In many organizations, the subject of prioritizing positions and people is a highly political one. While many accept that certain roles may exert greater impact on the organization, treating people in those roles differently is a challenging and often avoided activity.

If your organization is looking for truly strategic HR, delivering highly targeted or personalized retention solutions is essential.

Category III: Targeted or Personalized Approaches

This last category, in contrast to the all-employee approach, focuses retention efforts on high-priority individuals and jobs. Once prioritized, it then personalizes or customizes treatment to fit the individual needs of the targeted employee. The primary success measures for this category are turnover rates among targeted individuals and the average time-to-fill high-priority roles voluntarily vacated.

This category of retention strategies often has the highest ROI because it allocates manager time and retention resources to only a small percentage of employees.

Potential Problems with “Targeted” Strategies

Treating all employees the same is an approach that quells the masses but upsets top performers and key innovators who routinely deliver elevated contributions.

Historically, many organizations have opted to upset as few as possible, settling for highly stable organizations versus highly productive ones. Highly targeted strategies will reduce turnover among the targeted group but may actually cause momentary spikes in turnover among bottom and average performers, but is that a bad thing?

15) Regional customization strategy

• Goals of the strategy – improve retention rates throughout dispersed organizations by varying retention approaches based on the unique problems and needs of each region.
• Prioritization process – regions with high turnover rates and those with unique turnover causes.
• Identifying turnover causes – relies on local employee surveys, local exit interviews, and manager experience to identify local turnover causes.
• Treatments for countering turnover causes – offerings depend on which levers work best in each region. However, best practices and common problems are shared across regions.
• Benefits/weaknesses – because turnover rates vary significantly in different countries and regions, resources and treatments are targeted for maximum impact. Problems occur in organizations that prefer headquarter control, have weak metrics, and a one-size-fits-all management strategy.

16) Personalized retention offerings to prioritized employees

• Goals of the strategy – this strategy has the highest potential ROI of all strategies because it uses fewer resources and concentrates them where they can have the highest impact. After prioritizing retention targets, this strategy then personalizes retention treatments to meet or exceed the individual needs of targeted employees.
• Prioritization process – a corporate-wide prioritization effort is undertaken to determine which individuals would hurt the firm the most financially by leaving (i.e., top performers, innovators, those who occupy mission-critical roles, those who could significantly help competitors).
• Identifying turnover causes – because only a smaller percentage of your employee population is targeted, prioritized individuals can be interviewed or surveyed before they even consider leaving to identify what frustrates and motivates them. Should a targeted individual quit, a delayed but more accurate post-exit interview can be used for this small group to identify the real reasons for their leaving.
• Treatments for countering turnover causes – prioritized employees are surveyed to determine what is possible within the firm: what they would want more or less of to be more productive and less likely to leave. Treatments could include coaching, mentors, greater compensation, and stretch assignments for skill development.
• Benefits/weaknesses – focusing retention efforts on high-priority employees allows limited resources to be targeted and to maximize their impact. The process of prioritizing and identifying individual retention issues and treatments requires some HR time and expertise. Prioritizing and its associated “special treatment” of targeted individuals may also create some us-vs.-them animosity.

17) Flextime/flexplace strategy

• Goals of the strategy – increases retention rates through flextime and remote work with a significant impact on both retention and productivity.
• Prioritization process – key employees are identified and those in jobs amenable to flexible work are offered flexible work options with metrics for tracking their productivity.
• Identifying turnover causes – relies on interviewing or surveying targeted employees to identify those who find this flex option a positive retention factor.
• Treatments for countering turnover causes – work offerings include flexible scheduling of work hours and location up to 100% remote work.
• Benefits/weaknesses – because most firms don’t offer flexible options, key people are less likely to consider moving to other firms without them. The flexibility can reduce commute stress and costs, strengthen the family, reduce the firm’s real estate costs, and in addition, increase productivity (firms like Best Buy have realized up to 35% more productivity). Managing remote workers requires effective flex-work processes and managers who can manage their workers without needing to physically watch over them. Not all workers find this option desirable.

Less Frequently Used Strategies

Although not as widely used, these targeted strategies are among the most powerful:

• Free-time strategy – made famous by Google’s 20% Time, it provides employees in designated job families the opportunity to select their own projects during a percentage of the work week. In addition to retention, it can also have productivity and innovation impacts.
• Challenge/exposure strategy – this approach increases the opportunities for targeted employees to be challenged with exciting stretch projects and rotations. Employees interested in increasing their exposure in front of executives are also provided with an exposure plan to increase their visibility.
• Right job placement – the most restrictive of all strategies, it focuses on a handful of high-value employees. Each of these individuals is continually placed in their ideal job with an ideal manager, level of innovation, teammates, motivators, etc.
• Show them their impact – this education strategy focuses on improving retention rates of key employees who are unaware of the significant impacts of their work. It proactively “walks them downstream” in order to see the impact of their work by meeting and interacting with users and customers.
• Boomerang strategy – takes a long-term view of employment by assuming that you will lose some top employees. It sets a goal at the time of departure to ensure that employees leave happy. Post exit, the manager and the recruiting function maintain a relationship with key employees and then attempt, over time, to recruit them back to the firm.
• Diversity tailoring – emphasizes the tailoring of retention efforts to the unique needs of your diverse employee population.

Final Thoughts

Whether you believe that an economic recovery is already occurring, just around the corner, or off in the distance, you can not disagree that top talent will always have options. Focusing on retaining capable talent is a better alternative than suffering through a vacancy and spending resources to replace someone you could have kept.

The longer organizations postpone formalizing a retention strategy and adequately resourcing it to drive results, the greater the chance they will lose valuable resources.

It is my hope that by taking a step back and by viewing this complete list of potential retention strategies, you can better see the limitations of some strategies and realize greater opportunities for the future, when turnover rates explode.

This is true because retention is not yet a distinct discipline, and because most retention managers and consultants laser-focus on their favored approach.

In order to provide you with a big-picture view of the available strategies, I’ve used my extensive experience and research in retention to compile a comprehensive list. It provides a brief overview of each of the major retention strategies that corporate leaders can employ.

Classifying Strategies Based On Their Primary Retention Lever

Retention strategies are best classified based on the primary lever (or treatment) that the firm uses to motivate employees to stay (the other option is to classify them by the causes of turnover that the strategy is trying to counter). Typical retention levers include pay, benefits, engagement drivers, promotions, and development actions.

Individual levers can be combined into thousands of situation-specific solutions. The following list of strategies has been separated into three broad classifications: laissez-faire, all-employee, and targeted approaches.

Category I: Laissez-faire Approaches

This group contains decentralized, do-nothing retention strategies. The primary success measures impacted by this category are departmental turnover rates and average time-to-fill for positions vacated voluntarily.

1) Individual Managers Own Retention

• Goals of the strategy – the goal is to get the manager (who knows the employee best) to “own” the retention process and to select the best approach for each unique situation.
• Prioritization process – it is left up to the individual manager but most do not prioritize.
• Identifying turnover causes – it relies on employee self reporting and exit interviews.
• Treatments for countering turnover causes – vary with the individual manager but exclude the use of corporate-controlled approaches like increasing benefits, promotions, and across-the-board salary increases.
• Benefits / weaknesses of the strategy – giving managers ownership of the retention process means that they will likely pay more attention to it. Unfortunately, managers are not retention experts, so they will likely learn by trial and error. Managers will also frequently rely on their emotions rather than more effective data-based approaches.

2) React with a counteroffer or a retention bonus – this strategy involves waiting until employees announce that they’re leaving and countering any outside offers that can reasonably be matched. Incidentally, if you don’t also fix what is wrong with the job, it is unlikely that a counteroffer or a retention bonus will work long term.

3) Rely on effective recruiting – under this strategy, no formal action is taken to reduce turnover. Instead organizations focus on developing excellent employer branding, recruiting, and talent pool processes that provide talent on demand.

4) Do nothing – this strategy, by far the most common, starts with the assumption that turnover is normal, and involves taking no organized action.

Category II: All-Employee Strategies

This group contains the most commonly used formal strategies. Their popularity is largely driven by ease of implementation. It is assumed that the same-exact causes of turnover are shared by all employees, and that all employees must be treated equally. The primary success measures under this category are average turnover rate and time-to-fill for positions vacated voluntarily.

Yet with rare exception, blanket treatments fail miserably.

Not everyone with a fever has the flu, and treating everyone as if they do will result in some ill people dying.

Blanket treatments are expensive and erroneously propose that employees in general leave for the same reasons, regardless of the employees’ performance rating, job family, or location. In reality, blanket treatments do more harm than good because they send a message to top performers and innovators that their elevated levels of contribution do not matter.

5) Improve employee benefits

• Goals of the strategy – this popular strategy attempts to tie employees to the company over the long term using “benefit handcuffs” because surveys show that better benefits can be both a powerful retention and recruiting lever.
• Prioritization process – none unless benefits vary between different job classifications.
• Identifying turnover causes – it relies on traditional exit interviews to identify whether weaknesses in benefit offerings are driving turnover.
• Treatments for countering turnover causes – the benefits that are offered vary with the firm but improved health coverage, more time off, educational benefits, better work/life balance, and better on-site amenities (i.e., food, exercise facilities) are common choices.
• Benefits / weaknesses of the strategy – improving employee benefits can have significant retention impacts on lower-paid employees and those with either medical conditions or large families. Benefits are generally not taxed as income, so employees get more “net” value from them than from salary increases of the same cost. Unfortunately, improving benefits for all employees can be very expensive. Top performers and innovators may be more concerned with on-the-job opportunities than benefits. Also, individuals might stay because of the excellent benefits but could remain less productive because their job situation hasn’t changed at all.

6) Improve training and development

• Goals of the strategy – to improve retention rates by focusing on providing more learning and employee-development opportunities.
• Prioritization process – none unless access to training and development opportunities vary between job levels.
• Identifying turnover causes – it relies on traditional exit interviews to identify which areas of training and development have the highest impact on retention.
• Treatments for countering turnover causes – these vary with the firm but improved soft skills training, leadership development, job rotation opportunities, and technical skills training that prepare employees for promotion are often choices.
• Benefits / weaknesses of the strategy – improving employee training, learning, and development can have significant retention impacts on your firm’s top performers because of their keen interest in continuous learning. Training and development, in addition to being a retention lever, also directly helps the firm by improving the capabilities of its employees. On the negative side, training and development activities are expensive and they take time away from the job. Providing training and development to build skills but not following up with sufficient opportunities to use those new skills may actually contribute to increased turnover.

7) Increase compensation

• Goals of the strategy – this strategy assumes that the causes of turnover captured during exit interviews (compensation matters most) are valid, so it focuses on increasing compensation in order to prevent turnover.
• Prioritization process – no prioritization unless the increases in compensation are tied to job levels or individual performance.
• Identifying turnover causes – it relies on traditional exit interviews to identify the weaknesses in the compensation process that are driving individuals to accept outside offers.
• Treatments for countering turnover causes – these vary with the firm but options generally include across-the-board salary increases, cost-of-living adjustments, increasing the compensation “percentile” target for the firm, adding performance bonuses, increasing 401(k) matching contributions, and offering stock options or stock.
• Benefits / weaknesses of the strategy – improving employee compensation can have significant retention impacts on those employees primarily driven by money. Stock options (because they must be held) may act as a “golden handcuff” to tie individuals to the firm for a significant period. Unfortunately, increasing compensation is extremely expensive and even more so if it’s not tied to increases in performance. Giving every employee an equivalent increase in compensation may actually anger top performers and thus actually increase turnover among the best.

8) Improving employee engagement

• Goals of the strategy – the goal is to improve retention rates by focusing on the factors that increase employee engagement.
• Prioritization process – none.
• Identifying turnover causes – it does not connect exit interviews with engagement measures. It relies exclusively on employee engagement surveys and then it assumes that low engagement will eventually drive turnover.
• Treatments for countering turnover causes – offerings depend on which areas within your engagement survey are scored low. Most efforts to improve engagement scores involve increasing communications, building trust and reinforcing values.
• Benefits / weaknesses of the strategy – engagement surveys are relatively easy to administer but they are not inexpensive, if you count the employee’s time in filling them out. Unfortunately, there is little statistically credible corporate data directly connecting improving employee engagement scores and decreased rates of turnover. Most engagement processes are anonymous. So a firm cannot directly connect an individual’s low score with the fact that they quit (or even connect their stated reasons why they quit and their low-engagement areas).

9) Speeding up career progression

• Goals of the strategy – this strategy attempts to improve retention rates by focusing on providing more enhanced career progression (lateral movement) and more opportunities for promotion.
• Prioritization process – none, unless efforts to speed up movement are targeted at particular job families.
• Identifying turnover causes – it relies on traditional exit interviews to identify whether the speed of career progression or promotion impacts retention.
• Treatments for countering turnover causes – common offerings include improving the internal movement process to speed up lateral transfers and global assignments. Many also give preference and emphasize internal promotions over external hiring. Offering additional short-term projects for growth, developing new job titles, and creating new career tracks to speed up promotion rates are also frequently used.
• Benefits/weaknesses of the strategy – improving the speed of career progression can have significant retention impacts, especially on top performers who no longer need to leave the firm in order to get promoted. In addition, increasing internal movement and promotion rates further helps the firm by developing more leaders. Unfortunately, creating new career tracks and promoting more individuals significantly raises your salary costs and can also make an organization “top heavy” over time.

Less Frequently Used All-Employee Strategies to Consider

10) Employer branding – this powerful but more difficult-to-implement strategy emphasizes building your external image by encouraging individuals and the media to say good things about what it’s like to work at your firm. The underlying premise is that employees will want to stay at a firm that is perceived as a great place to work. The visibility of factors contributing to an organization winning an award or being recognized as a well-managed firm often influences internal perception as much as it does external perception.

11) Blocking strategy – this strategy, rather than focusing on overcoming the causes of turnover, emphasizes putting up recruiting barriers and blocking external recruiters from even contacting your employees.

12) Communications focus – this approach emphasizes improving internal communications, opening up access to information, and improving transparency so that everyone feels like they are an owner of the firm. Information would be provided early on during onboarding, during the performance appraisal process, and periodically throughout their employment.

13) Casino approach – this approach was championed by Google and emphasizes making the physical work environment so attractive that it by itself becomes a retention tool. The approach is modeled after what casinos do to keep customers inside from thinking about the outside world. It can also serve as an attraction tool as employees talk to their colleagues at other firms about the free food, the gym, shuttle bus, and on-site events.

14) Fixing bad managers strategy - this approach focuses on the most common cause of turnover: bad managers. It emphasizes the politically charged task of identifying and fixing weak managers through employee surveys. It has been employed by benchmark firms like Dell and FedEx.

Next week in part 3, look for Category 3 to learn about the most effective retention strategies, which are targeted at specific individuals and deliver a differentiated or personalized solution. Here was part 1 from last week.

Study after study has confirmed the notion that many employees would have left their employers months/years ago had the option to do so been viable. The economic downturn, combined with the mortgage crisis, has forced many frustrated, disappointed, and unmotivated employees to stay put. The trend is not a new one and is consistent with past downturns.

While turnover rates are at an all-time low, they most certainly cannot be taken as an indication of a firm’s status as a desirable place to work.

Just as in years past, when job opportunities become more prevalent, employees will exercise their right to demonstrate just how much they appreciated the treatment they received throughout reductions in force, furloughs, clumsy mergers, travel freezes, and budget cuts. The level of animosity among many will render most traditional retention approaches ineffective.

Some studies indicate that as many as two-thirds of employees are ready to go. Unfortunately, few corporations are preparing today to handle the dramatic increase in voluntary terminations that will come tomorrow.

While few organizations completely decimated their staffing functions, the majority have cut back to the point where capability has been negatively impacted. Strategic programs that deliver retention have been cut, and in most cases, no one is held accountable for retention solutions. It might seem outrageous, but unless you consider the phrase “let’s keep them all” to be a retention strategy, it’s a fact that most HR and recruiting executives can not even list common retention strategies, let along devise their own.

Retention Is One of the Most Poorly Managed Goals in HR

It’s hard to argue that retaining key employees isn’t a high-value activity, and I can’t say that I have ever visited an organization that would argue otherwise. In fact, most HR leaders and recruiters talk a lot about the importance of retaining the very best employees that the organization has invested so much time, money, and development resources in. Unfortunately, talk is where most HR organizations end when it comes to formalizing retention efforts.

Among organizations that force-rank satisfaction with HR deliverables, retention often ranks high in importance but extremely low in execution. In fact, it’s often lower than compensation and benefits, if you can imagine that!

Its perennial position at the bottom of the list qualifies it as the most poorly managed staffing activity. However, its position at the bottom should come as no surprise, since few organizations can identify who’s in charge of it, what is the strategy, and how retention efforts are measured and evaluated.

These three factors are the reason behind most organizations’ poor retention performance:

Reason #1 — Who is in charge of retention?

In many organizations the answer to this very basic question is no one! Rarely does the organization’s design for the HR function include a role(s) charged with designing, developing, and executing retention programs. When such a role does exist, rarely is it positioned at level with enough resources and power to make a difference (i.e., Senior Director or VP).

When it comes to organizational design, nothing says “low importance” more than lack of budget or executive-level leadership at the helm. Some might argue that all are responsible for retention, but merely listing it as one among many responsibilities essentially guarantees a mediocre enterprise-scale effort.

While great managers may assume ownership of retention activities in their group, because there is no clear support organization, their approaches will largely be ad hoc in nature and inconsistently leveraged, opening the door for anyone disgruntled to scream discrimination!

Reason #2 — The real costs of key employee turnover are not reported.

Retention metrics in most organizations begin and end with overall turnover by period. Absent are metrics that measure the business impact of turnover and specific goals to mitigate predicted impact. If your retention function doesn’t measure and report these five key metrics, chances are your efforts are under-managed:

• The cost of turnover. Reporting a percentage turnover rate seldom excites executives, but converting that turnover rate to a dollar impact on business performance can establish the visibility on talent issues needed to transform a good recruiting function into a great one.
• Top performer/key employee turnover. Often called regrettable turnover, this measure prioritizes the jobs and individuals based on the degree to which their leaving hurts the firm.
• Competitor win/loss ratio. This metric is simply the ratio of the number of top performers you have successfully recruited away from a competitor compared to the number of top performers who voluntarily terminated to join a competitor. If a top performer quitting goes directly to a competing firm (vs. retiring), it raises the costs because it hurts the firm while aiding a competitor.
• Preventable turnover. If turnover is occurring for silly or preventable reasons, the percentage of cases where that is true needs to be reported and fixed.
• Percentage of “at risk” employees. The best firms proactively identify high-priority individuals who present a high risk of leaving during the next one or two years. Reporting the percentage of target individuals at risk alerts managers helping them put into place proactive programs attacking retention issues before they get out of hand.

Reason #3 — What is the name of your retention strategy?

The economic impact of losing 10% of the workforce each year in a major corporation amounts to tens of millions of dollars. With that amount of money and disruption involved, retention is clearly a strategic issue. To develop a competitive advantage around a strategic issue requires a strategy that is measurably superior to that of your competitors.

Unfortunately, it’s rare for organizations to develop a formal retention strategy. To make matters worse, most HR executives don’t even know the common retention strategies in use that they could adopt.

Before launching into a comprehensive list of common retention strategies, note that all retention strategies fall into one of three categories and usually contain five common elements.

The Five Common Elements of a Retention Strategy

1. Goals of the strategy. This element identifies the goals and specific results the strategy should produce.
2. Prioritization process. This element specifies the methodology that will be employed to determine which (if any) employees should receive priority treatment.
3. Identifying turnover causes. This element specifies the methodology that will be employed to identify the primary factors that “cause” employees to leave.
4. Retention solutions. This element contains a catalog of proven counter measures or solutions that can be employed by managers to halt or reverse a trend of turnover categorized by common cause.
5. Success measures. This last element covers the process for selecting retention metrics and reporting the results.

The Three Categories of Common Recruiting Strategies

Retention strategies usually fall into one of three categories, but world-class organizations often employ a hybrid approach that uses different strategies for different groups within the organization based on their role in achieving wildly important organizational goals. The three common categories include:

• Laissez-faire approaches. This group contains decentralized retention strategies that rely almost exclusively on operating managers to solve the retention problem.
• Comprehensive approaches. These approaches attempt to retain all employees by improving the treatment, pay, or benefits of all employees. These approaches are also called “peanut butter” strategies because they attempt to spread the improved treatment evenly across all employees.
• Targeted or personalized approaches. This category concentrates retention efforts on high-priority individuals and jobs and then customizes the treatment as much as possible in order to fit the individual needs of the targeted employee.

Next week, part two will continue with the top 15 retention strategies in use today.

Note: If you have corporate experience operating a retention function, I welcome your comments on critical factors that can make it more/less effective. In addition, if you have questions that you would like answered on corporate retention strategies, please post them in the article comments section following this article.

The survey of some 5,000 executives, search consultants, and corporate HR professionals says the average tenure of a business executive declined 15 percent between 2005 and 2008 to an average of 2.3 years. Meanwhile, only 29 percent of the HR professionals surveyed say their company has knowledge management and succession plans to address the loss of management skill.

“It takes roughly three years of deep entrenchment in a job to reach peak performance. With executives spending less time in organizations and often being judged on short-term stock price performance, they stop short of reaching their full potential,” says ExecuNet Vice President and Executive Editor Lauryn Franzoni.

While the economy may have tamped down the voluntary turnover rate for 2009 — executive recruiters expect their searches to be down 14 percent for the first half of the year –  it has also increased the length of time executives spend searching for a job. The report says executives now expect to spend an average of 10.1 months looking before landing.

So if they’re anywhere close to the industry average, executives are spending about a third of the time they’re with a company searching for a new company to join.

The executive summary of the report itself doesn’t speak to that situation, though it does show that 73 percent of the executives are finding networking the most effective way of finding their next job. For another 10 percent, responding to job postings produced results, though the report suggests that fewer and fewer of these executive-level jobs find their way online.

“The sheer volume of résumés -– both qualified and unqualified –- that recruiters get from public postings, particularly as more candidates compete for fewer jobs, is staggering, and they find it prohibitive to post those jobs out in the open,” says ExecuNet President and Chief Economist Mark Anderson. “Recruiters tell us they don’t want cold calls or emails; they want someone to refer you to them.”

While recruiters can be choosier than ever right now, they expect to see an executive hiring boomlet in the second half of the year — big enough that they expect searches to be down only 4 percent for all of 2009. That prediction is consistent with what happened in the search industry in 2003, at the end of that recession. The optimism is also reflected in the latest ExecuNet’s Recruiter Confidence Index. In decline since the beginning of 2007, the index rebounded from a low of 26 percent to 38 percent between February and March.

“We’ve been tracking their confidence level since the last recession, and their confidence has always been a leading indicator of the economy and executive employment,” Anderson explains. “During the last recession, we saw recruiter confidence quickly strengthen six months ahead of the recovery.”

Imagine, for example, that you had a poor-performing worker like Homer Simpson. If Homer walked in late one day as usual and announced that he was leaving, would you consider that a bad thing, or would you secretly celebrate his departure?

Even better, what if he left your firm and immediately went to work for one of your direct competitors; wouldn’t that be additional cause for celebration?

On the flip side, what if you ran a golf team and one of your star performers left, would that not be real cause for frustration?

The purpose of this article is to open your mind about the silliness of measuring only aggregate turnover. I can think of no better indication of a so-called expert’s lack of true understanding of employee turnover than when I read an article or a book on retention and the author invariably expounds on the need to keep everyone.

The idea of keeping everyone is just plain silly. The fact is that there are many factors that can transform “ordinary turnover” into either positive or negative turnover. As a result, few firms are beginning to classify their turnover as either “regrettable” or desirable turnover. Whether turnover is good or bad depends primarily on the business impact caused by the departure of the employee.

Business impact can be classified under eight categories:

• Performance – The employee’s performance level.
• Position – The business impact of their position.
• Business unit – Whether their business unit is mission-critical.
• Skills – The criticality of the employee’s skill set to the business.
• Replacement – How easy they are to replace with an equivalent internal or external candidate.
• ROI – Their productivity compared to their costs as an employee.
• Where they go – Where they do go after they leave the firm (to a competitor?).
• Reasons for leaving – Were the reasons for leaving realistically preventable?

What Does Zero Turnover Mean?

It would be a mistake to assume that any firm that has low or “zero” turnover is a well-managed firm. Low turnover rates could, in fact, be caused by a number of factors including a lack of employment opportunities within the region, financial constraints that prevent employees from moving (upside down mortgage), a bad firm image (Enron or AIG) that keeps recruiters away, or a high concentration of older workers reluctant to change jobs later in their career.

Another much more common reason for low turnover (that few firms actually want to consider) is the fact that your employees may be in low demand because they are perceived as being poorly skilled and undesirable.

True recruiters are always trying to steal away the best employees, even during tough economic times. If no one steals (or even tries to steal) your employees, it might mean they aren’t worth stealing.

Classifying Employee Departures into Desirable, Neutral, and Undesirable

When you develop retention goals, it’s critical that you define them such that the business impact of turnover is taken into consideration.

Below you’ll find a long list of different types of turnover to demonstrate how complex the issue of turnover can actually be. Once you understand the complexity, the next step is to revise your goals, metrics, and exit classification system to ensure that you accurately classify future turnover. The following sections contain a comprehensive listing of each of factors that can be used to categorize turnover into desirable, neutral, or undesirable.

I) “Desirable” Turnover

At least 25% of all turnover is “desirable turnover.” While I would never go so far as to recommend organizations start rewarding managers for such turnover, you certainly wouldn’t want to punish a manager for turnover in the following cases:

1. A bottom performer leaves on their own (avoiding the need to terminate them).
2. A bottom performer is terminated (showing that the performance management system worked).
3. A bottom performer leaves and goes directly to a competitor (hurting them).
4. An average or lower level performer gets replaced by someone that becomes a superior performer (referred to as a talent swap).
5. An employee with declining or irrelevant skills is replaced by someone with increasing or more relevant skills.
6. A lower performer is replaced by promoting someone inside that needed more challenge or growth to develop (thus improving the organization, increasing internal movement).
7. The employee exiting is a notoriously bad manager.
8. A non-diverse employee gets replaced by a diverse one.
9. An employee with key skills working in a non-critical job/business unit transfers to a strategic job/business unit.
10. The exiting employee was a trouble maker or dissatisfied person that required a lot of management time.
11. The exiting employee was a union organizer or leader who’s departure weakened the union effort.
12. The exiting employee was slated for an upcoming layoff.
13. The exiting employee was highly paid due to tenure but delivered no more than workers earning much less.
14. The exiting employee is a retiree who led a fulfilling career and has agreed to consider “fill-in” work during retirement.

II) “Neutral” or OK Turnover

Some turnover is neither good nor bad. “Neutral” turnover might impact the firm by driving up replacement cost, but might be something that you exclude from turnover reporting rates that are used to reward/punish managers. Some of the situations that can be classified as “neutral turnover” include:

1. Turnover of an employee or contractor that was hired to provide short-term coverage.
2. Turnover by an employee who provided sufficient notice, enabling an exceptional replacement to be sourced, hired, and trained prior to the employee’s exit.
3. Turnover by an employee leaving a non-hard-to-fill job with a short learning curve.
4. Turnover of a top-performing employee who has a high probability of returning as a boomerang.
5. Turnover by an employee who left the firm because of a major illness or something that could not be predicted or prevented.

III) Critical or Highly Undesirable Turnover

Some turnover must be classified as highly undesirable or bad. Critical or bad turnover might be something that you focus your retention and metrics efforts on. I estimate that in an average organization, less than 20% of all turnover should be classified as critical. Some of the situations that can be classified as “critical” include:

1. Turnover of a top performer with little or no advance notice.
2. Turnover of a critical team leader or manager.
3. Turnover of a top innovator or thought leader.
4. Turnover of an individual with mission critical skills or knowledge.
5. Turnover of an employee that possesses the only knowledge or experience in a critical field in the organization.
6. Turnover of a individual with extensive contacts and experience.
7. Turnover of a employee in a “mission critical” job.
8. Turnover of an employee in a revenue generating or revenue impact job.
9. Turnover of an employee in a critical business unit.
10. Turnover of a diverse person or someone with international experience (especially in an exempt job).
11. Turnover of a top performer or a key individual that goes to a direct competitor.
12. Turnover of an individual that was on the succession plan.
13. Turnover of a high-potential individual who left due to a lack of development opportunities.
14. Turnover of a desirable employee forced out during a layoff or merger because of seniority or weak, non-performance-based, layoff processes.
15. Turnover in a position where there was no available internal candidate or external applicant pool to replace them.
16. Turnover of an individual forced to leave due to a work-related disability or accident.
17. Turnover of an employee who subsequently files a credible government or legal complaint against the firm.
18. Turnover of a famous person or industry icon.
19. Unplanned turnover of a C-Level executive who receives significant external publicity.

IV) The firm’s overall turnover may be “bad” when…

1. There is a very low termination rate as a result of managers not identifying and firing bottom performers often or fast enough.
2. There is a “misleading” low voluntary turnover rate as a result of the fact that your employees are not very good (or are viewed as not very desirable) by other firms, so recruiters don’t target your employees.
3. A firm has a high internal “churn” rate, when people “love the firm” but transfer internally excessively because of a bad managers, poor development programs or if it’s the only way to get additional rewards.
4. If the turnover rate is too low at slow growth firms (below 4%) it can “stifle” internal movement, frustrate your employees (which may lead to future turnover) and slow up individual talent development. This means you lose 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.
5. When all 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). Find alternative ways to identify bad managers when the economy is in the tank.
6. Having a low turnover rate means that you will do little or no external hiring. This will likely cause your recruiting department to stagnate due to a lack of practice and activity. No external recruiting for a long period will also likely hurt your best-place-to-work brand and external image as people forget who you are.
7. The firm doesn’t accurately identify the real reasons “why” critical individuals left (generally utilizing a post-exit interview), so that future turnover can’t be prevented.
8. The overall speed of filling vacant positions is so slow that the vacancies create negative business impacts.
9. The overall cost of filling vacant positions is so high that the vacancies negatively impact overhead costs.
10. The onboarding process of new-hires or transfers is so inefficient that it slows the “time to productivity” of the replacement.
11. The firm and individual hiring managers can be hurt whenever they terminate a poor performer and an internal hiring freeze prevents you from replacing them (thus punishing them for taking decisive action).
12. A large-scale layoff or other scandal receives significant bad publicity, causing current employees to begin “thinking” about leaving and hurting the firm’s employer brand (i.e., ability to hire replacements in the future).

Final Thoughts

It’s easy during tough economic times to under focus on turnover and retention because the turnover rate of almost every firm decreases, as employees increase their emphasis on job security.

However, this “lull” in turnover might be an ideal time to re-examine your processes, metrics, and goals related to turnover and retention. It’s especially important to act now because quite often the “seeds” or initial causes of turnover are more likely to be happening now because of the frustration related to budget cutting, hiring freezes, layoffs, and lack of development funds and opportunities.

That frustration may linger and even grow over time, leading to an “explosion” of turnover in a relatively short period when job openings at other firms do occur. Just like with a spouse or significant other, it’s probably too late to save the marriage once frustration levels get so high that they “begin looking.”

It’s also important to note that I have an admittedly corporate mindset, so this article was devoted to identifying what might be best for the corporation. Obviously, any individual who has been laid off or fired suffers significantly, but I’ll save that perspective for another article.

• Provide leadership and guidance.
• Listen to the Millennial employee.
• Provide challenge and change.
• Provide structure (i.e. clear expectations, goals, assessment of progress, etc).

One of the website’s readers posted a point-by-point criticism of the article, concluding with: “The advice given is good for employees of all ages. Contending that it is uniquely applicable to a new generation is nonsense.”

While I agree with the rather prickly poster’s perspective that the author’s advice applies to all employees, I do think he missed the nuances the author was trying to convey.

More specifically, practices that are helpful for workers of any generation are even more critical with Gen Y employees because of the cultural milieu this generation grew up in: extremely involved parents, the self-esteem movement, unrelenting emphasis on fame and making your mark on the world, etc.

So for instance, while providing leadership and guidance is just good management practice, regardless of the direct report’s age, it takes on greater significance with the Millennial employee. Given that Millennials have been described as the most coached and micro-managed generation (think “helicopter parents”), they, on average, want more attention and interest from their manager than would the “typical” Gen X employee.

Thus, simply writing off recommended practices for bringing out the best in Millennials as no different than with other generations, ignores the deal-breaker importance of these practices if you want to attract, retain, and engage the Millennial generation.

The Source of “The Gift” Gen Y Employees Are Handing You

So, when you look at what the research on what the Millennial generation wants in a work experience along with their unique attitude towards work, it’s hard to escape this conclusion:

“Gen Y employees want what everyone else wants in a work experience. However, if they don’t get it, they are far more willing to speak up … or leave.”

While obviously not everyone in a generational cohort thinks or acts the same way, on average, Gen Y employees are known for being much more comfortable challenging authority and speaking their minds. Gen Y employees are also well known for not sticking around if they’re not happy.

While many managers and HR professionals tear their hair out over these tendencies, they miss out on the priceless information their Millennial employees are giving them because of these proclivities.

Gen Y Employees: Your “Canary in the Coal Mine”

Your Gen Y employees are the Canary in the Coal Mine in terms of your managerial practices and the work experience you deliver.

A quick synopsis of the term in case you’re not familiar with it: Long ago, before sophisticated technology, coal miners would bring a canary down into the mine shaft as their early warning sign that CO2 levels were getting dangerously high. If the canary keeled over, it was a good time to head to the surface. Because canaries are more sensitive to CO2 levels than humans, they showed the effects before the men did. Thus, the canary’s increased sensitivity saved lives.

Your Gen Y employees are your Canary in the Coal Mine for those things that lead all employees to become disengaged. Things like:

• An impersonal boss who only sees you as a tool to achieve his/her goals, and shows no interest in your well-being or professional development.
• Outdated, nonsensical policies that make it hard to do your work.
• Lack of respect for your right to have a life outside of work.
• Being kept out of the loop, so you always feel like you’re laboring in the dark.
• A boss who only gives negative feedback — never praise or appreciation.
• No clarity around how your work matters and contributes to the big picture.
• Few opportunities to make a difference; to do something that truly matters outside of your routine tasks.

“I Quit … But I’ll Still Come to Work”

While all employees want these things, many of those from older generations tolerate them, rather than complain or leave. Instead, they will join the ranks of what the Gallup Organization calls ROAD Warriors — Retired on Active Duty. These employees who no longer care comprise 55% of the workforce, according to Gallup’s research. These are the people who say:

“I’m so mad, I am no longer going to work here … I’m not going to leave though … I’m just not going to work.”

The fact that 55% of employees in the average organization are just going through the motions is only half the problem. The other half is that because they don’t speak up or leave, their employer doesn’t realize “CO2 levels are rising.”

Thus, it’s easy for employers to go along blithely unaware of the huge price they are paying for ineffective management practices and organizational policies. Because these employees are not as vocal or willing to leave as Gen Y employees, it’s easy to think that:

• New employees don’t notice or don’t care about the sloppy, boring-as-watching-paint-dry orientation program and indifferent welcome they received.
• Conducting an employee survey and never reporting the results didn’t have an effect on morale and trust.
• When managers speak disrespectfully to their direct reports, it’s quickly forgotten by those employees, and leaves no emotional wake.
• Not asking employees for input over changes that directly affect their jobs is just something they need to get over.

Without Feedback, It’s Easy to Think Things Are Fine When They’re Not

Without dramatic feedback — either an “in-your-face” confrontation or high turnover — it’s easy for employers to lose millions of dollars a year in lost productivity and lost customers due to disengaged customers and never even realize it’s happening.

But with Gen Y employees, there’s no mystery. They’re more than happy to let you know what you’re doing wrong. And that’s the hidden gift of this generation:

You don’t have to wonder about whether you are doing the things that prevent you from attracting, retaining, and engaging talent. You don’t have to worry about laboring under the illusion that all is well when it’s not.

Your Gen Y Employees Will Tell You … Or Leave

So no matter how cheeky they might seem in their delivery, or how annoying you find their lack of loyalty, they are giving you valuable information. It’s sort of like being told you have bad breath. It’s not pleasant news, but it’s better than not knowing.

So What to Do?

1. Help your less vocal employees speak up. Banish the “suck it up” message that pollutes many organizational cultures. This is not a call to Whiners, but a request for frank, adult-to-adult conversation about what you do as an employer that makes people want to stay and do their best, and what makes people polish up their resume. If you doubt the importance of making it safe for people to speak up, read my article “The Movie Scene Every Manager Should Watch … But Might Be Afraid To …“
2. Thank employees for speaking up. Do this both when it happens and later in a public forum. Share examples in your team- and organization-wide meetings of how employee feedback is being used to make your organization a better place to work. This both communicates that management values employee input and it also energizes people, because they hear proof that they can make a difference, they do matter.
3. Don’t devolve into an arrogant “It’s an employer’s market they’re lucky to have a job” mentality. While you may have the upper hand in terms of people being security-conscious right now, remember the ROAD Warrior phenomenon. Even if people don’t leave, poor management and organizational practices significantly reduce the performance of those who stay. In this economy — or any economy for that matter — can you afford 10, 20, or 30% less productivity than your workforce is capable of?
4. Help your managers help you. Since an employee’s supervisor plays the most significant role in that employee’s performance and level of engagement, according to Gallup’s research as well as other studies, make sure your managers know how to do the things that lead to maximum performance and engagement. Make sure they also have the skills to engage employees in “crucial conversations” and foster honest, open dialogue.
5. Involve your employees in making improvements. Doing this helps you in three ways. First, it taps into the human need to matter, to make a difference. Believing that your input matters and that you can make a difference are huge drivers of employee engagement. Second, involving employees in making improvements fosters an adult/adult relationship with management, rather than a “kids-complain-to-mom-and-dad” dynamic created when employees are encouraged to speak up about what’s bothering them, and management’s job is to come up with solutions. Third, engaging employees in finding solutions is a powerful antidote to the feeling of helplessness and lack of control many people feel during these difficult times. Solving problems and generating creative solutions triggers the biochemistry and emotions of confidence and success, which puts employees in a more productive frame of mind to face the big challenges ahead.

The reasons are simple: with the current economy driving revenues down dramatically, many senior executives are examining how to plan ahead in order to increase their firms’ capabilities, reduce costs, and survive the economic chaos likely to continue for some time.

Organizations need an effective talent management plan that will allow them to “explode out of the box” at the first sight of economic recovery, yet one that doesn’t threaten economic sustainability in the short term.

While most in talent management are continuing to react with stale cost containment approaches developed decades ago, strategic talent managers are stepping forward with robust workforce planning solutions and new work models that account for the significant changes in both how people work and live that have occurred in the last 20 years.

If you are interested in doing more than talking about being strategic, here are some recommended action steps to help improve your organization’s workforce planning.

What the Heck is Workforce Planning?

It might seem like a simple question, but there is little to no agreement among HR and talent management professionals as to what constitutes workforce planning. To some, it’s mostly an administrative activity that reports on historical changes to headcount and forecasts likely changes based on historical trends (i.e., headcount planning).

To others, it is a more strategic effort designed to forecast talent needs, talent supply, and the ability of existing HR programs and activities to align the two.

The more strategic variant looks at both internal and external trends and predicts what will be needed to recruit, develop and redeploy “just the right amount” of talent to meet specified business needs. The definition of workforce planning I prefer is:

“Workforce planning is an integrated and forward looking process that is designed to predict (what, when, how much) will likely happen in talent management and then to provide action plans that will cause managers to act in the prescribed way. As a result of the planning process, managers will be able to avoid or mitigate people problems, take advantage of talent opportunities and to improve the “talent pipeline,” so that your organization will have the needed “people capabilities” required to meet your business goals and to build a competitive advantage over other firms.”

Goals of Workforce Planning

Once again, not everyone agrees on what workforce planning is, but generally speaking, there are eight major goals for workforce planning that everyone should agree make sense. These goals relate to an organizational capability to:

1. Reduce labor costs rapidly without negatively impacting productivity.
2. Identify and prepare leaders and managers for future openings.
3. Fill “sudden vacancies” in key roles immediately with capable talent.
4. Maintain a flexible contingent workforce.
5. Proactively move talent internally to maximize the return on talent.
6. Target retention activities on key talent.
7. Identify mechanisms to rapidly hire needed talent.
8. Increase the overall productivity of the workforce.

Key Programs within Workforce Planning

There is no standard array of programs that define every organizations’ workforce planning effort. No matter what you end up doing, your programs will largely fall into one of two areas.

The first area focuses on increasing organizational capability through talent, and common programs in each area include:

• Forecasting the future needs, talent availability, and potential talent problems.
• Succession planning and leadership development.
• Forecasted recruiting plans.
• Workforce innovation management.
• Retention planning.
• Immediate “backfill” planning (To fill sudden openings in key positions).
• Internal re-deployment and “right job” placement planning.
• Merger and acquisition integration plans.

The second area focuses on decreasing labor costs, and common programs in each area include:

• Contingency/contract labor workforce planning.
• Workforce outsource planning.
• Reduction in force planning.

Benchmark Firms

In my experience, these are the firms to study:

• Microsoft
• KLA Tencor
• Valero
• WellPoint
• U.S. Marines
• Google
• Eli Lilly
• Qualcomm
• Intel
• GE
• P&G
• Booz Allen
• Toyota
• NASA
• Starbucks

Workforce Actions That ‘Fit’ the Current Environment

The most effective workforce plans are not developed over a long period and then implemented all at once. Instead, while some plans are being developed, talent management leaders simultaneously take action to resolve immediate needs.

If your company is struggling in the current economic environment, five of the key action steps that you should consider immediately are listed below.

Action Step I – Labor cost containment/headcount reduction

I am not alone in forecasting the fact that the decrease in revenues that businesses are facing will continue for at least another year. Whether that actually happens or not, it’s always a good idea to prepare for the “worst-case scenario” and hope that your plan is not needed.

Start with position prioritization, a process that identifies which key positions, key individuals, and key skill sets will have the most business impact during the next two years. Once you prioritize, you can then focus on retention, redeployment, and development efforts on the most impactful positions.

A related step is to develop a process to effectively identify and “control” all forms of labor costs throughout the organization (that includes full-time employees, part-timers, contractors, consultants, strategic partner labor, and outsourced labor).

The next step involves developing the capability of reducing “labor costs” and headcount in the lower priority positions. That might include “mock layoffs” and designating lower priority positions as “contingent labor” positions. Other options to consider include labor wage arbitrage (moving labor to lower-cost areas) or outsourcing with contracts that allow you to rapidly reduce outsourcing costs as your needs decrease.

Action Step II – Increase the internal movement of key employees

As business needs change, it’s important to develop processes that don’t leave the internal movement of talent into the “right job” to chance (as most internal job posting system’s do). I recommend that you develop a proactive redeployment process and plan to move your top performers and highly skilled individuals out of less essential business units and into units and jobs where they can have a greater impact.

The goal is to make sure that you don’t have a “Michael Jordan” playing “baseball” within your organization, when his impact would be significantly greater if he was proactively moved into “basketball.”

The right job can be defined as having your top performers and highly skilled individuals:

• Doing what they do best;
• With the right skill set for the job and business unit;
• With the right tools, resources, and motivators;
• With the right manager; and
• With the right teammates.

Action Step III – Increase the retention of key employees

Most organizations literally “forget” about retention during tough economic times because they assume that their employees will put security over external opportunity.

Unfortunately, that would be a mistake because the seeds for foundation of top performer turnover begin long before they decide to leave the firm. “How you treat your current employees now,” will directly impact their willingness to stay later on when the economy turns around. If your firm has been using hiring freezes, pay cuts, furloughs and layoffs recently, your key employees are likely to be frustrated and overworked. It’s also true that some firms have learned to continue hiring while simultaneously releasing employees.

This “churn” means that recruiters in some industries, firms and regions are still targeting your very best.

The best retention plans first identify the things that excite and frustrate your key workers and then provide a plan for increasing their level of excitement, challenge, learning, and opportunity within the firm.

The last but most important action step is to develop a “bad manager identification program” because bad managers are the number one cause of employee turnover. [For more information on setting up a Bad Manager Identification Program, click here.]

Action Step IV – Reinvigorate your succession plan

If your firm has undergone layoffs, hiring freezes, and reductions in college hiring, you are likely setting up your organization for a future “talent pool gap.” What this means is that by failing to hire and develop talent over a period of even a few years, there simply won’t be enough available talent to fill future management leadership positions when growth begins. This will slow promotions because there just isn’t anyone internally to replace them. This will make the predicted “leadership gap” even worse.

The best course of action is adopt your own “churn” approach to maintain some minimal level of hiring and development to minimize the possibility of any future internal talent pool gap. A related option is to implement a talent SWAP approach, where you continually “troll” for top talent and then replace bottom and average performers only when you find an exceptional replacement.

Action Step V – Prepare to “explode out of the box”

The final action step is to develop a plan that enables your firm to have sufficient talent to enable it to “explode out of the box” the minute that your firm’s revenues begin to turn around. That means retaining your very best recruiters on staff and having them focus on developing Web 2.0 recruiting tools. It’s equally important to maintain the two most-impactful recruiting programs, employee referrals, and employment branding.

Develop a “boomerang” program that tracks and maintains a relationship with the very best employees you must release. The goal is to be able to almost immediately rehire some of the proven talent that you lost.

Final Thoughts

The basic premise of workforce planning is that it’s better to be prepared than surprised. It might seem counter-intuitive to try to plan during times where uncertainty is so high, but that would be a mistake.

During times of turmoil, almost any forecasting and planning will produce higher business impacts than reacting to unforeseen events without a plan. Fortunately, if you’re personally interested in workforce planning, you’re likely to find that no one actually has the formal authority to “own it” at the present time, so you can seize the opportunity and become known as the person who can see around corners. During turbulent times, you will find that no one will be considered more valuable than someone who is not “surprised” by the future!

Free Workforce Planning Handbook: If you are interested in reading in-depth about workforce planning, I have compiled a number of articles into “The Workforce Planning Handbook,” a 240+ page electronic book which is available at no cost for evaluation purposes at www.drjohnssullivan.com. Once registered and logged in, click on “Publications,” then click on “Draft Books.” It’s free to download.

Employee-productivity differences have attracted their share of researchers. Most agree that folks in the top half of workers out-produce the bottom half by about 2:1 (i.e., it makes no difference if people are shuffling papers or making widgets). And, when managers and knowledge workers are examined separately, the productivity ratio rises to 3:1, 4:1, or higher (i.e., responsible jobs have bigger ratios).

Productivity is more than a mental exercise. It shows up as absenteeism, errors, reduced throughput, turnover, low morale, rework, an excess number of employees, and so forth. Productivity losses are also sneaky because they are not easily seen; yet, they translate into hard cash: between 20% of base annual payroll leaked for unskilled workers to 50% for skilled and managerial employees — enough to separate a successful organization from a flop.

Converting payroll leakage into gross sales can be an even bigger eye-opener. Twenty percent leakage, for an organization that pays out 1/5 of its gross sales in salaries and benefits, would require a 500% sales increase to balance the books. Want to do more scary math? Calculate the incremental sales necessary to offset a 50% leak in managers and professional salaries!

Enter Financial Chaos and Uncertainty

We are in serious financial times. Opinions vary, but experts estimate our financial stress will last throughout 2009 and perhaps into 2010. The prosperity party is over. Like the dot-com bust, the world changed virtually overnight.

We cannot do much about external economic factors except dig in and wait. But, we can do something about employee productivity, especially when it comes to intelligent downsizing.

Ah’ll be Baack!

There are two ways to downsize. Most managers are accustomed to the Rambo model: plunge into the organization armed with rocket launchers, machine guns, and grenades terminating anyone in the line of fire. At the end of the rampage, the gross payroll body count is reduced; but, since both high- and low-producers are terminated without regard to skills, the organization continues to live with its 20% to 50% cash hemorrhage. Rambo-sizing is the norm.

What about examining employee performance before making termination decisions? Everyone knows performance recommendations are part fact and part fiction. Promotions and performance ratings are almost always based on personality and popularity — not specific skills. Just examine organizations that Rambo-sized their workforce in the past. What effect did it have other than forcing fewer people to spend more time at work? Termination decisions done without future planning are like bloodletting to rid the body of bad humours … they are more likely to kill than cure.

Planning Ahead

If management takes the time and HR is able to competently manage the solution, downsizing can actually help the organization get healthy and stay that way. It’s more like Mr. Spock than Rambo. It is rationally based. It begins by clearly defining the skills the company wants to leave in the past and acquire in the future. Here is an example.

We’reAllThatMatters is a legend unto itself. Employees generally want to work there because they can brag about the big-name. Unfortunately, people (read customers) outside the organization have a different opinion. Employees often treat customers rudely and without respect. For example, even if We’reAllThatMatters’ buggy bookkeeping system overcharges a customer 400%, employees treat anyone who complains as if it was his or her fault.

Now the organization must cut back its workforce due to economic conditions. Should it Rambo-size its employees? Should it ask managers for their subjective opinions about who stays and who goes? Should it amputate whole divisions? Since We’reAllThatMatters’ has been around some time, a majority of terminated employees may be over 40, raising the possibility of a nasty class-action suit. What to do?

Rambo-sizing would be a serious long-term mistake. The payroll would shrink, but both skilled and unskilled employees would suffer the same fate. Customer-sensitive as well as customer-insensitive employees would be terminated equally. We’reAllThatMatters’ payroll would shrink, but payroll hemorrhage would continue unabated. Logical-sizing would be different.

We’reAllThatMatters would a take hard look at itself and honestly calculate the financial impact of poor customer service on future business. It would then develop some key job profiles containing both technical competencies to do the job as well as customer service competencies it wants to build and retain. When this is complete, it would move on to the next step.

Employee-Level Evaluation

Individual employees would have his or her performance objectively evaluated using the list of necessary competencies as a target. For example, customer-centric skills might be evaluated by gathering past examples of service (e.g., similar to behavioral event interviewing), reviewing performance appraisals (to the extent they might include relevant information), giving tests, administering surveys, and so forth.

The secret to success would be to evaluate the skill set of every employee using an objective standard based on the organization’s tactical plan. Results for each employee would be anonymized and independently reviewed by a few highly competent managers. Employees who matched the profile would be retained, and those who did not would be reassigned or laid off.

Smart-sizing could be done with competencies such as analytical skills to develop better problem-solvers, initiative to encourage operational improvements, teamwork to develop better internal working relationships, creativity to foster new ideas and designs … the list goes on.

Final Question

However, there is a price to pay. HR has to develop the skills to help managers analyze and clarify the skills needed. It has to become proficient in accurately measuring competencies (real ones, not garden variety stuff), and it has to professionally manage the process. Managers have a price to pay too. They must have the patience to work through the details of smart-sizing, dedicate the energy and commitment to making sure the process is followed, and be able to clearly define the future at the employee level.

The outcome of this initiative is a smart-sized operation; in other words, the skills of the employees are intelligently aligned with the objectives of the organization. Overall, this should result in fewer employees doing more work (because each employee will be more skilled), less turnover (because employees will be more satisfied), fewer mistakes, better quality, and so forth.

The final question faced by everyone in the operation is whether saving 20% to 50% of base payroll is worth abandoning Rambo-sizing for smart-sizing.

I had lunch a few days ago with a recruiting leader who expressed his concern over the spike in turnover among the most critical segment of his company’s workforce. After we chatted for a while it became clear to me that this organization was not doing very much to encourage these people to stay. According to him, even though the company was doing well financially and expected to meet its sales goals for at least the first quarter, many employees were just waiting to be laid off. No information was being shared, and executives huddled in their offices all day.

Employment is about relationships, and the strongest relationships are built on trust, respect, and open communication. When things are difficult, it is more important than ever to make sure your management team is present, is as upbeat as it can be, and that every member of the executive staff is visible and concerned about every employee.

To maintain the employment relationship, employers have a huge responsibility. First of all they need to clearly know who their best employees are, keep them informed, help them maintain and develop skills, and encourage them to build networks and internal relationships.

None of these things costs much when compared to the cost of recruiting and developing new employees, and none of them are really very hard to do. But, to put them into place does require a change of mindset and a willingness to break (or at least stretch) the usual policies and rules that exist in many organizations. Good HR and good recruiting is all about treating people fairly — not necessarily the same.

Here are four ways to build and maintain loyalty and a strong employee-employer relationship.

First of all, keep employees informed. Silence is the greatest enemy of retention. When management does not update the employees on the financial and business state of the company and when rumors can be counted by the minute, turnover goes up and productivity goes down. While some people (usually the “B” and “C” players) hunker down and hide, the best ones start looking. I can’t tell you how many excellent employees who are highly valued have left their employers because of business uncertainty. No one expects assurances or guarantees; what they hope for is an understanding of trends — are things better, the same or worse? Are customers leaving? How is sales volume?

In this age of open Internet discussions and the transparency of information, employees may now more about your organization’s profitability, sales, or potential than you do. That’s why keeping anything from them is very hazardous and, if employees discover that they have been lied to or not informed, they can quickly lose their motivation and start looking for new opportunities.

Secondly, have a fair and clear performance management system. Let employees know where they stand and how they are performing. Be clear about performance and layoff criteria and explain the reason why certain people or types of employees were laid off and why others weren’t. Be clear about what weight individual performance had in decisions about people, and what weight was placed on circumstances such as a function being changed or eliminated. I know that sharing this information is discouraged for legal and other reasons, but it is more and more important to share what you can given the changed expectations and lower tolerance that employees have today.

Offer your best employees an opportunity to move within the company to jobs that may fit their skills and interests better, if that is possible. It is also a good idea to keep the bureaucracy to a minimum and remove time constraints. A major reason for employee unease and anger is insecurity over how their performance will be assessed. Very few employees have strategic performance objectives or spend time periodically reviewing their achievements with their boss.

Many employees, unfortunately, have goals and objectives that are not strategic and that lead to fear and self-doubt. For example, a colleague told me about a recent layoff she was part of. While the employee who was being let go had an excellent performance rating, so did almost every other employee in the organization. The way performance was assessed provided no meaningful information to either the organization or the individual.

Relationships thrive on the exchange of information, and two-way communication between employer and employees is as critical as is performance management.

Help every employee build a social network. Employees make friends and build relationships that can be strengthened or damaged during stressful times. Many employees stay at an organization because of who they get to work with, and many leave for the same reasons. We all know how powerful social networks such as LinkedIn, Facebook, and even Twitter have become, and companies can use these networks to promote employee interaction and teamwork.

Good organizations can even develop networks for those who have been laid off so that they can help each other and retain the connections they had when employed. By making these kinds of assets available, organizations not only improve their own reputation and brand and help former employees, but also reinforce the loyalty and motivation of employees who are still working.

Encourage internal blogging, the use of virtual communications tools like SMS or IM, and the use of video conferencing to strengthen networks and extend them globally. Knowledge is a powerful retention tool and naivety and ignorance can best be combated by sharing of ideas and experiences between people from many different firms.

Educate employees all the time. In bad times, employees have time to soak up new information. Education and development are the cheapest retention tools in your arsenal. Locking people into degree or certificate programs is almost a guarantee that they will remain with your firm until they complete the program. Most will be loyal and thankful. And all of them will be better-educated and hopefully more productive employees. This is a big plus for large organizations, and you should be capitalizing on this right now.

But development can also occur through on-the-job development and through many informal networks and conversations. Every employer should encourage employees to share knowledge using social networks or communities of practice, and employers should reward managers who encourage their employees to take classes or take on new responsibilities.

Many employees who leave organizations are simply looking for a bigger challenge or the opportunity to use new skills or degree. Smart organizations will encourage this and motivate managers to source and hire internally whenever possible and even if it will require a bit of training.

None of this is new or unique. Much of retention in good and bad times is treating employees fairly and as mature adults. Sharing information and being transparent is the best thing any of us can do.

What’s a recruiter to do?

Focus on retention. It’s at times like these that organizations earn their employees’ loyalty. As the saying goes, this isn’t my first rodeo. I’ve seen the market soar and tank. The way companies treat their employees in stressful and frightening economic times goes a long way in determining who comes out of these difficult times better positioned to re-take greater market share.

Kevin Wheeler had a great piece earlier this month about framing the future you want and identifying four things you can do now to make that future more likely. But there’s more that we can do internally. I agree with Kevin that keeping in touch with our best candidates and keeping our pipeline active is critical. The importance of using this time to plan and educate ourselves for our own future success cannot be overstated. But one of the first things I learned as a recruiter is “If you’re not recruiting your best people, someone else is.”

Now is the time to make sure that you are reaching out to your own best people and involving them in conversation. You’ve seen economic downturns before and so have they. We know that we’ll come out of these things, and when we do, the phones will start ringing.

Think about it. When the market starts going up again and senior management is confident that the upswing is for real, you’re going to be asked to go out and get the people you need to sustain your company’s participation in the improving marketplace. But so is your competition — and don’t think they don’t know who the best people in your organization are. They’ve got a list of people in the industry that they covet. They may even have had conversations with your people at conferences or on their own.

You need to be reaching out to your best people now. Not necessarily to reassure them, because you can’t promise anyone anything, but to keep the internal lines of communication open. This is no time for HR to take on a bunker mentality behind closed doors. Hiding in your office is never a good idea. You don’t want to start rumors that could actually stoke people’s fears.

Jim: Where are all the HR people?
Joe: They’re in their offices with the doors closed.
Jim: The economy is real bad. They must be planning a downsizing.
Joe: Uh-oh, you’re right. I’ve heard that a lot of companies in this area are cutting jobs. As soon as things pick up I’m going start looking. Better to do it to them before they do it to me!
Jim: You got that right. Hey Bill, did you hear that there’s going to be a RIF soon?

And that’s how it starts. You don’t want to do is give people one more reason to listen to calls from your competition. The other question that comes to mind goes a little differently, but it’s another reason to be focusing on the positive things you can do when things look bad.

Joe: We’re really taking a hit from this economy. I hear a lot of companies are considering layoffs.
Jim: Yeah, HR is probably making a list right now.
Joe: How come you never see HR people on those lists?
Jim: Yeah! I mean we’re not hiring anyone right now. What are they doing? Why not lay off a few recruiters and save the jobs of the people who do the real work around here?

Doesn’t sound pretty, does it? That’s why you’ve got to get out there and be visible. I’ve heard that nobody wants to see HR walking around during a downturn, because people are afraid that we’re looking to see who’s working, who’s busy, and who’s not. Don’t let that deter you. Get out there. Be open and honest in talking with managers and their best staff to see what you can do to help alleviate people’s fears at a time like this. Encourage managers to have staff or town-hall style meetings with employees to give them a chance to speak openly about their concerns. HR needs to be side-by-side with managers at these meetings.

To be sure, there will be some companies letting people go, and yours may be one of them. But no matter what, no matter how deeply you cut, you’re not going to lay off your best people. These are the most valuable assets your organization has. Unless you’re turning out the lights and rolling up the carpets, as long as your firm is around, you want them working for you. These are the people who make your company successful, and will again in the future. That’s why you need to be re-engaging them now, when things look bleakest. You can’t give them double-digit raises or six-figure bonuses, but give them what you can, and possibly what they crave most: open communication.

Remind them of how valuable they are to the company. Stress that management is exploring options how best to weather this storm. Ask for their best ideas of what the company can or should do right now, six months down the road, or a year from now when things are different. Because things will be different. Maybe better, hopefully not worse, but certainly different. Ask them what they think is going to happen. They are closer to the front lines and therefore may be hearing different things than the people in the executive suite are hearing. Treat them with respect and get their input. After all, these are your best people. The same things that make them good at their jobs may also give them insights about where your industry is going.

I brought ideas like this to one company I was working with when they were considering layoffs. I asked senior management what they were planning to do for those employees who remained after the reductions. One manager said, in all seriousness, “We don’t have to do anything for them. They should be HTHJ. Happy to have jobs.” That organization did survive the setbacks it was going through, but has morphed and merged several times since. Many of the best people from that organization have left for the competition or to start businesses of their own. Sure the superstars made it through that round of downsizing, but as soon as it was over, they started looking.

Treating people with respect when things look worst is not just being nice to people, it’s good for business. These are the kind of people you’d have to pay a fortune to get if they were on the open market. Do everything you can now, while they are inside your doors, to keep them there. People are always less likely to look when the economy is bad, but the good people are just as likely to bolt if they see your company behaving badly in bad times. This is an opportunity for your organization to make its reputation. How many times have you heard companies boast about having been in business “X” number of years and never had a layoff? Companies point with pride at a record like that not because they’re nice but because it’s a recruiting and retention tool. They’re working to retain their best and most valuable employees.

Nucor Steel reduces executive perks and will even shorten the workweek from five days to four but doesn’t lay people off. It runs some of the most profitable and efficient steel mills in the world. Lincoln Electric guarantees jobs to employees with just three years of service and has not had a layoff since the 1950s. Its  turnover rate is infinitesimal.

Many of us are recruiters, and our job is to find the best people to fill the vacancies in our organizations. But we are also human resource professionals. When vacancies dry up, we need to focus on other things we can do to add value to our organizations.

Get out there. Be visible. Retention is the most cost-effective form of recruiting. And the time to do it is now.

The effect of long-term hiring freezes is particularly damaging to the recruiting function, because “no hiring” generally means that a majority of recruiters will be laid off. Historically, budgets for recruiting have been cut so low that the function is literally decimated, making it rather difficult for companies to resurrect a decent function when the economy swings up.

Many executives think that the decision to institute some sort of resource freeze is one that helps the organization because it contains costs; however, the opposite is more often the case.

Poorly thought-out freezes that impact talent acquisition and other talent-management activities may actually harm the organization by:

• Driving increases or vacancies in revenue producing/impacting roles that decrease revenues beyond any cost savings.
• Driving increases in employee burnout/turnover.
• Missing out on new talent opportunities (i.e., not be able to hire a superstar that becomes available).
• Decreasing an organization’s capability/capacity to innovate.
• Damaging the employer brand making hiring more difficult when the economy returns.

Rather than waiting for the inevitable announcement of a freeze, recruiters need to be proactive and preempt any such silliness long before it occurs by making the business case for leveraging this time to re-architect the talent acquisition function, upgrade its strategic programs, and trade up the talent population while salaries and vendor costs can be negotiated down significantly.

(Incidentally, you can tell when a hiring freeze is imminent because they are almost always preceded by the infamous “paper clip memo” from the CFO, which limits the purchase of office supplies, magazine subscriptions, and travel).

Because every organization is unique, there is no one magic way to structure the business case, but I have put together a list of arguments that you can select from:

A) Negative impacts on revenue and costs
Obviously, not expanding your staff or keeping open positions vacant can save payroll dollars in the short term. However, such savings may actually present a false reality because freezes have many other unintended consequences that CFOs often fail to account for:

1. Lost revenue. Across-the-board hiring freezes mean that critical revenue-generating and revenue-impact positions go unfilled. Obviously, when there is no one in a revenue-generating position, there is a lost opportunity to generate revenue every day that the position remains vacant.
2. Customer impacts. Frozen budgets and understaffing can stretch your employees. This means that other employees must now do double duty because replacements can’t be hired. This may also impact quality and send a message to your customers that your firm is slipping as constrained employees sidestep process elements and cut corners. Both can negatively impact your product brand and future sales.
3. A limit on growth. Within most large firms, even during tough times some businesses units are growing, while others are shrinking. By freezing hiring “across the board,” you negatively impact your rapid growth and top revenue generating divisions. This limits their ability to continue to grow. In global firms, some regions are likely to be growing despite the downturn and an overall freeze will threaten your competitive position.
4. Headcount replacements are expensive. In the end, few hiring freezes actually end up saving money because budgeted headcount employees are often just replaced with consultants, temps, interns, and other “off the book” spending. In some cases, these alternative consultants and workers are actually more expensive than regular employees, leading to a situation where overall “labor costs” don’t go down at all. Facing employee shortages, some managers increase the use of overtime in order to get the work done, but at time and a half, this solution is relatively expensive.

B) Retention impacts

1. Frustrated employee turnover. Freezing resources means stagnation, and when opportunities are limited, they are likely to seek employment elsewhere. Freezing pay, promotions, travel, and/or training can also limit employee growth and learning, which will also increase turnover, if not immediately, at the first sign of opportunity.
2. It encourages your competitors. Hiring freezes are visible to outsiders on your website and the news of their existence spreads rapidly. These freezes send a message to your competitors that you are “weak” and struggling. This may cause them to increase their efforts to recruit away your employees and more often than not, your customers.
3. Freezing deadwood. Unfortunately, not being able to fill vacant positions causes managers to slow down or even cease their efforts to get rid of their deadwood employees. “Carrying” these low performers leads to lower productivity overall, but also weakens your managers by not forcing them to confront low performers. It gives managers an excuse not to make tough people decisions, which may also eventually weaken their decision making in product areas also.
4. Freezes frustrate “idle” recruiters. The best recruiters you are able to keep on your staff will invariably get rusty during hiring freezes. Having idle recruiters is a waste of money but it can also foster turnover among your recruiters who love action.

C) Missing out on talent opportunities

1. Exceptional talent. Across-the-board hiring freezes mean that when a few exceptional individuals like “Tiger Woods” enter the talent market, you will not be able to consider them. As a result, you’ll miss out on exceptional talent who could really make an impact. If your firm doesn’t capture this exceptional talent, other firms will.
2. Off-cycle recruiting. During tough economic times, both the amount and the quality of available talent will greatly exceed the available talent during boom times. Because during lean times, few firms are hiring, there is minimal competition. Together this means that a firm can now successfully attract experienced and college hires that their weak employment brand, pay rates or location wouldn’t normally allow.
3. Weakened recruiting capability. Extended hiring freezes invariably weaken the recruiting function. This loss of recruiting capability can impact the business because the remaining recruiting staff won’t have the ability to successfully recruit and land “in demand” candidates for the few positions that do become open.

D) Reduced innovation and technological capability

1. Reduced innovation. Budget freezes in particular can rob your innovators of the resources that they need to innovate, just as hiring freezes prevent you from recruiting new innovators. As a result, the rate of process and product innovation may decrease significantly during hiring freeze. In addition, freezing promotions and pay increases may limit your innovators motivation and willingness to be creative.
2. Impacts on technology. Because technology is constantly evolving and improving, hiring and budget freezes will directly limit your ability to attract new technologists and the needed new technologies.

E) Additional negative impacts of freezes

1. Employment brand impact. It signals a stoppage in a firm’s growth, which can impact your firm’s employment brand as a great place to work. This can make future recruiting more difficult and expensive.
2. Stock price impact. A freeze sends a message to analysts, customers, suppliers, and employees that your firm is not in a growth mode. Long or frequent “pauses” in recruiting may also send a stronger message that the company is in trouble, which could further hurt the stock price, which is likely lower anyway as a result of the weak economy.
3. Recovery time. Hiring freezes often mean that the recruiting function will be decimated. The function cannot be rebuilt overnight after the freezes are lifted. Many managers wrongfully assume that recruiting is a pure production function, one which you can put money into today and get results out tomorrow. While recruiting truly is a production function, it often requires significant ramp-up time, which many organizations fail to plan for. Refilling the “talent pipeline” with candidates after a freeze might take months, which can end up making the freeze last even longer than intended. In addition, “exploding out of the box” when the economy improves will also be more difficult.
4. Excessive early spending. Anticipating freezes often encourages hiring managers to hire “a bunch” of people early (whether they are needed or not). They do this in order to avoid “losing” the positions later in the year when hiring and budget freezes are generally introduced. In the same light, rumors of possible freezes can make managers and HR paranoid and to do “immediate panic” hiring the moment they hear a rumor about an upcoming freeze. They might also make rush decisions during a current hiring process, in order to complete it prior to the institution of a forthcoming hiring freeze.
5. Lower referral rates. Freezes may cause employees to hesitate before making referrals. They are hesitant partly because budget, promotion and pay freezes make the organization a less desirable place to work but also because a freeze may make their efforts fruitless because it diminishes the chances that their referrals will soon be hired.
6. More time spent on administration. Most across-the-board freezes are really not true freezes. Top managers almost always leave “exceptions” open. As a result, they don’t really “stop” hiring, they just slow requisition approvals and make them more painful to get approved. A large amount of a managers (and HR’s) time is wasted “getting around” these freezes and justifying “exceptions.” It can also give managers a bad taste for hiring of any kind, which may result in managers not devoting much time to the hiring process once the regular hiring process returns.

Action Steps

Rather than instituting across-the-board freezes, educate managers about the different options they have for cutting costs and increasing revenues:

• Focus on budget dollars. When it is important to slow down expenditures, it is often better to do it through budget control (controlling dollars) rather than through a hiring freeze or headcount tracking. In addition, always look at the revenue impacts whenever costs are cut.
• Increase internal movement. Managers need to increase the impact of their current employees by developing plans to transfer people internally from low return areas to those with higher return.
• Use incentives. Managers should consider offering short-term incentives to employees for increasing productivity or for reducing costs. Employees are often better equipped to judge where costs can be cut with minimal impact on productivity.
• Prioritize positions. If a manager decides to use a hiring freeze, they should limit the freeze to pre-identified non-key positions. Otherwise, a vacancy in a critical job can cause a significant loss in revenue and negate the projected cost savings from the hiring freeze.
• Demand metrics. If freezes are used, track metrics to determine whether overall costs are actually reduced by the freeze.
• Performance management. Managers should be encouraged to periodically fire low performing employees first, before seeking replacements.
• Rapid growth divisions. These critical regions or business units should be exempt from across-the-board freezes.
• Continuous churn. The new realities of talent management and business are that the old pattern of resource freezes and then layoffs needs to be broken. In a global economy, where firms need to be fast and agile, the new model is for firms to simultaneously hire and release workers in different areas. Smart managers must learn to continually add workers in areas of growth and innovation, while continually redeploying or releasing workers in areas of low ROI.

Final Thoughts

Any review of history will reveal that the majority of wealth in modern civilizations is more often than not created during times of significant economic crisis.

Opportunities abound for those organizations that are truly strategic, but as we all know, lots of people talk about being strategic but few really are. Now is the time for talent management to step up and proactively re-engineer antiquated practices and programs, and to embed talent management activities throughout core business processes while the organization can accommodate change.

If you wait until things are moving fast once again, you won’t have time to be strategic; you’ll be too busy catching up!

(Watch out, though, for the fireworks expected at Friday’s shareholder meeting when almost anything may happen.)

For the past several months, senior managers and top-level executives have been leaving the company in numbers large enough to attract attention from bloggers and tech writers. In June TechCrunch published a list of 114 director and VP level personnel who left Yahoo!, many in 2008. Not long after the site published another story saying Yahoo! could see another 100 senior people leave in three weeks, after options vest worth tens or even hundreds of thousands of dollars.

The company’s official comment on its loss of senior leaders is: “Yahoo continues to be a leader in our industry and remains a unique, exciting, and important place to work even as we experience the attrition that’s to be expected in the Internet industry.” Bloggers scoffed at that comment.

We noticed, however, that the list contained only two HotJobs expatriates: Dan Finnigan, formerly general manager and now CEO of Jobvite (profile; site), and Mike DeLuca, who was VP of sales.

That’s either good news meaning HotJobs staff is happy and mostly unaffected by the morale issues swirling around the search part of the business. Or it means that HotJobs, historically a poor cousin to other parts of the Yahoo! empire, just isn’t getting much notice in the blogosphere either.

We suspect it’s more of the former, though “happy” may be too subjective an adjective. Certainly HotJobs has staged a stunning turnaround in the last two or three years. Traffic to the site has doubled and is growing, instead of declining. Revenues are up, thanks mostly to the hundreds of newspapers that have thrown in with the site as their job board partner.

Yahoo! doesn’t break out HotJobs revenue separately. So it’s not possible to say with precision how much it has grown since the launch of the consortium in late 2006. However, with around 800 newspapers participating to varying degrees, revenue can be expected to have tracked at least some fraction of the site’s 50 percent growth in traffic.

Business management often argues that recruiters are not presenting the right candidates, and in perfect “hiring hindsight” find fault on the basis of candidate education level, character attributes, work experience, technical skills, compensation, etc.

Recruiters are quick to remind management that they present, but do not select, candidates for hire, and that most employees who leave a position do so because of other issues such as training, compensation, work schedule, promotional opportunity, etc. Recruiting and line managers need to acknowledge a shared responsibility for employee retention, and a shared success when good employees elect to stay and grow with the company.

In the spirit of developing good metrics, here are a few specific questions to help assess how successful a recruiter has been in contributing to retention

Did the recruiter submit a diverse slate of candidates?

One of the best ways recruiters can influence retention early in the hiring process is by presenting a diverse slate of candidates, thereby offering management significant choice when it comes to who they would like to hire. Employee referral programs, while often highly successful, sometimes have the unintended consequence of creating homogenous employee populations with a tendency to leave or switch employers in groups. Diverse employee populations aid in retention by offering a richer employment experience to new hires, simultaneously encouraging a culture of inclusion and innovation through broader perspectives.

Did the candidates submitted fit the job description as it was posted? Did the job posting accurately portray the requirements and qualifications sought in successful candidates?

Both internal and third party recruiters are subject to EEOC regulations and should present the most qualified candidates for an open position, regardless of age, race, gender, etc. So even if a particular hiring manager only wants to see candidates who are Cowboys fans, recruiters must use criteria from job postings when assessing candidate qualifications. Further, most new hires framed their understanding of a particular position based on the job description — and if they start with a flawed premise, it’s often hard to recover. This is especially true if career path, training, or other promises fail to deliver.

Did the recruiter explain the job description, work schedule, general compensation structure, and benefits information to the candidates?

If a telephone screening or recruiter interview is a part of your hiring process, good recruiters will use this time not only to evaluate the candidate, but also to go over the most important details about the position and company. Other recruiters will ask a candidate to prepare before a screening by conducting some research about the company, and then more effectively use their time by filling in the gaps with all of the information about the position that isn’t available online.

For call center positions or those with unique work schedules, candidates sometimes fail to fully grasp requirements such as evening or weekend work, mandatory attendance for training, or lack of flexibility in scheduling (which is sometimes required due to childcare or class schedules for those continuing their education). The more clearly these things are explained on the front side of the hiring process, the better your retention will be because there will be no surprises for your new hires.

Did the recruiter set appropriate expectations with the candidate about the interview, hiring, and onboarding process?

This is a partnership, and recruiters can only give candidates information that they have. Management and recruiters need to communicate closely when there are process or procedural changes that will affect new hires. Interviewing and orientation are highly influential parts of the process as they set the tone for new hires who are still forming their first impressions of your company. Missteps here are often magnified, and gross errors can give the impression that a company doesn’t care, toils under bureaucracy, or is generally ineffectual.

Did the recruiter make himself/herself available to the candidate during the hiring process for any questions or concerns?

In large corporations, often there are teams of individuals who handle pieces of the process such as relocation, employee orientation, benefits, etc. Recruiters and line managers are equally responsible for redirecting candidates to the correct point of contact so that new hires receive necessary information. Entry-level candidates, in particular, often have difficulties navigating through the various departments responsible for ensuring a smooth onboarding experience. The best recruiters will always offer to help and provide resources, recognizing how a good start can contribute to better retention.

Did the recruiter check-in with the candidate after the start date? (This is not always feasible in volume hiring situations, but is a great best practice where possible.)

The biggest employee retention issues often surface within the first couple weeks of employment. Candidates sometimes have not taken down their resumes from job boards or formally ceased their job-seeking activities. Introductions to coworkers, management, and staff begin to uncover personality clashes or stylistic differences. Commutes that seemed like a great idea now become unbearable. While candidate check-ins can’t erase these issues, they can at least help recruiters proactively identify these things in case there is anything management needs to do to prepare for or address.

Human resources and line of business management share responsibility for the successful recruitment and retention of employees. Recruiting functions must educate management as to the role they can play in retention, and must also draw clear lines as to what they cannot impact in results. The better this responsibility can be delineated and shared, the stronger your retention results will be.

I believe a company’s organizational values, its core values, culture, and mutual expectations, are a company’s best recruiting and retention tool.

Mutual Expectations

In relationships of every nature, including partnerships, joint ventures, service contracts and yes, marriage, the incidence of association failure can be traced in large part to the failure of the two parties to clearly understand, appreciate, and agree to mutual expectations upfront.

The employer/employee relationship unquestionably falls into this category. In fact, outside of a family, work relationships represent the greatest number of people involved. Yet few businesses formally establish clearly stated employer/employee mutual expectations!

The key to a company’s success is a reciprocal, balanced level of expectations between the organization and each of its employees.

Time was when the primary social and work contract in this country could be characterized as “show up, be reliable, do your job, and it’s yours until you retire. When that happens, we’ll continue to take care of you.”

But the erosion of this long-standing, unspoken social contract came about in the mid 1980s, when the burgeoning global economy created competitive pressures in the industrialized world, particularly in the United States. As a result, things began to move to a performance- and quality- orientation regarding the way in which a company viewed its fundamental relationship with employees.

Having built three successful businesses from scratch (the first local, the second national, the third global), I have established organizational values that have held up in both good and bad economic times. In fact, for 10 years before I sold my global company, it was considered the industry’s “employer of choice” for top professionals.

During the earlier days, however, we definitely spent our share of recruitment dollars and often settled for employees who exhibited less than 100% of our ideals. It was only after we established our organizational values (our core values, culture, and mutual expectations) that we hit our hiring stride.

That philosophy, or set of core organizational values, included a number of logical elements to employee/employer success. It wasn’t until we put those points down on paper and had prospective employees review them that we began to experience consistent recruiting success.

A few salient points of what employees could expect from the company: a competitive compensation and comprehensive benefits package; a clean, professional, safe and pleasant working environment; training that will help job performance and broaden career growth opportunities; a working environment that encourages individual initiative; commitment to diversity among staff and the fair treatment of all employees; opportunity to become stockholders within the company; and employee performance that will always be evaluated fairly.

On the other side of this mutual coin, here are a few company expectations of employees: open-minded, flexible and adaptive employees who are aware that change is a constant in the company’s competitive marketplace; self-directed, professional, reliable, career-oriented team players; a willingness to continually broaden knowledge and skills; and being a true company representative in speech and action.

Career development is another “best practice” recruitment tool. A successful company sees career development as an investment, not a chore. It should start on day one, with a comprehensive orientation program that includes a series of courses about technology, customer service programs, industry fundamentals, and evolution.

Since a full-time training staff is not part of the budget for most companies, “visiting faculty” and/or approved employee volunteers specified to address specific subjects could provide overview and training.

At my global company, a new employee would spend the first two weeks with various “faculty members” addressing the courses and various functions of the company.

Retention

Having invested considerable resources in recruiting, selecting, and developing high-quality talent, it’s logical that measures must be taken to keep these desired employees.

The primary retention motivator within the most successful companies is the company’s core values and culture, or its “organizational personality.” Looking forward to going to work every day with people you like and admire, taking pride in the organization, and performing work in a positive environment are fundamental and powerful retention tools.

If a company maintains an effective, appealing culture, its pay scale/benefits can be competitive, as opposed to very competitive. Put another way, if your organization is having trouble hiring or keeping desired employees, chances are your pay scale and benefits are not competitive, reflecting less than attractive organizational values.

Benefits should always be a reflection of a company’s core values. An organization needs to have a genuine awareness of the contemporary pressures of dual-income families, single heads of households, eldercare, and childcare. Believing this, we developed a PTO (paid time off) policy which stated that time could be used for any purpose, including vacation, illness, or personal needs.

The bottom line on pay and benefits is that if you have an ethical, practical set of core values and a culture that reflects them, you can and should be able to offer competitive pay and benefits. If you don’t, and want to upgrade the quality of staff, you must be very competitive. Benefits must reflect your integrated core values, culture, and mutual expectations.

Getting Benefit for Benefits

Over a certain period of time, however, employees may forget how good they have it. So keep your attractive pay and benefits package in the forefront of employees’ minds. Once a year, share with your entire employee family the facts about your company’s salary structure and benefits compared to the local labor market. If your pay and benefits package is good, make sure employees know and appreciate it.

The development and integration of comprehensive core values and culture, the cornerstone of organizational values, takes time. But once instilled, they become an organization’s heart and soul…and its key to successful recruiting and retention.

“It isn’t unusual to find employees driving 50, 75, even 100 miles each way to work and that can cost them $5,000 a year just in gas,” says Chuck Wilsker, president and CEO of the Telework Coalition, a Washington DC-based organization that supports telework options.

“When telecommuting is an option, it eliminates the geographic recruiting boundaries and increases the pool of prospective candidates. I have heard of specific situations where employers have been able to offer 15% less salary, simply because the employee will no longer need to absorb the daily commute cost.”

Employees who commute 30 miles or more to work are likely to turn-over at higher rates now that gas prices have sky-rocketed, according to Wilsker, and it will only get worse when the job market and the economy rebound. If more firms begin offering telecommuting options to appease employees, the competition for top talent will literally have no boundaries, since proximity to the office will no longer be a major recruiting criterion.

In addition, with no ceiling on gas prices projected anytime soon, Wilsker says that commute costs are starting to concern highly skilled employees, not just hourly workers. In the past, employees making $150,000 to $250,000 might not have considered long commutes when weighing an offer, now they are now thinking about it long and hard before accepting.

Fuel and commuting expenses are also making it harder to close offers made to relocating candidates says Mickey Matteson, account executive for Recruiter Relocation, a third-party relocation company. She says candidates are scrutinizing the cost of living in prospective urban areas, and in the past, most candidates would have accepted the offer, opting to live in less-expensive suburbs or outlying areas. Now, given the commute costs, more are either turning down offers or negotiating for higher salaries.

Matteson says relocation costs are also escalating and those increases are impacting recruiting. The average moving company fee is now $10,342, and many of the quoted prices have jumped so dramatically by the move date that some candidate deals are unraveling at the last minute. The total cost of relocating an employee or candidate is now $55,165, and given the steep price tag, Matteson says that 81% of companies are requiring relocating candidates sign repayment agreements, forcing them to repay the relocation costs, if they quit before completing one year of employment.

“Candidates are being more cautious and many are opting to rent out their existing homes rather than selling them,” says Matteson. “That’s making employers nervous because they don’t feel the candidate is committed, but at the same time, candidates want to try out their new employers and new surroundings. Some employers are allowing new workers to fly back and forth, but given what’s happened with the airline industry recently, I’m not sure that decision will make sense for very long.”

The Winners

Some employers are organizing car pools and offering employees the opportunity to purchase discounted mass transit passes, and the most progressive companies, are offering full or part-time telecommuting programs, which helps to attract and retain talent.

REI, the outdoor clothing retailer based in the Pacific Northwest and a perennial winner of Fortune magazine’s Best Places to Work Award, installed a customized work environment program (CWE) in some departments at its headquarters several months ago.

Initially, the program’s main goal was to help employees achieve greater work-life balance; now, the employees are saving money on gas. CWE allows employees to select alternate commute times to avoid traffic or the opportunity to work from home a few days a week, based upon each department’s need. CWE along with REI’s other subsidized transportation programs, such as van pools and paying 50% toward the cost of mass-transit passes, is a strong selling point with applicants, according to Bruce Bobzien, senior recruiter for REI.

So if telecommuting attracts applicants, lowers costs and increases employee satisfaction, what’s holding companies back from offering the option to everyone? Command and control. Employers are often reluctant to allow people to work remotely, beyond the constant watch of managers.

Jay Horowitz, CEO of Strategic Legal Solutions, a New York-based provider of outsourced legal services and staffing, recommends easing into telecommuting to get started, offering the arrangements on a case-by-case basis, perhaps a few days each week, to trusted workers. He also suggests employers make certain the telecommuting employee has a properly outfitted home office to assure effective communications.

Strategic Legal built a practice around experienced telecommuting attorneys who provide remote support for large cases and projects, such as class-action law suit discovery. Horowitz says that law firms are cognizant of all the indirect costs of employment including space, furniture, computers, and parking, so increasingly, the firms requested offsite attorneys for project work. Now, given the current gas prices, the concept makes even more sense.

“I wouldn’t hesitate to allow an employee to telecommute now that I’ve done it before,” says Horowitz, who allows the firm’s account executives to telecommute. “But I think you should have them come into the office for the first few weeks, train them, expose them to the culture and be very clear about the expectations. Maybe have them come into the office one morning each week after training, so you can stay connected. I think the more flexibility you show as an employer, the more likely it is you’ll be able to secure top talent.”

New Tools for Remote Supervision

Information technology has traditionally offered remote work opportunities, yet even the tech industry hasn’t had all the tools it needs to supervise telecommuting workers. oDesk, an online tool businesses use to build and manage remote teams, received $15 million in funding last week. The oDesk Web-based collaboration tools enable project managers to visually track and verify all work performed, both historically and in real-time.

Over the past few years, the term “recruiting” has increasingly become almost automatically appended with “and retention.”

The titles of VP, Director, or Manager of Recruiting & Retention have become pretty common, and many industry commentators clump the two together, almost perfunctorily.

I don’t get the connection.

Most organizations carelessly use these terms, so it may help to gain some clarity by agreeing on our definitions.

First, “recruiting” refers to those activities that are undertaken to convince employees of other companies to leave their current job in favor of a new one. By definition, the end result of this process should be the addition of new workers to our payroll who were not on that payroll the day before we recruited them. In other words, recruiting results in the influx of new talent into a company.

An important point here: this definition renders the phrase “internal recruitment” oxymoronic, and properly so. There is no such thing as internal recruitment, since you cannot, by definition, recruit someone to join the company who is already an employee. You can internally move, redeploy, reassign, or transfer them, but you cannot recruit them. Having recruiters spend time on internal movement activities and calling it “internal recruiting” represents a misuse of a recruiter’s time that will decrease the effectiveness of a function’s ability to actually recruit new talent into the company.

On the other hand, “retention” refers to those activities that a company undertakes to keep its highly valued current employees engaged and committed to the company. In other words, after workers are recruited, hired, trained, and productive, we initiate certain actions and engage in certain behaviors to encourage their ongoing loyalty to our firm.

Many companies do a nice job of making new employees feel welcome and provide excellent onboarding programs to assist with boosting retention from the employee’s first day. But these also occur after a new employee has been recruited, and after recruiting has moved on to finding candidates to fill the next requisition.

Separate and Distinct

If “recruiting” focuses on external talent who does not yet work here, and “retention” focuses on keeping the employees who are already here, aren’t these two activities separate and distinct at their core? Don’t they require vastly different activities and different skill sets to accomplish? Why do we automatically lump these activities together?

The most common thinking, of course, ties the quality of recruiting to retention performance using the argument that if the recruiting function hires the right people in the first place, our workers will have higher engagement, will be more career-oriented, and will stick around longer. But there are a few big problems with this argument.

First, in all but a few rare cases, recruiting doesn’t make the hire; the hiring manager does. Almost universally, the most the recruiting function can do is create the slate of finalist candidates (if they even do that), and the manager takes it from there.

Recruiting may have a vote, but it is rarely a veto. And on those rare occasions when it is a veto, it is not an override veto: recruiting may be able to stop a hire, but it can never force one on a hiring manager who doesn’t want the candidate, no matter how poor the manager’s reasoning.

Turnover’s Fuzzy Logic

The other problem with the argument is that it reflects fuzzy logic about the prime causes of turnover. While a good recruiter should be able to increase the quality of the candidate slate, and therefore increase the quality of the final hire, a bad line manager, poor management practices, and unkind co-workers can frustrate the greatest hire in the world, causing them to leave in record time.

Does a recruiter have control over any of these factors? I have never read a study that links attrition to recruiting practices. I have read hundreds of studies, though, that clearly link attrition with bad management practices, poor selection practices (remember, the manager makes that decision), bad bosses, boring work, lack of career-enhancing opportunities, and unsatisfactory compensation opportunities. Notice that none of these qualities have anything to do with recruiting.

Another challenge in merging these functions is that the capabilities required to be a great recruiter have little overlap with the skills required to build impactful, measurable retention programs.

Great recruiters have an external focus on the market of people who do not work here and may not have ever thought about working here. Retention initiatives are internally focused on people who have already decided to work here. Why would we think that one human being would be good at or be able to split their time between the two worlds? In fact, both roles are large enough to ensure that if you are doing one well you are almost certainly under-delivering in the other.

Interestingly, when we ask recruiting leaders who have this title to enumerate the scope of their retention activities, it is typically limited to ensuring the quality of candidates in the pipeline, sometimes providing marketplace feedback on competitive talent practices (usually compensation and talent management schemes at direct competitors), and marketplace feedback on the company’s market reputation.

Recruiting can certainly increase attrition through poor recruiting practices. Recruiters could, for example, misrepresent actual job duties, fail to eliminate habitual job-changers, or fail to stand firm with hiring managers about best hiring practices. But these are recruiting failures, not retention failures.

Look at it this way: assuming that recruiting does its job right, retention of that employee is no longer up to the recruiting function once that hire becomes an employee. It is up to HR and to line management to ensure their long-term success and loyalty.

After all, consider that line managers:

• Make the final hiring decision.
• Are primarily responsible, along with HR, for onboarding/new hire integration.
• Direct employees’ day-to-day work.
• Set the tone of the work unit.
• Lead the career development, along with HR, of direct reports.
• With assistance from HR, provide performance feedback/direction.
• Using HR programs, are responsible for promotions, both within their work groups and throughout the organization.

Let’s stop pretending that recruiting and retention are natural soul mates. Even more importantly, let’s put the retention focus where it properly belongs: in the hands of HR for overarching programs and in the hands of line managers for day-to-day delivery.

Let’s make first-year retention performance and top talent retention performance part of line managers’ key performance objectives. Let’s measure HR business value in terms of their demonstrated effectiveness at impacting workforce engagement and key employee retention.

Let recruiting focus on bringing us the best new talent on the market.

Then recruiting and retention will have the space they need to improve.

My friend was released after just 20 days on the job.

She was given work assignments to complete that had never been discussed in the interview. At her exit interview, her manager admitted he had overestimated her technical skills in the interview. She had not professed extensive technical skills in the interview. She was given no notice that she was to be terminated, just asked to come to the conference room at 3 pm on what turned out to be her last day.

Reflecting back, she realized that there had been virtually no communication with her manager over her last three days leading up to her termination. What’s ironic is that she was actually getting a lot of work done then. She felt that she was finally just starting to get the hang of things.

This was during the time when her manager was probably meeting with HR to work out and finalize her termination. At the exit interview, she was told that she “didn’t pick things up quickly enough.”

My friend had asked lots of questions of her manager while employed there, particularly when given work that was beyond what had been discussed in the interview. But whenever she asked her boss about her assignments, he talked about other things and never really answered her questions.

When a manager says something like “you didn’t pick things up quickly enough,” this can also be seen to mean, “I didn’t take the time to manage you well.”

Especially with new hires, managers have to invest a lot of time in integrating the new employee. When a new piece of equipment is obtained for the office, there is often instruction in how to use that piece of equipment, at least for the person who is responsible for using it. We may even send the person to training in how to use the machine.

Sink or Swim?

We don’t seem to do that consistently with people. We throw them into situations and expect them to “sink or swim.” We cannot afford to have too many new hires sink. It just costs too much money.

It costs a manager something more than money to admit that he may not have managed the person in the way that they needed to be managed. He didn’t take the time to figure out how to motivate the person. He didn’t figure out how the new person learns best, through careful instruction or trial and error.

The cost is that the manager has to admit that he made a mistake. That he was wrong. It’s much easier to blame the now-terminated new hire:

• “You didn’t pick things up fast enough.”
• “You weren’t communicating enough.”
• “You didn’t understand the culture here.”
• “You were a bad fit.”

In all these cases, the common denominator may have been that the manager didn’t do a good enough job in interviewing the person or integrating the new hire into the workforce in the first weeks or months. In every case, the manager blamed the employee for what may have been the manager’s shortcoming.

Managing is hard work. It’s not intuitive. No one is born a manager. Some people are born leaders, but managing requires training and it takes time.

Good managers can be developed, but only if they are given the time to learn, also the same way new hires need time to develop.

Managers need to master a broad skill set to be effective in all phases of the role:

• Understanding how the department operates so that the right mix of jobs is created.
• Interviewing (which is so much more than just talking to people) to effectively determine whether candidates have the correct skill-match for the position.
• Orienting the new hire to the workplace and to the job and his or her colleagues. Integrating a new hire takes weeks, not hours. Too frequently, managers leave orientation up to HR. No offense to HR, but new hires are too valuable to be trusted only to HR. The HR team has a critical role to play in integrating new employees, but the new hire is going to listen far more to what their new manager tells them than anything HR has to say.
• Setting performance objectives so that the new hire clearly understands what is expected of him or her.
• Giving feedback on an ongoing basis, not just at the end of the year in an anxiety-ridden performance evaluation.
• Recognizing and rewarding people for their effort as well as for their accomplishments.

When you look at all the expectations that we have of managers, it’s easy to understand why we invest so much in management development and training. It takes time to become an effective manager. Anyone promoted to management generally figures this out in the first few days on the job.

The piece that too often gets overlooked is training our managers in people management. How to interview candidates, how to select the right ones who can be most productive in their environment, and how to continue to get the most out of them on the job. Managers need to learn how to engage their staff so they give their best effort on the job as opposed to just doing enough not to get fired.

The good news is we usually give new managers the time to figure out how to do their new job, in part because of all the time and money invested in developing this person to the point of promotion.

No doubt, this new manager would certainly be annoyed if after a few weeks in the new position, their manager called them into a conference room and started in with, “You’re not picking things up quickly enough.”

“Water carriers play an important role at Herman Miller,” says Deb Exo, director of talent management. “They carry forward the context of the past that supports the future of the company and they provide insight about the company and mentoring to new employees.”

While having a stable of tenured employees might be newsworthy enough in 2008 employment lore, it’s the furniture pioneer’s ability to sustain those employee retention levels that might be its most notable accomplishment. The company averages 3 percent voluntary turnover per year and reported 9,600 applicants for 738 new positions, according to Fortune’s “Best Places to Work” list for 2008.

The company’s candidate selection process doesn’t currently include assessments or psychological profiles, but it does include a multi-day stay at the company’s Marigold Lodge, where candidates participate in an interviewing marathon.

Exo laughs as she says that the company’s interviewing process is legendary for being long and involved, and admits that she went through 12 interviews before receiving an offer.

“Following an initial screening for technical skills, the candidates stay at the lodge for several days, where they may go through as many as 8 to 12 interviews, but certainly no less than five,” says Exo. “The candidate gets the full experience of the company culture 24/7 while they stay there, because there’s a lot of storytelling that’s included in the process. They also bump up against water carriers and we get a chance to really engage the candidate, so we can see how they learn and think.”

Exo says that the length of the interviewing process isn’t pre-scripted, and while candidates are often exhausted after interviewing in the evenings and during meals, the complete disclosure methodology seems to give everyone involved enough information to make informed choices. Water carriers also carry forward the culture by presenting to new hires during orientation. New staff members are informally assigned to a mentor, who is usually a water carrier. They provide new employees with tips about how to get things done and navigate the company culture. Mentoring is designed to breed future water carriers.

Of course, not everything at Herman Miller has tribal roots. There are 2008-style incentives that encourage employees to stick around and become future water carriers. Exo received a pair of diamond earrings for her 25th anniversary, so now she not only carries water, she carries rocks.

For more about Herman Miller and the company’s migration to talent management, read the June issue of the Journal of Corporate Recruiting Leadership.