The Challenge of Retaining Top Talent: The Workforce Attrition Crisis ByB.LynnWare,Ph.D.,andBruceFern Itisnowonderthatintoday'saggressivebusinessenvironment,thechallengeofsustaininga competitiveadvantagepreoccupiesthemindsofmanybusinessleaders.Corporatecustomers andindividualconsumershavemoreproviderstochoosefromthaneverbefore.Furthermore, theyoftenperceivethatwhattheyarepurchasingis,forallpracticalpurposes,acommodity thatcanbeeasilyobtainedfromothercompaniesifneedbe.

Sohowdoesacorporationdistinguishitselfinahighlycommoditizedandcompetitivemarket? Today'sbusinessesaremoredependentthaneverbeforeontheirtopperformerstoinnovate andprovideservicesthatdifferentiateacompanyfromitsfiercecompetitors.Inotherwords, corporationsarereliantupontheirhumanassetstosurviveandthrive. However,withunemploymentnowrunningatlessthan6%,manycorporationsand governmentagenciesarestrugglingtofindandkeepthesevaluedemployees.Changingwork forcedemographics,suchastheshrinkingofthemostdesirablelaborpool(2534yearolds) andthenegativeimpactdownsizinghashadonemployeeloyalty,haveledcorporateAmerica tosearchforanswerstorecruitingandretainingthestrategicassetofthetwentyfirstcentury: talentedpeople. Retainingtoptalentwaslessofanissueinthepast,buttheshiftingtidesoftheunspoken employee/employercontracthavecreatednewcurrentsintheworkplace.Theoldcontract askedemployeesto:

workhard beloyal givetheirall

Inreturn,theywouldhave:

ajobforlife ahomeawayfromhome regularsalaryincreases agoodchanceforapromotion

Thenewcontractissubstantiallydifferent.Itstatesthatemployeesmustnowworkharder, doingnotonlytheirjobs,butthejobsoftheirformercoworkerswhowere"rightsized."In return,jobsecurityisextinct,promotionsarescarce,salaryincreasesaremodestatbest,and theconstantuncertaintyofchangeisalmostguaranteed.Isitanywonderthatemployee loyaltyisonthedemiseandtalentedindividualcontributorsandmanagersfeellessbondedto theirorganizations?

 Research Becausetheincreasedflowofdefectingemployeesplaguedourclients,IntegralTalentSystems, Inc.,anationalconsultingandtrainingfirmandBruceFern,anexpertinthefieldofretention, engagedinanaggressiveendeavortotackletheattritiondilemma.Aspartofthisproject,we conductedattritionandretentionresearchwithourclients(1),andsubstantiatedourfindings byreviewingindustrypracticesandthebehavioralscienceliterature.Weuncoveredanumber ofcriticalfindings,sevenofwhicharedescribedinthisarticle. 1.TheCostsofAttritionCanBeStaggering,ButOftenUnseen Whatdoesitcostanorganizationwhenatalentedemployeedefectstothecompetition?Some ofthecostfactorsareobvious,suchasproductivitylossesduetoavacantposition.However, thereareoftenunseencosts,likethereducedproductivityfromthedepartingemployeewhois inevitablydistractedduringhisorherjobsearchandthereforecontributeslessduringthistime period(sometimescalled"shorttimersdisease"). Usingconservativecalculations,onetechnicalcompanyinCalifornia'sSiliconValleyestimates thatitcoststhemanaverageof$125,000whenjustoneemployeeleaves.Othercompanies calculatethatattritioncoststhemannualproductivitylossesof6575%inthepositionthe employeedeparts. Anotherofourclientswithanationalsalesforceofhundredsestimatesthattheyhaveto scrambletomakeupforoveramilliondollarsofpotentiallylostsaleswhenjustone salespersonleaves.Toaddinsulttoinjury,thisdoesnoteventakeintoconsiderationthe departedemployee'sattemptstowoohisorherpastcustomersovertohisorhernew employer.Multiplythesecostsbythenumberofemployeeswholeaveinoneyear,andthe financialimpactisdramatic. 2.TheReasonsEmployeesStayareNottheSameasWhyTheyLeave Mostorganizationsdonothaveahandleontheactualreasonswhyemployeesstay,aswellas theactualreasonswhytheydepart.Manyorganizationsattempttocapturethecausesof attritionthroughexitinterviews.Unfortunately,traditionalexitinterviewsjustscratchthe surfaceofthecausesforattrition.Theyinevitablyfailtodifferentiatebetweenfactorsthat makethenewjobattractivetothedepartingemployee,versusthereasonswhytheemployee waspromptedtoconsiderleavinghisorhercurrentjobinthefirstplace. Forexample,manyemployeesreport"bettercompensation"asoneoftheirmainreasonsfor leaving.Inmanycases,ourresearchrevealedthatthesesameemployeeswerenot,infact, originallydissatisfiedwiththeircompensation.Instead,otherreasonspromptedthemto considerleavingtheircurrentjob,suchastheabsenceofprofessionaldevelopment opportunities.However,theyoftendonotreportthesenegativereasonsassociatedwiththeir oldjob(possiblyfromfearofretribution),butinsteadreportwhatisattractiveinthenewjob. Becauseofthisphenomenon,organizationaldatafromtypicalexitinterviewsfailstosurface therealcausesofanorganization'sattritionproblems. Thisisjustastruewhenanemployeeisactivelyrecruitedbythecompetition.Ourworkin retentionshowsthatattractivecandidatesreceivecallsfromrecruitersallthetime!What

causesthesuddenshiftthatmakesanemployeeactonarecruiter'scallataparticularpointin time?Weconsistentlyfoundinthesecircumstancesthatsomethingdeterioratedintheirwork situationsthatcausedthemtotakethecurrentrecruiter'scallmoreseriously. Obviously,whenorganizationsunknowinglymisdiagnosethesituationandfailtosurfacethe mostcriticalfactorsthatcontributetoattrition,theirsolutionstocorrecttheproblemfallshort ofthemark.Theresultisabaddiagnosisleadingtoimproperprescriptions. 3.TheManager'sRoleinAttritionisParamountbutUnderplayed Mostmanagersweinterviewedaspartofourresearchinretentionlamentedthelossof talentedcontributors.However,whenaskedtodiagnosethereasonsforanemployee's departure,theaveragemanagerpointedtoavarietyofexternalorganizationalfactorsasthe causesofattrition,failingtotakeanypersonalresponsibilityforthesituation.Theytypicallydid notacknowledgeanyfactorswithintheircontrolthatcontributedtotheemployee'sdeparture. Forexample,managersoftenattributedattritionproblemstosuchfactorsascompensation. Certainfactorsthataretheresponsibilityof"theoverallcorporation"cancertainlyaggravate attritioniftheyarenotinorder,suchasinequitablepayscalesorexcessivelyrigidpoliciesthat diluteemployeeautonomy.However,wediscoveredthatalargenumberoffactors contributingtoemployeeretentionarewithinthemanager'scircleofinfluence. Therefore,theresultsofanyattritioninterventionaredependentupontheorganization's abilitytoprovidemanagerswithanawarenessofthosefactors,aswellastoolstohelpthem meettheirpersonalaccountabilityinretainingtoptalent. Furthermore,managersneedthisguidancemorethaneverbefore.Managers'spanofcontrol hasbeenwideninginmostcompaniesoverthepastseveralyears,andthenumberoftimesthe manager"touches"theemployeeisthereforelessfrequent.Eachcontactmustmaximizeany opportunitytoinfluenceemployeemotivationandcommitment. 4.PreventionistheBestMedicine Thelossofkeyemployees,eveninsmallnumbers,canbedevastatingtoacompany.(This pointstotheimportanceoftrackingnotjustoverallattritionratios,butalsotrackingthelevel ofperformersleaving.) Consequently,wewereinterestedindeterminingthedegreetowhichmanagersrankretention asahighongoingpriority.Notsurprisingly,wefoundthattheonlytimetheaveragemanager thinksaboutretentioniswhensheorhereceivesaresignationfromanemployee.Wealso foundthatmostmanagerspredictablyattempttotalkdepartingemployeesoutofleaving, tryingtoconvincethemthattheyaremakingamistake. However,alsopredictably,wefoundthatthevastmajorityofthetime,theseemployeesleave theirresignationsonthetable,resistingattemptstopersuadethemtostay.And,inthe infrequentsituationwhenamanagersuccessfullypersuadestheemployeetoremain,heorshe oftenleaveswithinsixtoninemonthsanyway.(Theexceptioniswhenthereisaclearsalary inequitywhichisremedied,andtheemployeeissatisfiedwitheverythingelseaboutthework situation.)

Clearly,thesolutionliesintyingretentiontocriticalbusinessactivitiessothatmanagersdonot thinkaboutretentionafterthefact,whenitistoolate,butratherseeitasintegraltobusiness successandsurvival.Treatingretentionasanongoingpriorityenablesthemanagertofocuson proactivemeasurestosustainlongtermemployeecommitment,ratherthanonreactive attemptstoreversesurpriseresignations. 5.RetentionHasanOftenUnrecognizedImpactontheCustomer Managersarewellawareoftheimpactontheirfunctionwhenavaluedemployeeleaves. However,evenmanagersofcustomercontactfunctions,suchassalesorcustomerservice, oftenfailtodemonstrateasensitivitytotheimpactattritionhasoncustomers. Whenkeyemployeesleavecustomercontactfunctions,customersoftenexperience:

adiscontinuityintherelationship anegativeimpactontheirownproductivity timewastedreorientingthenewemployeetotheiroperationandthewaytheywork

Whentherelationshiprepresentsavalueaddedpartnership,thechangeinaccountmanagers orserviceproviderscansettherelationshipbackmonthsandgivecompetitorsaweighty advantage.Thisisespeciallytrueifthetransitiontonewaccountpersonnelisnotwell managed.Atacertainpoint,regularchangesinaccountpersonnelcansendamessageof organizationalinstabilityandcreatetheimpressionthattheorganizationdoesnotcareabout theaccountrelationship. Inthecaseofdevelopmentorsupportfunctions,wealsofoundagenerallackofawarenesson themanager'spartofthenegativeimpactthedepartingemployeehasoninternalcustomers. Thedepartureofatopperformingemployeecanthereforehavea"rippleeffect"onthe organizationanditsclientsthatcreatesproblemsformonths. 6.MisguidedThinking:"AttritionisInevitable" Itistruethatsomelevelofattritionisunavoidable.Infact,acertaindegreeofattritionis desirableinordertocompensateforpoorhiringdecisions.However,humanresourceand seniorlinemanagersoftenquestionwhethertheycanreallyincreasetheirretentionratios. Theanswerisdefinitivelyyes,withevidencetosupportit.Inoneofourclientorganizations,the attritionrateforoneoftheirdivisionsin1995priortoourinterventionwas18.5%,with25% attritioninoneofthemostcriticaloccupationgroups.Afterworkingwithusin1996and makingretentionapriorityforeverymanager,theattritionratedroppedto11.7%overalland 15%inthecriticalgroup. Onemightpredictthatotherfactorscontributedtothisoutcome.Infact,itshouldbenoted thattherewereactuallyreductionsinemployeecompensationduringthistime,whichshould haveincreasedattrition.Nevertheless,westillsawanincreaseinretentionrates. Anotherofourclientsaskedthatweconductaretentionriskanalysisandinterventionina criticaltechnicaldivisionbecausetheorganizationfearedthatattritionwouldriseinthenear future.Twointerestingfindingsemergedfromourresearchwiththisgroup.Thefirstwasthat thisdivisionwasalreadyfollowinganumberoftheretentionprescriptionsweprovideour clients(oneofthefewdivisionsintheentirecompanytodoso).Morestriking,however,was

thefactthatasaresultoffollowingtheseprescriptions,thisgroup'sretentionrateswereover 10%higherthantherestofthecompany's,thusvalidatingtheefficacyofourmodel. AnothercompanyintheNorthwestbeganwithanattritionrateof17%.Afterfollowingthe sameprescriptions(2),theyreducedtheirattritionrateto3%,bringingtheirretentionrateup to97%.Astheevidencesuggests,attritionisnotanunbeatablefoe.Instead,itisachallenge thatcanbeovercomewiththerightstrategiesandtools. 7.WorldClassRetentionReflectsAMultiFactoredSolution Thescenarioinmanyorganizationsisthesame.Someone,suchasaseniorlinemanagerorHR professionalwhoistiedtothebusiness,raisestheredflagofattrition,recognizingits potentiallydevastatingimpactonthecompany'sstrategicposition.Then,someonescrambles topullsomesortoftrainingortoolstogetherwhichfocusesononlyafew(butnotall)ofthe factorsthatarerequiredtoreduceattrition.Theresultistheorganizationexperiences mediocreresults,ornoresultsatall. Thismultifactoredretentionsolutionislikethestoryoftheblindmenandtheelephant.Never havingseenanelephant,threeblindmenwerebroughtovertoayoungelephanttoletthem experienceit.Eachmantouchedapartoftheelephant.Thefirstonetouchedalegandsaid, "NowIunderstand.Anelephantislikeatreetrunk."Thesecondmantouchedthetailandsaid, "No.Youarewrong.Anelephantislikeasnake."Thethirdmantouchedanearandsaid,"You arebothquitemistaken.Anelephantisliketheleafofabigpalmtree." Ifanyofthemenwantedtocontroltheelephant,theywouldhavefoundthemselvesincapable ofdoingso,becausetheirunderstandingoftheelephantwasonlypartial.Thisisalsotrueof manyorganizationsthattrytotackleonlyonefactoroftheattritiondilemma. Onepieceofanecdotalevidencecomesfromareportmadebyoneofthenation'sleading financialservicescompanies.Inanattempttostemtheoutflowofcriticalmanagersand individualcontributors,theycontractedwithareputabletrainingfirmwithwhomtheyhad workedsuccessfullyinthepast.Whilethefirmadmittedtheywerenotexpertsinemployee retention,theyneverthelessconductedsessionsforseniormanagers,hopingtohelptheirclient todealeffectivelywiththeproblem. Unfortunately,butalsopredictably,thefirmaddressedonlyafragmentoftheretention solution.Thekickbackfromthemanagerswasstrong,sincetheyintuitivelysensedthiswas onlyapartialsolutionanditwouldnoteffectivelyaddresstheirissues.Therefore,onelitmus testforaretentionsolutionistoassessitsscopeanddepth.Anysolutionthatisunidimensional isboundtofail. RetentionStrategies Ourresearchsurfacedsixdimensionsthataremostcriticaltoinfluencingretention.These dimensionsmustbeinfusedintothreemajorcomponentsthatmustbeinplaceandalignedfor anorganizationtoachieveworldclassretention: 1.ManagerRetentionPractices Ourresearchconsistentlyvalidatedtherealitythatthemanagerplaysasignificantrolein influencingtheemployee'scommitmentlevelandretention.Thereareanumberofmanager

retentionpracticeswhichincreasetheprobabilitythatanemployeewillremaincommittedto anorganizationovertime. Theseretentionpracticesrepresentthemanager'sactualbehaviorsonthejob.Thisoftenhas littletodowiththeamountofclassroomtrainingtheyhavereceived.Furthermore,thebest retentionpracticesarenotthesameasthestandardmenuforgoodorganizational management.Mostorganizationsasktheirmanagerstoplaceproductivityasthehighest priority,underscoredbypressurestofulfill"ourobligationstoourinvestors." Goodretentionpracticesfocusnotonlyonwhattheemployeeiscontributingtothecompany, butalsofocusonhowthemanagercancreateaclimatesothattheemployeeisretainedand committedonalongtermbasis.Whileenlightenedleadersbalancetheneedsofthe organizationwiththeneedsoftheemployee,thetruthisthattheseleadersarerare.Though managersplayaverycrucialroleinretention,theydonotcontrolallofthefactorsthatcan affectattrition.Therefore,thesecondcomponentrepresentstheorganization'sresponsibility intheretentionequation. 2.OrganizationalRetentionSystems Thereareanumberoforganizationalsystemsandprocessesthatinfluenceretention.Someof themareevident,suchasequityofpayscales.Othersystemsarelessobvious,andtheirimpact onretentionisoftenunrecognized.Forexample,thereisevidencethatanorganization's recruitingsystemsandprocessescansignificantlyimpactretentionratios.Thesesystems supporttheManagerRetentionPractices,buttheyalsoincreasethelikelihoodthatemployees arecommittedonalongtermbasisandareperformingattheirbest. 3.MeasurementandAccountability Closelylinkedtotheothercomponents,thiscomponentensuresthatretentionbecomesanon goingpriority.Manyorganizationsdonotevenknowwhattheirattritionratesare.Andthose thatdooftenlackenoughdatatopinpointwheretheproblemismostsevere,ortouncoverthe specificcausesofattrition. Forexample,thoseorganizationsthatmeasureattritionsometimesdonottrackitbylengthof service.Thetenurepatternsofthedepartingemployeescanrevealvaluableinformation concerningthepotentialcausesforattrition.Additionally,manyorganizationsdonottrack attritionbyoccupationalgroupotherthanby"manager"or"nonmanager."Thissimple segmentationisoftenacrudeonethatdoesnotprovidetheorganizationtherefined informationitneeds. Measurementgoeshandinhandwithaccountability.Organizationsmustholdtheirmanagers personallyaccountableforretention.Likewise,theymustholdtheircorporatestaff accountablefordeveloping,maintaining,andupgradingtheirretentionsystems.When retentionisrelegatedthestatusofbeinga"HRissue,"itoftenfallstothebottomofthepriority listformanagers.Whenitbecomesoneoftheirbusinessgoals,ittakesonanewperspective. Oneexamplecomesfromoneoftheworld'stophardwaremanufacturers.Inarecentmeeting, thenewdirectorofthetelephonetechnicalsupportgrouppresentedthefollowingfournew businessgoalstohismanagementteam.Thefirstthreewere:

 1. FulfillTechnicalSupportContractObligations 2. MaintaintheHighestLevelofCustomerSatisfaction 3. ManageCostsAggressively Thefourthgoalwastoretainemployees!Aftersomediscussion,theentiremanagementteam observedthattheywouldnotachievetheothergoalsiftheycouldnotachievetheirretention goals.Inanotherdivisionofthesamecompany,theseniormanagers'personalbonusesare calculatedonthebasisoftheirsuccessatretainingtheirbestpeople.Whenmanagersareheld accountableinthisfashion,itensuresthatthemotivationtoexamineandenhancetheir personalretentionpracticesiseverpresent. Conclusion Interestinglyenough,organizationalexpertspredictedthatmergersanddownsizingwould resultinemployeeswhofeltluckytohaveajobandwhowould,ofcourse,stay.Thismaybe trueforemployeesinthelowertiersofperformance.However,toptalentedemployees recognizetheyrepresentavaluedorganizationalasset.Whentheirloyaltydeteriorates,the tendencytoswitchorganizationsincreases. Theaveragecostsofreplacingtoday'sdefectingworkforceareeatingawayattheprofitability ofeventhehealthiestorganizations.Evenwhenthebottomlineremainsintact,thelossofjust ahandfulofkeyemployeeswhohaveaspecialexpertiseorwhomaintainvaluedcustomer relationshipscanshakeanorganizationtoitsroots.Inthisageofhighstakesandunpredictable marketandorganizationalchanges,organizationsmusteducatetheirmanagersandcreatean environmentwheretoday'stoptalentcanthrive.Thealternativeisunacceptable.
1997IntegralTalentSystems,Inc.AllRightsReserved. (1)Becauseofthesensitivenatureofanyorganization'sattritionproblems,wehavenotidentifiedourclientsorother organizationsbynameinthisdocumentwhencitingexamplesoftheirretentionproblemsorsolutions. (2)Thiswasnotoneofourclients,butratheracompanywediscoveredduringourretentionresearch.