Talent Retention

"What happens if your competitors are doing more to attract talent than your company is doing to retain talent?"

The Strategic Importance of Talent Retention

Like the ebbs and flows of financial capital to markets that best optimise returns, so too human capital flows between organisations and employers offering the best 'deal'. The War for Talent, coined by McKinsey and Company, predicted that increasingly organisations will be competing for shortages in management talent. That is, competing to attract, develop and retain the talent that fuels competitive advantage.

Much has been done over the last decade to improve the acquisition of management talent. Companies have adopted more sophisticated approaches to plug the talent pipeline from the external market, from graduate recruitment strategies through to the rapid growth in the use of search firms to fill senior roles. And there are few talent focused medium to large organisations who have not introduced, or who are not planning, the introduction of development programs for high potential staff.

The same focus has not been as vigorously applied to the retention of key staff. Sure, most Human Resources departments track turnover statistics. Exit interviews by Human Resources may also be beneficial (provided the information collected is accurate and well used). And organisations with well constructed Talent Management programs often claim that the very process of letting high potential people know how valued they are, and how bright their futures are, is a key talent retention strategy in its own right.

We do not dispute the value of these initiatives. Rather, our emphatic view is that a co-ordinated approach to the retention of talent is an essential piece of an overall human capital strategy. McKinsey and Company estimate that talented executives will work for five different employers over their career. Therefore, even the very best strategy for identifying, acquiring, and developing management talent will come undone if defensive tactics do not temper the 'burn and churn' of management talent.

Costs of Unwanted Turnover

It is far from bold to suggest that the success of organisations is tied to the preservation of human capital and corporate memory. Increasingly, the competitive advantage derived from products and technology is limited and short term. People and their intellectual capital, however, are not easily copied. Recognising this, a well worn strategy for driving competitive advantage is to poach the best people in key competitor roles.

The costs of losing high calibre staff to competitors can be enormous. Estimates vary from one to two times the salary of the employee through to in excess of a million dollars for senior executives. And these are referring to the tangible and readily quantified costs! When less direct or tangible costs are included, the total cost may be staggering.

Direct costs may include:

• Termination costs
• Re-hiring costs
• Costs in developing the new recruit to 100% effectiveness

Indirect costs may include:

• Lost customers or reputation
• Lost business opportunities (opportunity cost)
• Decrease in overall leadership bench strength
• Lost competitive advantage to 'poaching' competitors
• Decreased morale and increased stress among remaining employees
• The 'Floodgate' effect whereby the loss of a couple of key employees can lead many others to consider their employment options

These costs will vary from organisation to organisation according to a range of criteria. It is worth noting, however, that these costs are likely to be at their highest for your highest calibre employees. This is because the most capable people are typically the best remunerated, but more importantly, their high calibre status means their loss incurs the highest opportunity and other intangible costs. And unfortunately, this high calibre status also means they are the staff most at risk. They are likely to have most options at their disposal, as they are certainly the most attractive to poachers!

Factors Impacting Retention

The factors impacting retention are quite complex but can be categorised into three broad areas:

Organisational Factors include the characteristics of the organisation itself such as culture, leadership style, success, reputation and so forth. At a more local level, job related factors also fit here and may include issues such as location, remuneration, variety, challenge, and opportunities for advancement and development.

Individual Factors include a wide range of issues such as personality/values, aspirations, wealth, family, health, interests, and education.

External or Environmental Factors, as the name suggests, are typically beyond the control of employer and may include economic cycles, employment prospects, and labour legislation.

Retention Strategies - What can employers do?

CompAssess has developed a suite of services designed to help our clients:

• Identify the most critical employees to retain
• Understand which of these employees are at greatest retention risk
• Quantify the turnover cost for these at risk employees
• Understand the 'push and pull'* factors that promote retention for this employee population
• Develop an employee value proposition for high potential-high value employees
• Implement strategies to honour the employee value proposition
• Identify and track the key metrics to fine tune strategies and determine success and return on investment

* Push factors are those issues that may repel people from their current employer, including unfair treatment, poor job fit and so forth. Pull factors are those that may entice employees to other organisations including better employment conditions or better market image.

» Contact CompAssess for more information on our approach to promoting retention by reducing or eliminating the causes of unwanted turnover.