Why Employee Retention Fails

After almost five years of reduced expectations, it looks like the job market is bouncing back for IT professionals. More companies say they'll add staff in 2005, and many IT departments are advertising openings that they were reluctant to fill just a few months ago. Having noticed this trend, many companies are recalling the mid-1990s when the first rumblings of the Great War for Talent started. Worried that we may be on the cusp of a major labor shortage, some IT leaders and their human-resources counterparts are discussing employee-retention plans for the new year, in the hopes of keeping employees from jumping ship for newly created and greener opportunities. An informal study of failed retention initiatives can help companies shape effective programs. Here are the most common reasons that corporate retention initiatives fail: Too much emphasis on pay, benefits, and perks: Pay is as important to IT professionals as to professionals in other fields. Yet, the Saratoga Institute, which compiles exit-interview results, among other staffing information, reports that 88% of employees voluntarily leave their jobs for other reasons, such as misalignment of mutual expectations, person-job mismatch, insufficient coaching and feedback, perception of poor career-advancement prospects, work-life imbalance, and both distrust toward and low confidence in senior leadership. Still, most managers refuse to acknowledge the "push" factors, preferring to see the "pull" factor of more money as the prime motivator. The truth is, both push and pull factors come into play, but companies make a big mistake by hanging their employee-retention strategies solely on the easier-to-manipulate tangible factors of more pay, better benefits, and flashier perks. It’s not that these factors are unimportant; they're very important. In fact, most employers of choice typically offer better pay and benefits than their competitors. But what sets them apart are positive, caring cultures where most managers know how to provide the everyday coaching, feedback, and recognition that keep employees engaged. Blindly following other companies' best practices: One of the disadvantages of reading Fortune magazine's “100 Best Places to Work in America” list each year is that we become so enamored of great employers that we think their best practices will work equally well for our companies. Sometimes they do, but often they don't. The best employers thoughtfully match their cultures, benefits, and management practices to the needs and desires of their workers. FedEx gears its workplace to the short-term work-experience needs of younger part-timers, while American Express focuses on long-term career development with a strong emphasis on gender equity. SAS Institute has created an employment brand that says, “Come to work for us and enjoy a campus-like environment, and have a life outside of work.” This software-development company is famous for its 3% turnover rate in an industry where 20% is the norm. Most companies can't—or won't—invest the up-front dollars to do what SAS has done. The good news is they don’t have to. But by asking their particular workforce what they most want and need, companies can usually provide what it takes to keep employees—and keep them engaged. The danger of benchmarking against others in your industry is that it may keep you from tailoring an innovative benefit or practice to meet the needs of the 20% of the talent that's creating 80% of the value in your company or department. Failure to train managers and hold them accountable: Studies of employee turnover consistently show that the direct supervisor builds or destroys employee commitment. Yet, how many companies select executives for their ability to manage people, train them in effective people-management skills, and then hold them accountable? You could probably count those on the fingers of one hand. Many employers of choice carefully monitor their managers’ voluntary-turnover rates, new-hire retention rates, and employee-engagement survey scores, and reward those who score highly with bigger bonuses. Managers with low scores get lower bonuses and are called into meeting with their superiors, which may lead to more training, coaching, reassignment, or termination. In other words, smart companies know that as the competition for talent heats up, they can no longer afford the luxury of another bad manager. Leigh Branham is founder of Keeping the People and author of The 7 Hidden Reasons Employees Leave(Amacom Books, January 2005). Related Links: Why Employees Really Leave