense of “lawyer letters” to fix the mistakes. And because the agreement itself is probably illegal, you likely can’t go to court to enforce it.
• It’s a contradiction — and finally, if you happen to be an advocate of free trade and open market capitalism, you will likely have difficulty explaining to your Republican friends the hypocrisy of your actions.

Reasons Why the Agreement May Not Even Work

• A cold-calling ban may be insufficient — some of the agreements only restrict “cold calling” or making the first contact (as opposed to an absolute no-hiring ban). And as a result, smart recruiters often find a way to ruse or convince employees at the target firm to make the first contact.
• Third-party recruiters can be used to go around it — most external third-party recruiters are not included in these corporate agreements, so competitors can still hire your employees; they just have to do it indirectly through a third-party. Some executive search firms have don’t-recruit agreements with customers, so finding a top firm to manage your go-around can be problematic.
• Employees will still find a way to work for your competitors, indirectly — rather than going directly to a competitor, your clever employees will find a way to get there indirectly. All they have to do is to make a short stop working at a consulting firm or they can simply take a long break and apply. Ex-employees are not normally covered by these agreements.
• Limited poaching will occur anyway — even though the agreement says no recruiting, in practice you can get away with hiring one to three people a year from a firm without getting a stop call or a “lawyer letter.” Recruiters love to stretch limits, and many managers will go along up until the point where someone complains.
• Even keeping the agreement secret is difficult – with the growth of social media, you can almost guarantee that your recruiters (especially contract recruiters) will informally spread the word about the restriction.
• Some competitor firms simply won’t go along – these agreements can only have their maximum impact if all of the major players in an industry or geographic region participate. With the recent U.S. Department of Justice and civil lawsuits and the publicity that surrounds them, fewer executives will even be willing to discuss these agreements. Already, most global firms simply refuse to participate.

Final Thoughts

I have written about this questionable practice on numerous occasions including my recent article called Recruiting’s Dirty Little Secrets. Although secret, this practice is quite common not just in high-tech but it is also not hard to find in healthcare, major accounting firms, and among consulting firms. There are arguably some potential benefits related to this practice. They include: it pleases your major customers; it may reduce salaries by restricting bidding on candidates; and you may have less turnover because fewer recruiters are targeting your very best. However, after extensive research on the potential problems, I have concluded that the ROI of these agreements is weak and it is getting lower by the day.

The leadership set aside at least half the day for the team to identify upcoming problems and opportunities and the resulting strategic moves that need to be made. This article is merely a checklist of the strategic talent management actions that I have found that the very best corporations should have on their potential to-do list.

The Top 15 Potential Strategic Actions to Consider in Talent Management

If you’ve decided to stop fighting fires and to do something major with a strategic impact, here is a list of possible programs and actions that you should consider.

1. Increase the productivity of your workforce – workforce productivity is merely comparing the output of your entire workforce (the total value of the products and services they produce) with the cost of your workforce (total labor and talent management costs). Many talent management departments measure engagement (a precursor to productivity) but they don’t measure workforce productivity. Even fewer take proactive actions to directly increase it. Increasing productivity requires talent management to identify the barriers that restrict productivity and then to proactively provide the consulting advice, best practices, and tools that have been proven to increase a team’s productivity.
2. Increase employee innovation – fierce marketplace competition requires firms to accelerate innovation in product and service areas, despite having fewer resources. Rather than targeting a few departments, talent management must increase innovation in all areas of the business. Typically, innovation can be increased tough the targeted hiring of innovators, retaining innovators, and minimizing the barriers that innovators face within the corporation. Talent management must help shape the culture so that the expectation of continuous innovation permeates every business area.
3. Reward great people management – Most managers simply don’t spend enough time on talent management activities. The primary reason is that managers are not directly measured or rewarded based on how well they manage their talent. This is true even though talent management “owns” all of the key components related to measuring and rewarding (performance management, performance appraisal, competencies, and reward systems). The key action step is to develop a “people management scorecard” for each individual manager and reward them based on their performance against those standards.
4. Identify and fix bad managers – research by Google has shown that in most cases, an employee’s or a team’s manager is the single-highest impact factor on the hiring, retention, innovation, productivity, and the development of employees. Yet most organizations have no formal program for identifying weak managers. Strategic actions would include implementing surveys and metrics to identify with managers and to provide general lists with proven tools and approaches to improve a manager’s people management performance.
5. Convert talent management metrics into their dollar impact – unfortunately, most traditional talent management metrics fail to impress executives because they are not expressed in “the language of business,” which is dollars. Saying we have a 12% turnover rate, a 54% engagement rate, or an 87-day time to fill generally won’t impress senior managers because the metrics are not expressed in their dollar impact on corporate revenue. In contrast, stating that every percentage point increase in regrettable employee turnover costs us $7.2 million gets an immediate reaction. Work with the CFO’s office to credibly calculate the impacts.
6. Calculate the risks of weak talent management — shifting from the positive business impact to the possible negative impacts requires a risk management manager. Risk management is an increasingly important function throughout the business, but unfortunately, few talent management functions have put anyone charge of risk management. Risk managers identify and quantify the risks associated with potential talent problems (its probability and likely costs). Underfunding important talent programs can create tremendous economic risks such as losing key innovators to competitors, failing to have enough developed leaders, and a weak employer brand that drives top candidates away.
7. You need to prepare for a leadership gap — the combination of increased growth and higher turnover rates will mean that most corporations will begin to suffer because of a lack of leadership bench strength. In addition, because the type of leaders who will be needed will also change, the entire leadership and succession program will have to be re-examined and new social media and project rotation tools will need to be developed and implemented.
8. Speed up internal movement through proactive internal placement – very few things increased productivity, retention, and employee development faster than periodic internal movement. Unfortunately, most corporate programs require the employee to initiate the movement and to find the “correct” placement area. A more strategic approach is a proactive one where recruiters periodically identify employees and then help to correctly place these individuals who should be moved both for their own and for the corporate good.
9. Improve internal best-practice sharing – most talent management leaders spend most of their time and resources on developing new programs and approaches. Surprisingly, the data indicates that you can have a higher impact faster and at lower cost by simply identifying and sharing “hidden” existing best practices. Rather than relying on this best-practice sharing occurring organically, a superior approach is a proactive one that seeks out these affected practices wherever they might be in the organization. And once identified, they are shared in such a manner that managers easily understand their value and implement them.
10. Update your retention approach – just like employer branding, retention programs have been allowed to atrophy because the economy has reduced most turnover to a trickle. Unfortunately, turnover is about to dramatically increase, so processes to prioritize key individuals, processes for identifying who is at risk, and retention toolkits need to be reinvigorated before it is too late.
11. Employee referral programs need to be reinvigorated — as the rate of hiring and competition for talent increases throughout the year, stagnant employee referral programs need to be re-examined. Because they produce the highest quality and volume of hires, referrals as the percentage of all hires should begin to reach over 40%. Employee referral programs must be closely integrated with the developing social media approaches.
12. Assess your external employer brand – during the economic downturn, the area of employer branding has been frequently ignored because very little hiring was going on. Unfortunately, during the same time, the reputation of many corporations has been tarnished as a result of layoffs, salary/promotion freezes and a reduction and development resources. In addition, corporate images in general and in some specific industries like banking, oil etc., have been damaged by recent events and “occupy” type movements. The growth of glassdoor.com, blogs, Twitter, and Facebook now make it much easier for negative messages to be spread. At the very least, the positive/negative aspects of your employer brand should be measured and monitored before an upturn in hiring begins.
13. Re-examine your social media approach – although many talent managers have “done something” in the area of social media recruiting, realize that the potential for social media in talent management is much greater than almost everyone anticipated. Plans should be developed to determine how social media can positively impact training, employee development, learning, retention, collaboration, problem identification, crowdsourcing of answers, and best-practice sharing. The mobile platform should be examined in a similar manner because it is rapidly becoming the dominant communications platform for employees.
14. College recruiting needs to be reengineered — communications and job seeking approaches have changed dramatically on college campuses but college recruiting programs have unfortunately been stagnant for years. Program features that need to be examined include remote college recruiting, social media approaches aimed at college students, mobile platform approaches and marketing research to better understand the needs and the actions of top grads.
15. Improve non-monetary motivation – when compensation and reward resources are limited, nonmonetary motivators need to be emphasized. Unfortunately, the compensation function focuses almost exclusively on “expensive” salary, benefits, and bonuses … even though a significant percentage of employee motivation comes from … recognition, praise, and feedback. Talent management should develop non-monetary motivation tools for managers that are easy to use and that produce measurable results. They should also target key employees and server them in order to identify “how to best manage and motivate me” plans.

Benchmark Firms to Learn From

A key competency for any talent management leader is rapid self-directed learning, so it only makes sense to benchmark the firms that are aggressively making tremendous strides in talent management. My extensive research has identified some of the best firms to learn from. Many are from the Silicon Valley, which has already returned to a “war for talent” (Google, Facebook, Zynga all approach talent management using a more scientific approach).

Firms outside of technology have also taken some amazing steps so they should not be ignored (Zappos, Sodexo, CACI, DaVita, Deloitte, KPMG, PepsiCo, and the U.S. Army have all taken bold steps).

Additional Strategic Talent Management Actions to Consider

In addition to the top 15 major actions recommended above, some other strategic actions to consider include:

• Prepare for VUCA, the new normal — talent management plans, approaches, and processes need to be improved so that they can handle the new business environment that we face (VUCA = Volatility, Uncertainty, Complexity, Ambiguity)
• Increasing revenues — examining how talent management actions can directly increase individual employee revenue generation
• Integration of talent management functions – an almost-universal weakness is a lack of integration. Talent management functions must more closely cooperate, coordinate, and integrate so that they work seamlessly.
• Hire right before they do — if your firm doesn’t have the strongest employer brand, location or glamorous product, you must develop a plan to quickly initiate hiring immediately before your talent competitors. A rapid “explode out-of-the-box” plan is also required.
• Corporate headcount “fat” – setting up a process that ensures that the return to hiring doesn’t result in a surplus of employees (i.e. headcount fat).
• Competitive analysis — identifying the competitive advantage that your talent management practices provide compared to your talent competitors.
• Prioritizing — prioritizing jobs, managers, and talent management programs so that your limited resources provide the highest possible impact.
• SWAT team — creating a rapid response team that can respond to sudden talent management opportunities and problems.
• Alerts — providing a process that alerts managers about upcoming problems before they get out of hand.
• Lean or agile talent management – adapting lean, CRM, and agile business approaches and tools to the area of talent management.
• Remote work opportunities — as technology, communications, and social media tools improve, talent management must develop ways that allows top talent to work from anywhere.
• Forward-looking metrics — unfortunately, almost all current talent management and recruiting metrics are backward looking, in that they tell you what happened in the past. Instead, forward-looking and predictive-metrics that allow for improved decision-making need to replace them.
• Reengineer performance appraisals – this is an almost universally disliked process that requires tremendous amount of time but produces no measurable results. A completely new approach is required.
• Transparency – throughout the business world there is an increasing emphasis on transparency and openness. The time has come for talent management leaders to reassess their entire approach to secrecy, privacy, and the degree of openness with employees and applicants.
• Cloud talent management – HR and talent management cannot be exempt from the powerful trend to move everything to the cloud.

Final Thoughts

The period immediately before the beginning of the New Year is a great time to sit back and think of your accomplishments and your legacy. Unfortunately, rather than being strategic, too many talent leaders have been simply happy to survive the last few years with their sanity intact.

Now is the time to shake loose any lethargy, to take some risks, and do something bold before you retire or move on. You may have “earned a seat at the table” but you can’t be truly respected and admired unless you produce a measurable strategic business impact.

For more podcasts, webinars, and articles on recruiting be sure to check out ERE.net!

It’s always better to be prepared than surprised.

By definition, being strategic requires that you look forward — identifying trends, opportunities, and threats. With the December lull looming, now is a great time to plan for the future. I’ve listed the “top 10 talent management trends” I foresee that require your attention.

But you should certainly do your own thinking. I recommend that you start by examining this past year…

2011 Was The Year of Social Media

2011 was a tough year for many in talent management, but despite compressed budgets, organizations continued to hire and develop talent. One factor that seemed to invade nearly every high-level functional discussion was social media. It’s clear that Facebook, LinkedIn, and Twitter will play a dominate role in recruiting and development best practices in years to come.

Not surprisingly, 2011 saw no fewer than 40 new vendors emerge to help organizations use social media to attract referrals. We also started to see early stage tools to use social media in talent assessment (pre/post hire) as well as applicant/candidate/employee experience management. New tools brought much enhanced visibility into talent issues, but most talent-management metrics continue not to resonate with key leaders outside of the HR function.

2012 Will Be “The Year of the Mobile Platform”

By the end of next year, even the skeptics will have to admit that the mobile platform will have become the dominant communications and interaction platform by early-adopting best-practice organizations. The capabilities afforded users of smartphones and tablet devices grows immensely day by day. Long before unified inboxes existed for the desktop, smart device users could see all incoming e-mail, social messaging, text messaging, and voice and video messaging in a single place.

Tablets will become the virtual classroom, and an emerging class of tools will let employees manage almost every aspect of their professional life digitally. During the next year, talent management leaders need to invest heavily supporting execution of talent management initiatives across mobile.

The Additional Top Nine!

Intense hiring competition will return in selected areas — global economic issues will persist for years to come, but the global war for talent will continue spiking in key regions an industries. While growth has slowed somewhat in China, Australia and Southeast Asia — including India — continue to see dramatic demand for skilled talent. In the U.S. and Europe, demand is still largely limited to certain industries where skills shortages have been an issue for years.

In high tech inclusive of medical technologies, 2012 will see a significant escalation in the war for top talent. As innovators and game changers step out of established tech firms like Facebook, Apple, Google, Twitter, and Zynga, a whole new breed to tech startups will be born each vying for the best of the best. While recruiting will move forward at a breathtaking pace, so too will “rapid” leadership development.

Retention issues will increase dramatically — almost every survey shows that despite high engagement scores, more than a majority of employees are willing to quit their current job as soon as a better opportunity comes along. I am predicting that turnover rates in high-demand occupations will increase by 25% during the next year and because most corporate retention programs have been so severely degraded, retention could turn out to be the highest-economic-impact area in all of talent management.

Rather than the traditional “one-size-fits-all” retention strategy, a targeted personalized approach will be required if you expect to have a reasonable chance to retain your top talent.

Social media increases its impact by becoming more data-driven — most firms jumped on the social media bandwagon, but unfortunately the trial-and-error approach used by most has produced only mediocre results. Adapting social media tools from the business coupled with strong analytics will allow a more focused approach that harnesses and directs the effort of all employees on social media. Talent leaders will increasingly see the value of a combination of internal and external social media approaches for managing and developing talent.

Remote work changes everything in talent management — the continued growth of technology, social media, and easy communications now makes it possible for most knowledge work and team activities to occur remotely. Allowing top talent to work “wherever they want to work” improves retention and makes recruiting dramatically easier.

Unfortunately, even though it is now possible for as much as 50% of a firm’s jobs to be done remotely, manager and HR resistance has limited the trend. Fortunately, managers and talent management leaders have begun to realize that teamwork, learning, development, recruiting, and best-practice sharing can now successfully be accomplished using remote methods. Firms like IBM and Cisco have led the way in reducing and eliminating barriers to remote work.

The need for speed shifts the balance between development and recruiting — historically, best practice within corporations has been to build and develop primarily from within. However, as the speed of change in business continues to increase and the number of firms that copy the “Apple model” (where firm is continually crossing industry boundaries) increases, talent managers will need to rethink the “develop internally first” approach.

In many cases, recruiting becomes a more viable option because there simply isn’t time for current employees to develop completely new skills. As a result, the trend will be to continually shift the balance toward recruiting for immediate needs and the use of contingent labor for short-duration opportunities and problems.

Employee referrals are coupled with social media — the employee referral program in many organizations is operated in isolation as are the organizations’ social media efforts, but talent managers are beginning to realize that the real strength of social media is relationship-building by your employees.

With proper coordination, employee relationships can easily be turned into employee referrals. This realization will lead to a shift away from recruiters and toward relying on employees to build social media contacts and relationships. The net result will be that as many as 60% of all hires will come from the combined efforts. The strength of these relationships will lead to better assessment and the highest-quality hires from employee referrals.

Employer branding returns — Employer branding and building talent communities are the only long-term strategies in recruiting. True branding is rarely practiced (hint: it’s not recruitment marketing) especially in the cash-strapped function of today, but years of layoffs, cuts in compensation, and generally bad press for business in general may force firms to invest in true branding. The increased use of social media and frequent visits to employee criticism sites (like Glassdoor.com), make not managing employer brand perception a risky proposition. While corporations will never control their employer brand, they can monitor and influence in a direction that isn’t catastrophic to recruiting and retention.

The candidate experience is finally getting the attention it deserves — Organizations have never treated candidates as well as they did their customers, but the high jobless rate has allowed corporations to essentially abuse some applicants. As competition for talent increases and as more applicants visit employer criticism sites like Glassdoor.com, talent leaders will be forced to modify their approach.

At the very least, firms will more closely monitor candidate experience metrics as they realize that treating applicants poorly can not only drive away other high-quality applicants but it can also lose them sales and customers.

Forward-looking metrics begin to dominate — Almost all current talent management and recruiting metrics are backward looking, in that they tell you what happened in the past. Other business functions like supply chain, production, and finance have long championed the use of “forward-looking” or predictive metrics and the time is finally coming when talent management leaders will shift their metrics emphasis. Forward-looking metrics can not only improve decision-making but they can also help to prevent or mitigate future talent problems.

Other Things to Keep Your Eye On…

In addition to the major trends highlighted above, there are 12 additional “hot” topics to keep your eye on:

• Risk identification — almost every other business function has already adopted a risk management strategy. So the time is coming when talent management will be forced to adopt a similar strategy and set of metrics. This program will not only cover HR legal issues but also the economic “risk” associated with weak hiring, the absence of developed leaders, and the cost of turnover of key talent.
• Prioritization — continued budget and resource pressure will force talent management leaders to prioritize their services, business units, key jobs, and high-value managers/employees.
• Integration — there will be increasing pressure for talent management functions to more closely integrate and work seamlessly.
• Expedited leadership development — as more baby-boom leaders and managers actually begin to retire, there will be increased pressure for expedited leadership development — specifically solutions that develop talent remotely using social media tools and within months rather than years.
• Competitive analysis — the increasingly competitive business world has forced almost every function to be more externally focused. Although HR has a long history of being internally focused and not being “highly competitive,” there is increasing pressure to become more business-like and to adopt an “us-versus-them” perspective. That means conducting competitive analysis and making sure that every key talent management function produces superior results to those at competitors.
• Contingent workers — as continuous business volatility becomes the “new normal,” the increased use and the improved management of contingent workers will become essential for agility and flexibility.
• Unionization — there is a reasonable chance that actions by the NLRB will increase union power and make it easier for unions to gain acceptance at private employers.
• Recruiting at industry events — as industry events return to popularity, recruiting at them will again become an effective tool for recruiting top and diverse talent.
• Location software — talent managers will begin to realize that software that allows you to check-in and see who is within close geographic proximity has great value and many still unidentified uses.
• Hire before they do — most firms will restrict their hiring until the turnaround actually begins. However, your firm must have a talent pool or pipeline developed, so that you can hire immediately and capture the top talent right before your competitors realize the downturn is over.
• Assessment continues to improve — vendors, software, and tools continue to improve in this area that will become increasingly important.
• Increase your revenue impact — increased economic pressures will continue the trend of forcing all functions (including talent management) to convert their functional results into business impacts in dollars. Talent management will face increasing pressure to directly demonstrate how their hiring, retention, development, etc. is focused, so that it directly increases and maximizes corporate revenues.

Final Thoughts

A recent survey of CEOs rates talent management as the No. 1 area where CEOs expect dramatic change during the next year. Given this increased attention, it’s even more critical that talent management and recruiting leaders set aside time to conduct a SWOT assessment (Strengths, Weaknesses, Opportunities, Threats) to identify where they are and where they need to be.

The “new” talent management leader must be more strategic, more proactive, and more business-like, and that means getting your entire staff to begin thinking about and planning for the game-changing events, trends, and opportunities that will occur during the next year. It’s time to realize the “but-we-are-overwhelmed-and-too-busy” excuse for not forecasting and planning is wearing thin.

It’s the largest number of  “job-leavers,” as the U.S. Bureau of Labor Statistics calls them, in more than a decade. Included in the count are workers who took buyouts, some who quit ahead of a dismissal, and others who may be taking time off before starting a new job. The bulk, however, are those who decided to leave a job without having another lined up.

There’s no way of telling what kind of workers these job-leavers are. However, any number of surveys over the last few years show there’s a gathering wave of intentions about leaving, if not actual departures.

“Top performers have had it with stagnant opportunities and rewards, and are starting to jump ship now that the job market is a bit looser,” says Dr. Pat Sikor, TNS Employee Insights Senior Researcher. Pointing to declining scores on employee engagement surveys, she says it “reflects the pent-up demand of employees to want more than what they have.”

TNS Employee Insights conducts surveys and research into the effect of employee engagement on business performance. Its recent research shows a dramatic drop in some key measures of engagement. Between 2006 and 2011, TNS found a 17.6 percent reduction in employees who feel their company rewards them according to the value of their performance. There has been a nearly 13 percent decline in their feelings about the company when it comes to personal development and growth.

Other surveys have found similar results. What this suggests is that employees are disengaging, with most choosing not to become job-leavers, but ready to bolt should an opportunity come along.

BlessingWhite, which conducts a periodic broad, global study of engagement, found last year that 13 percent of North American workers planned to leave their current job in a year. That was almost twice the 7 percent who planned to quit in the 2008 survey. While workers were about as engaged last year as in 2008 (57 percent v. 56 percent), the less engaged the worker, the more likely they said they were to leave. Older workers were more likely to be engaged; millennials, the least engaged.

Disengaged and disengaging workers aren’t necessarily minimum performers. There is a correlation between engagement and performance, as the BlessingWhite report details. However, for any number of reasons (many of them referenced in these reports), top performers can grow disenchanted.

Why did workers want to leave? The BlessingWhite survey found 28 percent of North Americans cited lack of career opportunities. That was also an area where the TNS Employee Insights survey saw a decline from 2006. In the 2010 survey, worker satisfaction with career opportunities within their current company had declined 14.3 percent; 48 percent said they were satisfied in the most recent survey.

With the economic malaise continuing and job creation barely keeping up with population growth, most workers aren’t too likely to simply walk out the door with no place to go, although obviously tens of thousands do. Fewer will go out in Joey style, producing a video of his musical resignation seen now by 3 million. But top talent that grows disenchanted has opportunities. Whether they call that headhunter who left them a message or put out the word to their network, they will find another job.

However, as TNS’ Sikor says, “The key to retaining top talent therefore is simple: move the needle and increase employee engagement.” She’ll be one of the speakers at a free TNS webinar on Dec. 6 — “How to Retain Top Talent – Moving the Needle in Employee Engagement,” which is HRCI approved.

If you are a proponent of transparency, you’ll be happy to know that despite this low percentage of openness, there are many benefits associated with making managers and the high-potentials themselves aware of who is on the high-potential list for succession planning and leadership development.

The following list covers the positive benefits. (The arguments for maintaining secrets was covered last week.)

20 Benefits of Transparency in High Potential Selection

1. The designation motivates and increases engagement — openly recognizing the potential of individuals certainly excites and motivates the employee, and because other employees know, they will get additional reinforcement actions from your coworkers. Their manager might also feel excited, proud, and recognized because they now know that their development efforts were successful. Employee engagement may also increase as a result of your proactive action.
2. The designation helps to reduce anxiety — during weak economic times, even high-performing employees are naturally anxious about their future. Designating an individual as high potential helps to reduce their level of anxiety and uncertainty about their future. The designation lets them know that they will be continually developed and that they will have a major role to play in the future of the organization.
3. You can expect increased retention among HiPos — one of the primary advantages of telling HiPos of their status is to give them a sense of belonging. Being designated a HiPo is a form of recognition and accomplishment, and openness allows the firm to send a message to the individual that there is a high probability of a bright future for them. HiPos should also be made aware that should they leave this current organization and move to another, it is unlikely that, even with their outstanding track record, they will automatically receive the same “high-potential” designation until they have proven themselves. This level of rotation combined with the uncertainty should they move to another organizations helps to improve their retention rate.
4. The designation may cause HiPos to take themselves more seriously — after being notified that they are high-potential, individuals who are not self-aware of their potential may begin to take their careers more seriously. As a result, they may increase their learning and self-development or they may even pursue advanced degrees now that they know that that development or learning will actually be put to use by the organization.
5. Designation allows a more targeted focused use of resources — when a limited number of individuals are openly designated as high-potentials, it’s obviously easier for everyone involved to prioritize and focus their development resources and opportunities on these individuals. When the individuals’ names are kept secret, managers may devote too many development resources on individuals who are not likely to become future leaders and top performers.
6. It is easier to develop when the employee knows why it is happening — openness makes it more likely that any development advice and recommended actions will be taken seriously because the employee involved knows that they are being groomed for possible succession. If the selected individuals are not told their status, it can be awkward having development conversations and scheduling increased levels of development without revealing the reason behind it. It is also true that when everyone involved knows the goal of the development conversation, it allows for a more direct and honest exchange about the HiPos’ weaknesses and their development needs.
7. Keeping the names secret is hard work and openness makes everything easier — if your policy is to keep the names secret from all employees and managers, reaching that goal will be difficult and time-consuming. This is because employees are naturally curious and they will devote time to finding out who is on the list. You will need to keep secret not only the actual list of names but also the title and the invitee list of all development meetings that are designed exclusively for high-potentials.
8. They will find out anyway — experience tells us that despite your secretive efforts, employees will eventually learn who is on the list. Even if they don’t find out for sure, they will guess, and if they guess wrong, a great deal of confusion can occur.
9. Openness reduces the confusion over who should be a role model — if employees are aware of the HiPo designations that have been made by management, it will be much easier for them to select “the right individuals” to emulate and copy as their role models. If employees are also seeking a mentor, they now have a strong list of individuals to approach.
10. Reinforcing your communicated values and skills — you powerfully reinforce the existing messages that you have sent to all employees and managers about what behaviors they should copy, when you designating employees with those same skill sets, behaviors, and results as high-potentials.
11. Releasing the names reinforces the message of openness — if your organization espouses of the value of “openness” and transparency, having an open high-potential list will enforce that value.
12. An open list increases the likelihood of diversity — having a closed list can unfortunately lead to speculation about favoritism, however when the list is open, everyone can see if you have actually practiced diversity.
13. Openness can reinforce employees’ faith in management decision-making — if the high-potential selection process is fair, open, and accurate, it will likely select individuals who employees already admire and respect. The net result will be that your employees’ faith in management decision-making, and rewards for performance will be significantly reinforced.
14. It can eliminate speculation by managers — in some cases, being secretive extends to most managers, who will not be told who is high-potential. Not knowing for sure may cause some managers to treat those who they presume to be HiPos differently. Taken together, being open can eliminate this inaccurate speculation, wasted time, resources, and effort.
15. Openness will encourage managers who develop employees — with an open list, managers who have successfully developed high-potentials in the past will be rewarded as other employees gravitate toward them in the hopes of also being developed.
16. An open list may improve promotion decisions — unless managers are provided with a HiPo list, they cannot know for sure who should be considered for a promotion. By providing every manager with a list of high-potentials, you make it much more likely that managers will include these HiPos in their interview process for promotions and development assignments. Widely distributing the list also increases the chances that they will interview “lesser-known” individuals from other business units or regions who otherwise a manager might not have known about.
17. Knowing the high-potentials who are likely to be targeted makes it easier to focus your retention efforts — openly designating high-potentials can make them likely targets of external recruiters. However, in the same light, knowing that these individuals will be targeted may allow you to focus your retention and blocking efforts on these individuals, so that the net result may actually be a decrease in the turnover of these key employees.
18. If you periodically remove individuals from the list, you help to reduce an entitlement mentality — having a high-potential list can help to develop a two-class mentality between HiPos and the rest. However, if employees see that individuals are periodically removed from the list, there is less of a likelihood that they will see this as a permanent class distinction. If individuals in lower job levels are also included on the high-potential list, more employees will feel that they have an opportunity development.
19. Customers and vendors might feel more valued — openly designating HiPos will likely mean that your firm’s major customers, strategic partners, and vendors will become aware of who is on the list. If they have the opportunity to work directly with these HiPos, they are more likely to feel valued as a customer and partner.
20. Transparency may improve your employer brand image — the fact that you have an open process and are direct and honest with your employees may build your external employer brand image and help with recruiting as employees spread the word on their external social networks.

Final Thoughts

Obviously the decision between having an open or closed list has historically been a difficult and complex one. As the practice of management and HR progresses, there has been an increasing emphasis on openness and transparency. This is partially a result of growth of the Internet and internal and external social networks, which make it incredibly easy to spread “secrets.” In addition, it has been widely reported that new generations entering the workforce have come to expect (or even demand) a dramatically higher level of transparency.

As a result of these factors, most organizations should reconsider their decision to keep most elements of their succession plans secret. Obviously there are some drawbacks to openness but I have found that all of them can be overcome if you commit your best thinkers to the problem. The pendulum is steadily shifting toward the time where the succession planning variation of “don’t ask, don’t tell” will become an historical footnote.

It’s a quick and dirty worksheet, admittedly not including all the costs and after-effects of someone leaving, like frustrated customers or clients, the costs of staffing the job temporarily, and so on.

It does include things like some recruiting costs, as well as the time it takes the newbie to get up to speed. You can find it at The Center for Economic and Policy Research.

Apple in Sydney

In Part 2 of this case study on Apple’s talent management practices, I look at its approach to innovation, compensation, and benefits, careerpathing, and online recruitment (its career site). Some approaches discussed are unique to sub-factions within Apple, as would be expected in any organization of significant size. It’s also quite rare for organizations that design, manufacture, and sell through direct retail to have consistent approaches across all units.

Talent Management Lessons To Learn and Copy (continued)

You should not be surprised to learn that the firm that made the term “think different” a brand uses talent management approaches that are well outside the norm. In addition to the lessons presented in Part 1, some approaches other firms can learn from Apple include:

Career paths reduce self-reliance and cross-pollination — in most organizations, HR helps to speed up employee career progression. The underlying premise is that retention rates will increase if career progression is made easy. The Apple approach is quite different; it wants employees to take full responsibility for their career movement. The concept of having employees “own their career” began years ago when Kevin Sullivan was the VP of HR. Apple doesn’t fully support career path help because it doesn’t want its employees to develop a “sense of entitlement” and think that they have a right to continuous promotion.

Apple believes career paths weaken employee self-reliance and indirectly decrease cross-departmental collaboration and learning. Absent a career path, employees actively seek out information about jobs in other functions and business units. In a company where creativity and innovation are king, you don’t want anything reducing your employee’s curiosity and the cross-pollination between diverse functions and units. Automatically moving employees up to the next functional job may also severely narrow the range of internal movement within the organization, which could reduce the level of diverse thinking in some groups.

Create and manage a culture of innovation — most firms have a culture with a singular focus on one attribute like performance, quality, customer service, or cost-containment. Apple is unique in that it has two dominant cultural attributes that exist side-by-side. The first (discussed in part one) is “performance,” with the second being “innovation”; the latter may actually be the strongest of the two. The dual emphasis works at Apple because the firm operates in the consumer technology field, where there is a universal expectation for “disruptive” performance.

Producing $2 million-plus in revenue per employee certainly establishes Apple as a performer, but it is its industry-dominating product innovation that differentiates it from competitors like HP, Sony, Microsoft, and IBM. Three factors drive the innovation attribute, including the expectation of continuous innovation, extreme secrecy within the product development process, and continuous brainstorming/challenge meetings (even at play just days before a product launch).

“I expect a pony”

Apple’s culture of innovation is unique because the goal is to produce a “pony, not a real horse but instead something so desirable that everyone wants it and considers it ‘gorgeous.’” Simple evolution doesn’t cut it — only extraordinary industry-leading innovation that results in WOW products does. To accomplish that, Apple doesn’t do what most consumers assume it does. Instead of developing completely new industry technologies, Apple takes existing technologies and then bundles numerous small developments on top to produce what appears to the public as giant step forward. It takes a powerful culture and group of managers to delay taking great work public faster, but Apple knows that numerous small releases don’t produce the same media and consumer buzz.

The expectation of innovation permeates the culture

The expectation of innovation is driven by Apple’s history of innovation, its leaders (who forbid the use of “that’s not possible”), and the peer pressure among employees to be among the contributors to the final product that the customer sees. In order to generate this expectation of innovation, it doesn’t rely on posters or motivational slogans (although they have those too … around here, changing the world just comes with the job description). Instead, every communication, process, product launch event, and even advertising slogans (Think Different, Imagine the Possibilities, Here’s to the crazy ones. The misfits. The rebels. Etc.) make it crystal-clear that innovation is at the heart of Apple’s success. Innovation has driven Apple’s past and current successes, and it will continue to drive future success. After walking in the door of the corporate offices in Cupertino, California, you can literally “feel” the expectation to innovate.

Secrecy drives internal competition

The second critical driver of innovation is the product development process. This innovation process is unique in that it doesn’t rely on a formal “ideation” type model; instead, it has been described as an “iteration” process energized by peer competition and Apple’s famous siloed/secret approach to teams. Apple does many things using small development teams, as many firms do, but doesn’t rely on a single team to design each product element. Multiple teams may be assigned to the same area (or they may accidentally wander into the same area). The approach has been called 10 to 3 to 1 because 10 teams may work on a product area independently. When work is ready for review a formal peer review, it will whittle 10 mockups to three and eventually down to one. It is an approach that is unique to Apple. Outsiders may consider it expensive and slow, but they can’t argue it isn’t effective.

Apple is well known for its obsession with secrecy in order to heighten the impact during a product release. Secrecy is also the most unique element in its innovation process. In order to maintain secrecy, development and design teams are intentionally siloed. As a result of these communication barriers, team leaders may not be initially aware of how many teams they’re competing against and what those other teams are working on. The level of open collaboration that you might find at other firms like Google is not possible under this process, but neither is early-stage groupthink. Once possible feature solutions move forward to peer review, the organization benefits from broader scope best-practice sharing and collaboration. While it may seem counterintuitive, Apple has turned “team silos” that would be a negative factor at most firms into a positive force.

Paired design meetings force free-thinking to continue until the end of the design

Another element of the design and innovation process is the holding of weekly “paired design meetings.” Every design team is expected to hold two meetings each week. The first is a traditional production meeting where small refinements are discussed and made. The second is a “go crazy” meeting, in which everyone brainstorms and uses free-thinking to scope out parameters. Most organizations stop these brainstorming meetings once the design parameters are clear, but Apple continues them long into the development cycle to guarantee that completely new ideas will constantly raise the innovation bar.

The talent management lessons to learn in the area of innovation include the concept that intense competition may produce innovation faster than any formal ideation process. In addition, peer vetting of ideas, delaying collaboration until toward the end of the development process, and requiring the continuous use of brainstorming processes may result in bolder innovations and higher levels of risk-taking.

Tying economic rewards to overall company success can reduce selfish behavior – You won’t find anyone who will publicly argue that Apple pays well with regard to base compensation. Economic rewards at Apple are significant, but largely tied to the company’s valuation. The primary monetary motivator at Apple is “the opportunity for wealth creation” as a result of stock ownership. Most employees at Apple get periodic stock grants to reward their contribution. By putting the focus on the stock, they send every employee a clear message that individual accomplishments are important only if they directly contribute to the overall success of the company. This approach, coupled with the firm’s famous “product focus,” keeps everyone focused on product success rather than individual results and individual rewards. Individual rewards are provided based on performance and consist of stock grants and cash bonuses up to 30% of base salary. Apple’s retail employees also have stock opportunities. They are paid on an hourly basis and do not receive a sales commission.

Benefits and even pay play a secondary role in recruiting and retention — at Apple, the primary long-term attraction and retention factors are stock growth and exciting work. Because of the importance of these two factors, its message on benefits is clear. If you’re doing the best work of your life and having a major impact on the world, do you really need sushi in the cafeteria? (It has that also.) Although most talent competitors to Apple spend huge amounts of money on benefits, Apple’s offerings are spartan when compared to Google, Facebook, and Microsoft. While Apple’s health plan is well-funded, and it has good food and an on-campus gym, neither the food nor the gym is free. One perk that does excite potential applicants (especially in retail) is the employee discount on Apple products which is given to every employee. These discounts further support and reinforce Apple’s companywide emphasis on the product.

Your corporate jobs website should boldly inspire — because the primary goal of most corporate career/jobs websites is simply to provide company and job information to potential candidates, most corporate job pages are chock-full full of information. Apple’s website is lean on information but strong on inspiration. As a result, after exploring the site, the potential applicant comes away inspired rather than with a pile of information about the company.

There are two categories of inspirational messages on the site, and each one is bold. The first group of corporate messages makes it clear that Apple is “anti-corporate.” In fact, the first bold headline you see is “corporate jobs, without the corporate part.” They also highlight what they are proud not to have including endless meetings, being bureaucratic, having executive perks and managers wearing suits. Instead they boldly tell you “don’t expect business as usual.”

The second category of inspiration on the website concentrates on openness, innovation, and changing the world. Key phrases include “open minds, collaboration, and of course innovation.” You will also find the phrase “there’s plenty of open space — and open minds” (obviously perfect sentence structure isn’t a high priority either). Finally, they promise to “give you a license to change the world” and “be inspired.”

Its focus on inspiration is so strong that for a tech firm, there is a surprising lack of technology-speak on the page. You will not find blogs, videos, or any mention of Apple’s availability on Twitter or Facebook easily. When it comes to mobile access, the site will render fine on the latest smartphones, but receives a 1.51/5.0 with regard to meeting mobile standards. If you visit the site, you might even find links that don’t work and features that load very slowly. What you will find is inspiration — loads of it.

I’ll leave you with this introductory statement from its career site:

“There’s the typical job. Punch in, push paper, punch out, repeat. Then there’s a career at Apple. Where you’re encouraged to defy routine. To explore the far reaches of the possible. To travel uncharted paths. And to be a part of something far bigger than yourself. Because around here, changing the world just comes with the job description.”

Next week, Part 3: Employer branding, recruiting, retention, and other talent management approaches to copy and learn from.

For more podcasts, webinars, and articles on HR be sure to check out TLNT!

Turnover Rates Are Impacted By Employee Desirability

High turnover rates do not always mean that you have bad managers or that you are not a great place to work. Firms with great brands and industry visibility are often the target of recruiters. In fact, it is not unusual for hiring managers to direct recruiters to only target employees from the top five firms in their industry. That being the case, you need to consider the reverse: employees may stay only because they have few options to leave.

Reasons Low Voluntary Turnover Might Be Bad News

Every organization needs to understand “why” recruiters opt for and against targeting the employees of an organization, and why employees stay. Some possible drivers of low turnover include:

• Poor performers – your employees could be perceived by other firms as being poor performers and therefore undesirable.
• Weak skills — your employees could be perceived by other firms as being poorly trained, with obsolete skill sets.
• Unambitious — your employees may lack ambition and drive, so they do not seek external jobs or respond when they are contacted by recruiters.
• Set in their ways — your employees could be perceived as inflexible and “set in their ways,” so that recruiters assume they couldn’t adapt to working at another firm.
• Not innovative — other firms could perceive your employees as not being innovative or fast-changing, which is a critical component in a fast-changing and innovative organization.
• Overly tolerant — your employees may have become overly tolerant of bureaucracy, so they do not get frustrated and leave as a result of slow internal movement and bad management practices.
• Not global — other firms may perceive that your employees do not have the global experience or perspective required to operate in an international environment.
• Poor industry image — if your industry has a weak image (i.e. quick service restaurants), many recruiters or hiring managers may never even consider your employees.
• Weak employer brand — if your firm has a weak or negative employer brand image, it is unlikely that your employees will be targeted.
• Low employee visibility — if you work in a non-technology field, it’s quite possible that your employees are not been easy to find on the Internet and social media. As a result, only the best recruiters will be able to identify them.
• A culture of retribution — if your organization proactively punishes individuals that seek outside positions, fear will cause fewer employees to return recruiter inquiries.
• Location — if your firm is in an isolated geographic location, your employees may have no other choices because there may be few local competitors that could even attempt to poach your employees. If your employees have well-established family roots in the area, they may also be unwilling to relocate.

Reasons Low Involuntary Turnover Might Be a Problem

If your firm has a low involuntary turnover rate, you need to determine if it is an indication of a problem with management. Some of the reasons why a low involuntary turnover rate may be a problem include:

• Weak performance management – if your performance management process is weak, it will not identify many of your poor performers. It may also be overly tolerant and prolong the releasing of poor performers who cannot improve.
• Afraid to terminate — your managers or HR professionals may fear the lengthy process for firing or they may simply lack the courage to make tough decisions. This fear might also mean that employees with obsolete skills are kept far too long.
• Slow to release — senior managers or HR may simply be extremely slow in releasing surplus labor during economic downturns. The slow action will not only reduce your involuntary turnover rate but it will also increase your labor costs unnecessarily.

Other Problems Related to Low Turnover

Regardless of the reasons for low turnover, there are many negative consequences related to low turnover. They include:

• Limited development opportunities — without frequent position turnover, there will be significantly fewer development and promotional opportunities for employees with high potential. If you have ambitious and desirable employees, this may actually drive them away.
• Managers can get lazy — when managers don’t have to frequently defend their employees from external recruiters, they can get lazy. This lack of competition may mean that the employees will get less development, training, and coaching because it’s not needed in order to retain them.
• Rusty hiring — having a low turnover rate means that you will do little or no external hiring. This will likely cause your hiring managers and your recruiting department to stagnate due to a lack of practice and activity.
• Less external stimulation – having low external hiring causes you to lose out on the many benefits that external hires can bring to an organization, including new ideas, skills your workforce doesn’t have, and competitive intelligence. New hires can also serve as a competition catalyst, because current employees feel threatened having to compete with external talent for openings.
• Allowing bad managers to go undetected – when your turnover rates are low, it may serve to “hide” your bad managers. During low turnover periods, bad managers look the same as the good ones (everyone has relatively low turnover rates). The lesson to be learned is that alternative ways need to be found to identify bad managers when the economy is in the tank.
• Reduced problem identification — without frequent exit or post-exit interviews from your employees that leave, the organization misses out on valuable opportunities to learn about what may be wrong with the organization.

What Turnover Rate Is “Too Low”

Turnover rates are relative, so it’s hard to say what is “too high” or “too low.” Comparing turnover rates between industries is problematic. Retail turnover can reach 200%, while turnover among tenured university professors is virtually zero. The best way to assess your turnover is to compare your organization’s performance to that of your closest competitors and specifically the top five firms in your industry.

Positive Turnover

If an employee that you are contemplating releasing or firing quits, consider that positive turnover. If a “Homer Simpson type” employee quits your firm and goes to a competitor, it should be considered a “double win.” If you have a great employer brand and a superior recruiting function, turnover rates become less of an issue because can instantly replace the loss of one top performer with another.

Turnover Measures To Consider

Generic turnover measures are silly. You need to examine turnover more closely before you decide if it is bad or good. Prioritize your employees and jobs, so that all turnover is not considered equal. Some measure to consider giving you a better picture include:

• Performance turnover – use weights to weigh the departure of a top performer much higher than the loss of a low performer.
• Regrettable turnover — measure the percentage of turnover that represents key individuals, innovators, individuals with critical skills, diverse individuals, individuals in hard-to-fill positions and future leaders for retention that is “regrettable.”
• Desirable /acceptable turnover — highlight positively the turnover of low performers, those with obsolete skills, recent bad hires, silo-builders, and those with low potential.
• Preventable turnover — it may also be appropriate to classify whether regrettable or high-performing employee departures were preventable (i.e. retirement or the family relocated) because easily preventable turnover must be considered a bigger problem.
• Where they went — I also recommend that you look at where an employee goes after they quit. If they go to a powerhouse firm, it is likely an indication that you have some pretty good employees.

Final Thoughts

In my experience, voluntary turnover rates below 4% should be considered a warning sign and involuntary rates below 2% should require further examination. Well-managed firms with excellent management and retention practices frequently maintain low voluntary turnover rates, but also have much greater internal mobility and involuntary turnover rates to keep the development process working and prevent talent stagnation.

* Note the word “ugly” has nothing to do with physical appearance, only relative labor market value to external recruiters!

Earlier this week, Mercer released its What’s Working survey that found that “one in two U.S. employees [are] looking to leave or [have] checked out on the job.” Other surveys support these findings, including ones by Right Management.

Is this simply the grass-is-greener syndrome, or is there something else going on? Even though there are plenty of jobs for certain types of people — Amazon is adding 5,000 people, and McDonald’s, Google, Facebook, Microsoft, and Apple are just a few others that have announced fairly large hiring plans — we are not actually out of this recession, and changing jobs is a risky business.

While money and benefits are not the primary reason people leave their employers in normal times, these times are very different.

This recession has lingered longer than most and is impacting a generation of workers who have not suffered much from recessions in the past. Their tolerance is different, and so are their expectations.

Today I think there are four primary drivers of these rather frightening statistics. And these same reasons will eventually drive away the new people you recruit as well, unless you are candid and realistic right up front with the candidates.

The first driver is actually pay this time. For many employees it has been a long time since they have gotten much in the way of a pay increase. The recession is often used as a reason for not granting reasonable increases, and managers have been more focused on performance — of lack of performance as a way to hold down these increases.

Yet, employees see their organizations making good profits and in some cases even record profits. Corporate coffers are flush with cash, yet this has not translated into significant pay increases. At the same time, option grants have shrunk due to changes in how they are taxed, giving some employees even less reason to stay.

Employees perceive a unfairness in how they are paid compared to how firms are profiting.

Second, and not completely separated from pay, is the amount of work that is being asked of employees. Many people I speak with are really doing what two or more would have done prior to this recession. Managers have asked for more and gotten it as employees fear there are few other jobs.

Yet the perception about jobs is changing, and many are starting to make a move if for no other reason than to lessen their workload or find a more flexible employer.

A third growing issue is the attitude younger workers, especially those in the Gen Y category, have about work. They feel their personal freedom is threatened by restrictive social media polices. And they are unhappy with the unwillingness of many firms to allow flexible working hours. They are also inclined to want open, authentic cultures and this recession has caused firms to tighten up communications, keep more secrets, and allow much less open discussion. This is all negative to the younger folks who will seek out more open and flexible environments.

A fourth element is lack of development. Many surveys have pointed out that Gen Y in particular, but all of us at some time, want to take on new responsibilities and learn new skills. During the recession organizations cut back on training and limited development opportunities. In some cases when development was available no one could take advantage oif it because of high-demand work requirements that left no time available. This has resulted in frustrated and bored employees who are looking for a change.

In reality, it’s not hard to see why these surveys are showing a potentially devastating amount of turnover about to happen.

I also realize that while there may not be a lot you can do about these things; there are always creative tactics that can help. Here are some thoughts.

First of all, make internal mobility the most important thing you focus on. Helping employees find new positions may be the best and most direct way you can influence them to stay. Yet, most organizations either erect numerous bureaucratic hurdles that make moving around tough, or they simply do not offer any simple way for an employee to learn about possibilities.

The intranet or some other internal website should be designed so that employees can learn about open positions and can apply for those positions. Work with HR to take down barriers and make it as easy to move between positions as it is to move outside the firm. This probably means that many current practices will have to change. Organizations with low turnover generally follow several rules that guide the internal application and transfer process.

1. Employees should be able to interview for new positions without permission from anyone.
2. They should not have to complete any sort of application form, and resumes should be very simple, if used at all.
3. They should be able to leave their current position within a maximum of two weeks after accepting another offer — even if their old position has not been filled.
4. Salaries offered should be similar to those an external hire would receive.

Second, help hiring managers reposition jobs to match the available skills rather than seek out only those who are perfect fits.

Don’t go for the exact match. Encourage hiring managers to be more open to giving internal candidates an opportunity. Exact matching is expensive and pays little in return. No one is good enough at predicting what the exact set of skills are going to be for every project and job. Hiring internal people with basic qualifications is often the better decision as these people not only bring enthusiasm and freshness, but also fit the culture. Recruiters need to encourage managers to experiment and realize that most of us are not doing the exact job we were trained to do or even the work our degrees prepared us for.

And, finally, be open with potential candidates about what’s going on in the company.

When you set realistic expectations up front, you lessen the disillusionment that will come after the new hire starts. Strive for authenticity. Encourage them to talk to employees who are happy and engaged. Make sure candidates are good culture fits and that they are fully informed about the work they are going to be expected to do.

Working with the hiring managers is key to success, as talent shortages are partly caused by lack of imagination. Jobs can be tailored to fit candidates, job descriptions can be changed, and managers can be flexible. It takes negotiating with them and providing them information about what’s going on. Turnover may happen, but you may be able to lessen its impact or bring in new people better fitted to your culture.

Those numbers (click to enlarge the graphic at right that breaks it down) are from KPMG’s new survey on labor costs for full-time nurses in hospitals. It got surveys back from 120 CEOs, CAOs, COOs, CFOs, and HR directors.

Other findings:

• Recruiting costs — such as advertising, sign-on bonuses, relocation, and orientation — represent 1% of RN labor costs. Payroll represents about 78% of costs.
• The typical new-hire orientation and training program runs 233 hours (see the graphic at left, again click to enlarge).
• It takes on average 37 days to fill a permanent RN position.

Here’s a team and company way out of alignment, and it realizes it. It was unable to agree on the causes of their problems, which is very unfortunate. I wonder how many of them may be thinking about running for the door? Do you think they’ve considered what it has cost them thus far in time, dollars, and productivity to have issues so detrimental to the health of their organization? Why aren’t they discussing how to fix the problem? Given my experience, I’d assert they are just so overwhelmed with the idea of fixing their problems that they’re paralyzed.

Companies can take a proactive approach making the time and spending money to build their organizations the right way the first time.

The proactive approach will save them considerable time and money in the short and long run. Or, companies can take a reactive approach after they’ve lost time and money with turnover and processes that don’t work. Generally, companies that take a reactive approach in business have many reasons as to why they didn’t work proactively in the first place. Sometimes they say they didn’t want to spend the money up front. There was one case where the company knew their churn was costing them a fortune, but they were making money in spite of that and weren’t in enough pain yet to take steps to correct their issues.

In a perfect world every startup would take the proactive approach and build their company from the beginning by identifying not only mission, vision, values, goals, objectives, etc., but will determine where they want to go in the short- and long-term and build a holistic, aligned organization beginning at the founder level where they can attract, hire, and retain the top talent to get them where they want to go. They will revisit these items on an as-needed basis to ensure alignment and health, and tweak when and where necessary. But we don’t live in a perfect world so taking the reactive road to correct your issues is a lot better than sinking further into an abyss you may not be able to pull out of. As I always say, better late than never!

Let’s take a look at two cases where companies lost employees for different reasons, and the associated costs.

The first case was a director of learning and organizational development at a Fortune 500. She was with this organization only a year before being let go. They said she wasn’t a fit with the company. Her total comp over that year was $225,000 ($180,000 + $45,000 bonus). When we added up the exit, severance, onboarding, interview, relocation, T&E, and search costs, these expenses came to just over $179,000. Add this to salary and bonus, and the loss to the company becomes $404,000! Yes, they lost over $400,000. Could this have been avoided? I would assert they could have, and would have, if the company had the vision to align its executive team and then build a talent strategy around this.

The second example is the case of a sales rep who achieved 96% quota in his first year with the company and quit for another opportunity. He had issues with company management, and particularly his direct manager. Salary, commission, bonus, and non-recoverable draw added up to him earning $229,530. He sold $1.25 million, of which $100,000 was services. When we consider all the other involved expenses, which include exit costs, lost revenue for three months without a rep covering the territory full time, initial onboarding and recruiting expenses, etc., the company earned $483,000. You may be thinking that this isn’t such a bad profit considering the guy quit. But remember that sales is the only direct revenue-producing part of a company. All other positions are a debt on the company and it is the sales division’s responsibility to generate enough revenue to compensate for all the non-revenue positions. Remember that Profit = Gross Revenue – Cost of goods – Cost of operations – Cost of sales.

Something else to consider is the importance of not weighing one qualification too heavily over another. For example, many companies focus on skills and abilities and don’t give enough thought to cultural fit. There are many pieces to your approach to business and talent; carefully consider each. One study found that almost half of employees will fail within the first 18 months of employment. It’s never just one thing. It’s a multitude of items that are either not considered and/or not considered and worked through carefully enough.

Lastly, smaller companies have considerably more to lose than large companies with the same issues. It can be devastating to a small company when it loses key people, not only from a morale standpoint but from a financial standpoint. I know that fixing problems takes time, effort, commitment, and even struggle. What I can tell you is that once you’re on the other side it’s like a huge weight lifted off your shoulders. The work is worth it. You’ll see this when you look back on the process you went through to become a healthy, desirable, and successful organization.

Why do people stay at a company or leave? What motivates such behavior, and how can employers motivate people to stay longer? What is a “good” rate of turnover and how do we know who to entice to stay and who to let go? While this article cannot hope to answer these questions in any detail, let’s take a quick look at the subject and see what we find.

First of all, when employees are asked why they leave, they usually give reasons like these: They want a better work/life balance, more money, a better opportunity for career growth, more independence and control over their own work, and of course job security.

For most of the past decade, employers have worked hard to give employees more time off and more benefits aimed at the family. They have increased salaries and offered stock options, enriched and enlarged jobs until some employees are now complaining that their jobs are too enriched, and they have offered employees more autonomy over the kinds of work they do, where they do it and how they do it. More pay is “at risk,” meaning the employee has to perform to get it, and this is at least loosely coupled to job security.

What is surprising is that turnover, which should be at an all-time low given this slow economy, is about the same as always. Sure, the rate has slowed a bit and few firms are experiencing the 25%-20% turnover rates of the past two or three years, but people are still leaving — good, valuable people who we want to keep. And as the recession eases, more will decide to leave: the grass is always greener.

So the question becomes: what are the real reasons people leave and what can employers do about it?

What is important here is that no single factor in and of itself is decisive in causing turnover or in raising retention rates. Like so many others things, it is the systemic effect of several factors that leads to a final decision. People from different cultures respond differently to various factors, as do those of different ages.

Professor David Finegold and Senior Research Scientist Susan Mohrman, at the Center for Effective Organizations at the University of Southern California, presented a paper in the Spring of 2001 at the World Economic Forum in Switzerland entitled: What Do Employees Really Want? The Perception vs. The Reality.

This paper presents research from a wide range of organizations, people, and cultures and disputes many of the reason people commonly give for leaving. Some of their findings include the fact that security is generally only a major factor in those over 50 and that money is only a motivator is those under 30. For most employees in the in-between ages, other things play a much large role.

Most employees want these four things in their organization most of all:

1. A clear and compelling strategy;
2. An innovative environment low in bureaucracy;
3. Challenging work assignments that enable employees to grow their capabilities; and
4. Rewards based, in part, on how well the organization performs.

As I look at these I see that almost all of our “traditional retention” tools fall short. I was recently in an organization where they were going through the annual stock-option-granting exercise. They spent days and days assessing how valuable each person on the management team was (against some dubious criteria, I must say) and then how many options they would each get. The firms that practice this all say it is to retain people. Yet, many of those with options leave whenever the new firm offers an equal or better package of their own stock! It takes a lot of stock and many years of accumulation before this becomes a more powerful retention tool than satisfaction with the job or a challenging project.

One of the most intriguing results of this research was the finding that group or team incentive pay is a larger factor in retention than individual pay. By offering incentive pay to an entire team, you force management to encourage and develop individuals and you push individuals to work together so they can all get the reward. By focusing on paying and rewarding individuals for their performance you often work against team efforts. Yet, most good things are accomplished by groups of people pulling together and few, indeed, by anyone working alone.

I have always believed and counseled my clients that creating an exciting, challenging workplace filled with managers who are held accountable for turnover is the best retention policy of all.

The negatives of turnover are obvious: greater costs to hire and train new employees, lost knowledge and experience (i.e., intellectual capital), decreases in productivity, and lower quality of work. The positives are less well understood, but no less real: infusion of new ideas, additional of new knowledge and experience to the company’s knowledge base, lower wages as new employees often enter at a lower scale, and enhanced promotional opportunities for those who stay.

The costs of replacing a lost employee can be staggering. Costs can be as much as 3x base salary for a mid-level manager. Formulas abound for calculating replacement costs. The Saratoga Institute offers a commonly used one. There are others that are less traditional. But anyway you calculate it, turnover costs money.

It would seem that if our traditional beliefs about why people leave are not valid and that if our current retention tools are not that effective, it is time to try some new approaches. Challenging work, flexible schedules, good managers, rewards based on what actually gets done — sounds like common sense to me.

For more podcasts, webinars, and articles on recruiting be sure to check out ERE.net!

Like so many companies, CashAmerica, a nationwide chain of loan and pawnshops, had a retention problem. By the middle part of the last decade the problem had become acute enough that the company regularly operated at 80-90 percent staffing.

That might have been good for the bottom line, but the cycle of hiring and training, not to mention lost productivity, had a cost.

Clint Jaynes, when he took over as SVP of human resources in 2006, figured the cost to be about $2,000 in training costs for every new hire.

As Jaynes studied the matter, he found many newly minted clerks left within the first 90 days; more within six months. By the end of two years, somewhat more than half of all new hires were gone.

Store managers, who cost five times as much to train, had a lower, but still significant turnover rate.

Jaynes suspected that a big part of the problem was in the selection process. Because of the hoary nature of pawnbrokering, hiring was largely done locally. Walk-ins were the norm.

“What drew me was the opportunity to bring some sophisticated tools to the managers,” Jaynes says. “They didn’t have many. They all hired people, but that wasn’t (much of) their training.”

Experienced in using assessments to help select candidates, Jaynes turned to PeopleAnswers. The company uses standardized personality and behavioral assessments, normalizing them against the results obtained by testing existing employees and analyzing their results against their performance.

The results of the high performers are then used by PeopleAnswers to give a thumbs up or down to each candidate.

Other assessment companies use different methods, with the most sophisticated — and pricey — method being the development of custom tests designed for specific jobs at specific companies.

Jaynes chose PeopleAnswers because he was both familiar with the company and knew that its results presentation would be easy for managers to use with minimal training.

At the end of two years, a period when 200 of the company’s 800 stores used the assessments, Jaynes found that where the assessments were in place, clerk turnover was 39.7 percent. In the 600 stores where no assessments were used, turnover was 53.3 percent.

If the entire company had been using assessments, the training savings alone would have been in the neighborhood of $850,000 for the clerk position alone. Manager turnover also declined where the assessments were used in selecting candidates. Add in those costs and the total savings for training alone would have exceeded $1 million.

If the story ended there, it would be a happy ending for CashAmerica. It doesn’t. Besides the training savings, CashAmerica found that revenue increased where the assessments were being used; in some places by $50,000.

“We were able to get a higher-quality person,” says Jaynes. Ironically, that pushed up overall turnover because store managers no longer had to accept mediocre performance and terminated subpar workers. It also cut down on internal theft.

CashAmerica’s success is not an isolated case. Dr. Charles Handler, an industrial psychologist and president and founder of Rocket-Hire, a consultancy in pre-employment testing, screening, and assessment tools, says companies that use assessments see all sorts of benefits.

“Retention for a lot of companies might be a starting point,” he says, “But there are other reasons to use assessments.” Among them: cultural fit, leadership potential, decision-making, career planning, and advancement.

Handler cautions that though there are many assessment companies and tests available, price should never be the deciding factor. Instead, “The more you tailor the assessment to the individual, to the company, to the job, the more accurate and the more value it will show,” he says.

Today, CashAmerica regularly uses assessments everywhere. Turnover is down and performance is up. Not all of it can be attributed to the use of assessments, but that’s where it started.

The complete story and a look at the results other companies are getting with assessments will be in the June issue of the Journal of Corporate Recruiting Leadership.

Industry varied, as did company size. About 14% of respondents had less than 500 employees; 6% had 500-1,000 employees; 36% had 1,001 to 5,000; 14% 5,001 to 10,000; 31% more than 10,000.

What’s missing is the most important conversation, regardless of our economic situation.

No one is talking about what needs to be done by companies to optimize their organization with the highest number of “A” players possible. What percentage is possible? If done properly, 80-90%. In our current economic climate it is especially important to move away from mediocrity. The 80-20 rule, as it relates to sales, is just not acceptable if you truly want to be successful in today’s market. For those who aren’t familiar with the 80/20 rule, it says that 20% or your sales organization will produce 80% of your revenue. Is this really what you’re company is committed to? Have you considered the possibility of what your revenues would look like with 80-90% of your sales organization achieving quotas vs. 20-50%?

Optimization Checklist

These questions are just some that you need to be asking yourself. If you’re not asking these questions, you are headed for mediocrity or possibly even failure. 

1. Have you calculated the costs of your hiring errors over the past two to five years? This is truly the only way to know how many millions of revenue dollars you’ve lost.
2. Do you really know what type of people you’re looking for? Have you created a specific, measurable job spec using your current and past A players as the benchmark? Is the executive team aligned with regard to revenue and growth plans and how the sales organization directly helps to bring this revenue plan to fruition?
3. Are you clear on your corporate culture, and have you put a process in place to assess candidate fit with your culture?
4. Do you have a plan in place to assess your current employees and remove all your under-performers, as well as a timeline in which to complete this task?
5. How are you finding candidates? If you employ an internal recruiting organization, are they posting ads on job boards or actively searching out quality candidates? Are you using contingent recruiting firms to find your candidates? Have you retained a firm for the search?
6. Are you paying your internal recruiters at the same level you pay you’re top salespeople? If not, do you actually expect a 60-80k/yr recruiter to have the ability to find and attract a 300-400k/yr performer? If they had that ability, they’d be working for themselves, not for you.
7. Do you have a plan to retain top talent?
8. Have you created a list of questions, both open ended and closed, to qualify the competencies you require of your sales executives and management?

Firms like Microsoft, Google, Starbucks, Facebook, and Pixar have successfully used physical layouts, food offerings, social settings, and perks similar to those found in casinos to attract, maintain, and manage their customers/employees. According to one study, the number of corporations that offer “outrageous perks” nearly doubled between 2006 and 2011. So before you reject the idea, learn more about it.

Understanding the Casino Approach to Talent Management

Time clocks, policies binders, and rigid work rules may have worked long ago with regard to keeping employees at their desks, but times have changed. The casino approach focuses on using positive factors and “productivity perks” to influence behavior, including:

1. Enticing food — includes free, often gourmet food (DreamWorks, Skype, Netflix, Zynga, & LinkedIn) snacks and a large variety of drinks. Offering abundant coffee and caffeinated drinks both to provide a stimulant for productivity and to increase opportunities for co-worker interaction.
2. Unique office designs and facilities — creative office designs and furniture provide perks and innovations that not only excite recruits, but that also make it comfortable for employees to put in lots of hours. Three Rings for example designed its office to look like the Jules Vern Nautilus submarine, including a 20-foot long squid tentacle cushion and giant portholes.
3. Events — onsite events that are fun can proactively encourage creativity and cross-functional collaboration. Zappos holds both product design contests among employees (e.g. to design a new Adidas shoe) and toga/chug parties.
4. Policies — the absence of silly policies allow employees to create wild workspaces and workstations (Pixar and Google). Some organizations allow employees to bring their pets and children, which further reinforces a message of freedom and creativity. Perks like free beer and wine demonstrate unambiguously that the firm treats employees like mature adults.

Impacts of the Casino Approach to Talent Management

If you think that offering perks like a dress-down day or support for childcare makes your firm appear “modern,” think again. Numerous large and small firms in almost every industry have evolved beyond dated 20th-century perks to offer those more akin to the casino-based talent management model. “Outrageous” perks are primarily recruiting tools, but they have a much broader impact on a wide variety of both candidate and employee behavior. Some common impact/goals for the casino approach are listed below:

• Improving recruiting — although nearly every firm states in its recruiting and employer branding materials that they are “different,” the outrageous perks offered under the Casino approach are much more likely to be talked about. Offering free food/snacks, a relaxed physical environment (Zynga) or even letting employees bring their dogs to work (Google and Kimpton) send a clear initial message that you really are different from traditional firms like IBM, GM, and GE.
• Getting them to come to work early — offering a free breakfast (Twitter, Netflix, & Digg) gets employees to come in early. Infusionsoft offers a cereal bar and Pixar is famous for its free “wall of cereal.” Free shuttles, ample bicycle storage (Three Rings) and onsite shower facilities (Springbox) can also encourage workers to come in early. Some firms have even offered valet parking (Microsoft and Google) to get their employees to their workstations faster.
• Keeping them at work — by increasing the number of hours that an individual is physically at work, you increase the likelihood that they will actually work more hours and that they will interact with different employees. A free gourmet lunch (Facebook and Google) and ample snacks decrease the need to leave the facility for nourishment. Onsite facilities like car care (Cisco, SAS, and Google), allowing dogs, an onsite laundry (Google) and a huge swimming pool (Pixar) take away many excuses for leaving the facility. Adding frequent during- and after-work events like speakers (Google and Facebook), parties (Zappos) and movies (Pixar) keeps them at the facility longer. In perhaps the most outrageous illustration of the casino approach, Facebook during its first few years offered a $7,000/year bonus for employees who lived within a mile of their headquarters in order to encourage employees to come the work even during off hours.
• Increase collaboration — increased cross-functional collaboration is a primary factor in increasing the speed of innovation. By using architectural features (Google, Sun, and Pixar) and even timing the food lines (Google), firms can increase the likelihood that this valuable collaboration will occur more frequently. Other features like free shuttle buses (Google, Microsoft, and Genentech), sports facilities, and free movies (Pixar) can directly increase collaboration. Companywide ski trips (Google & Odin Technology) can be used to provide additional chances to bond and collaborate.
• Increase retention and decreased poaching — most talent management professionals realize that free food, gyms. etc. can directly impact employee retention because they offer desirable features that no other company can match. But perks like a free lunch (Skype, LinkedIn, and Zynga) also have another benefit in that by keeping employees at the facility, they minimize the chances that an external recruiter can take them to lunch and recruit them away.
• Reinforce your message of freedom innovation and creativity — it’s quite common for corporate value statements and websites to extol the firm’s culture of freedom and creativity. However actions speak louder than words in this area. For example, providing free alcohol to employees causes most in HR to “lawyer up,” but for firms that want to be seen as “different,” it provides another opportunity to treat employees as mature adults. Numerous firms have joined this trend by either providing kegerators or refrigerators full of beer and wine (Twitter, Yelp, Door Number 3, Crowdflower, Bluespring Software, Barkley Advertising, Digitas Health, DPR Construction, and Three Rings). Google’s “martini blowout” party sent out a distinct message just by the name of the event. Conservative individuals within HR may disapprove the concept but nothing demonstrates that your firm is “different,” creative, trusting, and tolerant clearer than providing alcohol.
• Improved health and productivity — in addition to keeping employees onsite longer, offerings like onsite gyms (Oracle, Chesapeake Energy, and Nike), providing organic food (Google and Facebook) and onsite healthcare facilities (SAS and American Pipe) can lead to better employee health, lower insurance rates, and reduced costs related to sick day usage.
• Impressing customers — especially at startup firms, bold and outlandish office designs and furniture can also impress visiting customers and investors. They can show potential customers that creativity and innovation permeates the entire organization.

Final Thoughts

The goal of this article is not to provide a list of all the new and what many consider to be “outrageous” perks that firms are beginning to offer. Instead, the primary goal is to make you aware that these new adoptions are based on solid research and behavioral principles. To the untrained eye, the “outrageous” offerings that we have all heard about might appear to be simply extravagant employee perks, but nothing could be further from the truth. Firms like Google approach talent management as a science, not an art. The best firms that have adopted elements of this casino approach have conducted a thorough ROI analysis in order to demonstrate to skeptical executives that the benefits in productivity and innovation far outweigh the costs and the risks.

You should also note that although many of the firms listed are Silicon Valley firms, the practice has spread to many other geographic areas and industries. The final lesson for all in talent management to learn is that the 20th century model of work/life balance is gradually being replaced by a model that purposely blurs the line between work and life, to the benefit of both the employees and the shareholders.

I’ve broken them out into six categories, but some of the approaches could easily belong in multiple categories. If you are using one of the approaches, please share your experiences, learning, and guidance using the commenting functionality below.

The Long List of “Unknown” or Barely Known Talent Management Approaches/Tools

Productivity Improvement Tools

• “Free time” and Remote Work Flexibility — almost every firm needs to improve productivity, idea capture, and successful innovation. While many firms now offer flextime, a more effective mechanism is “free time” to think and innovate. Firms like Google and 3M are famous for offering “free time,” with Google offering up to 20%. A more common option is remote work or flexible scheduling options that allow employees to make their own decisions as to when and where they can that best produce. Flexibility is becoming increasingly important as next generation workers have come to expect the ability to work on the fly. When top-performing employees are allowed to control their own schedule, studies show productivity and innovation rates increase significantly. (Google, Genentech, 3M, and Best Buy)
• Bad Manager Identification – managers oversee the single largest component of variable cost in most organizations –labor costs — which average 60% of variable expense. The actions of managers significantly impact the ROI of that spend by affecting innovation, productivity, and workforce development. Unfortunately, bad managers are not rare and they seldom hire “A” players or innovators. The best approach to mitigating bad manager risk is a bad manager identification program, a.k.a. leadership effectiveness or individual dignity entitlement surveys. Such surveys identify bad managers based on their actions and performance. Once-identified, organizations can act to fix, replace, or move troubled managers. (FedEx, Dell, GE, AT&T, and Monsanto)
• Managing Factors that Effect Productivity — many managers simply do not understand how to effectively improve productivity. Most think improving productivity is about getting employees to work harder, longer, and more like them, but more often than not it’s about skills, motivation, and removing barriers. Educating managers on the top 20 factors that impact productivity and providing simple tools to address each can dramatically improve performance. The 20 factors that impact productivity include:

• Removing Barrier to Productivity – identifying factors that limit productivity and eliminating them is one of the most impactful talent management actions an organization can undertake. Talent management professionals should begin by accepting their role as internal productivity consultants and develop a process that identifies true barriers to productivity. Through employee surveys and focus groups talent management professionals can uncover a vast array of conflicting process elements, antiquated policy, overlooked resource allocations, outdated organizational design, and routine system abuse. The premise is simple and highly effective; just ask: “if we had to scale up productivity tomorrow, what factors would prevent our current team from doing so?” Some political issues may emerge, but past experience demonstrates the vast majority of issues are extremely basic conflicts easy to address. (The State of North Carolina)
• Leverage Non-Monetary Motivation – most would agree that employee motivation is a huge driver/barrier to productivity, and that all motivation isn’t compensation tied. Unfortunately, rarely does any department in the human resource function offer up non-monetary motivation solutions. Focusing solely on monetary incentives is both costly and ineffective long term. Progressive organizations are now leveraging systems to ensure delivery of non-monetary drivers such as recognition, praise, and feedback. Successful approaches rely on employees completing “how to manage me” profiles that can then be used by managers to deliver individualized treatment — i.e. adjusting the frequency of feedback, engaging socially, etc. Early stage adoption of CRM technologies to manage employee experience are demonstrating that the same systems use to ensure customer engagement (repeat conversion to buyer) and loyalty can work with employees. (Baptist Health Care)
• Work-Challenge Based Promotions — if your engagement surveys capture perceptions about the fair awarding of promotions, you probably already know that it is a major issue in almost every organization. Most promotion processes are entirely subjective, and team members often feel that the wrong people get promoted, which has a dramatic negative effect on productivity, retention, and morale. One extremely effective solution is to promote employees based on their performance in a tournament, like series’ of challenges based on the duties of the job to be filled. Allowing team members from within and outside the department to participate if they desire the role. This allows individuals who feel they have not been given an adequate opportunity to demonstrate their abilities to do so. It also sends a clear message that ability to do the work the best is the only factor considered. The approach is proven to produce superior candidates, positively influence employer brand, and increase productivity. A second approach to consider is allowing employees to appeal when they consider a promotion to be unfair. (MGM Grand and IBM)
• Support Best Practice Sharing  – Talent management does not need to create new tools or approaches in order to add value. In larger firms, many times there are already best practices in use, but hidden in a single function or business unit. Talent management can have an immediate impact if it simply develops a mechanism for identifying best and “next” practices and effectively spreading them rapidly throughout the organization. Internal wikis allow fast best-practice and information sharing using a model many are familiar with (Wikipedia). Communities of practice, consultant directories, and internal social networks can also aid in spreading practices and alerting others about upcoming problems. (Cisco Systems)

Strategic Talent Management Tools

• Measuring and Rewarding Great People Management – managers are the primary delivery channel for talent management processes, but too many fail to take their people-management responsibilities seriously, and managers rarely spend enough time on people management. An effective way to get a manager’s attention is to measure, report, and reward great people management results. Only 39% of firms currently reward managers for great people management even though HR “owns” all of the key components of the reward process (including performance management, performance appraisal, competency management, and the reward systems). “What is measured, reported and rewarded is … done first and done best.” Implementing and rewarding success via a quarterly people management scorecard can dramatically improve people-management results. (GE, PepsiCo, and FedEx)
• Providing Integrated Talent Management Solutions Managers Expect – managers are faced with multifaceted problems that simultaneously require at least a partial solution from several different talent management functions. Unfortunately, the solutions that most talent management teams provide are fragmented and independent. Obviously managers would prefer a single integrated solution. Talent management must work to integrate the different talent management functions and to provide comprehensive rather than fragmented solutions.
• Identifying “Headcount Fat” – quite often corporations are forced into conducting layoffs because they suddenly realize that they have a surplus of employees. A superior approach is to periodically assess the overall workforce and the workforce in each major business unit to identify areas that are overstaffed. Identifying labor surplus is usually done using predetermined ratios. The current ratio is compared to the ideal using revenue per employee ratios, labor costs-to-revenue ratios, and manager-to-employee ratios. The early identification of surplus gives talent management managers time to identify possible solutions that may minimize the need for layoffs.
• Developing a Story Inventory — the emergence of social networks and peer-to-peer media make it much easier for employees to play a larger role in building employer brand and recruiting referrals. “Authentic stories” are the most powerful and credible way of spreading an organization’s brand, but most organizations have no way of identifying, cataloging, and sharing the powerful people stories that could influence talent populations. The best approach is to develop a process for gathering stories from employees and managers and building out a “wow” story inventory that is easily accessible. The inventory can then be used by employees, managers, and even the press when looking for cool stories about ordinary people doing extraordinary things. (Zappos)

Tools to Improve Successful Innovation

• Measure, Report and Reward — the tremendous success of Apple in recent years demonstrates the financial impact of successful innovation. Unfortunately, innovation does not come easily in a large corporate environment. What you measure, report, and reward is more likely to be done well, so talent management needs to develop processes for effectively measuring, rewarding and widely reporting managers whose teams produce innovations that are successfully. Managers should also be measured and rewarded for coaching and sharing best practices among other managers on how to manage and improve innovation. (Google)
• Increasing Collaboration – innovation is surpassing efficiency as the prime driver of corporate performance. Even with the increased emphasis, few in talent management accept responsibility for delivering something proven to increase successful innovation, cross functional collaboration. Higher rates of collaboration increase learning, drive best-practice sharing, and excite and energize employees. Collaboration can also reduce project roadblocks and resistance. Talent management must develop physical (i.e. increased cross-functional interactions and meetings) and online approaches (i.e. internal corporate social networks) that increase the chances of more frequent and in-depth collaboration. (Google)

Coming Up in Part Two…

Next week, I’ll introduce talent management approaches and tools aimed at workforce development, improving talent management functional positioning and budgets, and using key business processes and tools from other functions.