Beware of the Artificial Calm
By Karine Stover
Human Capital Consulting
Universal Advisor, 2004 Issue No. 2


As organizations have reacted to and coped with the recent downturn in our economy, the focus has generally been on survival tactics such as diligently monitoring cash flow, eliminating nonessential expenses, stretching out debt, and delaying capital spending. Many employers have also breathed a bit easier after experiencing a dramatic reduction in the revolving door known as employee turnover. In fact, overall voluntary turnover has dropped to a low of approximately 6 percent.

As a result, the attention given to retaining staff — including people issues, being an employer of choice, and creating a positive workplace environment — has waned, often without an adverse impact. However, there are three primary ingredients which hold the potential to create a recipe for the perfect storm:

1. One level scoop of economic recovery. Economic indicators point toward an improved economic climate, which is starting to translate into growth and increased hiring activity.

2. Add one heaping spoonful of restless and unsatisfied employees. The low level of voluntary turnover likely has less to do with employees’ desire to stay with their current employer in jobs they enjoy and more to do with their belief that their current job represents the best alternative. Recent survey research indicates that while seeking greener pastures, they’re disengaging, producing less, polishing their resumes, and biding their time until the employment picture improves:

• More than 8 in 10 workers plan to look for a new job when the economy heats up ( CNN/Money).

• Two-thirds of employees are likely to begin or increase the intensity of their job search as recovery is underway; an additional 19 percent say they’re somewhat likely to search (Wall Street Journal).

• Less than half of all Americans say they’re satisfied with their jobs ( The Conference Board).

3. Mix in projected demographic changes. According to U.S. government statistics:

• More than 40 percent of American workers will be eligible to retire by the year 2010.

• 58 million job openings are projected by 2010.

• A 10 million person shortage in the U.S. workforce is projected by 2010.

• Managerial positions are expected to increase 25 percent, with a corresponding 15 percent decline in workers aged 35-55.

Sprinkle mixture with easy access to information regarding job opportunities, thanks to the proliferation of web-based job boards and company-specific Internet postings. Finally, top it off with headhunters who are always on the lookout for the best people — the majority of whom are employed. There are several implications for employers. First, every organization has a certain number of employees it doesn’t want to lose. If those employees aren’t happy with their current situation, there’s increased risk they’ll leave. Second, even if an organization were to view its employees as commodities and, therefore, expendable and easily replaced, there are monetary and psychic costs associated with each turnover. Third, locating and attracting talent, particularly at the manager level, is likely to become increasingly difficult.

Most managers don’t need to be sold on the need to reduce turnover and enhance employee retention. However, making a significant impact on retention typically is not achieved though a gimmick, prize, or quick fix; rather, it’s achieved by focusing on what’s important to employees and changing management’s attitudes and behaviors toward employees.

For example, one of the most effective actions managers can take is to ask employees what’s most important and why they’d choose to stay. This can be accomplished through focus groups or surveys. To be heard and understood is to be valued and respected. Recent survey literature demonstrates that top management isn’t “in touch” with employee perceptions and is much more likely to respond favorably to survey items than the rest of the employee population.

It’s no secret that employees leave supervisors, not companies. The Gallup Organization has conducted extensive research on the topic, and in the popular book, First Break All the Rules, they conclude “...if your relationship with your manager is fractured, then no amount of in-chair massaging or company-sponsored dog walking will persuade you to stay and perform. It is better to work for a great manager in an old-fashioned company than for a terrible manager is a company offering an enlightened, employee-focused culture.”

If it’s determined that supervisors are, in fact, an impediment to retention, another effective action is to formally assess management competencies against desired competencies and put tailored development plans in place to overcome deficiencies.

There are numerous strategies that can enhance an organization’s success in retention. Organizations that will weather the perfect storm are ultimately those that view human capital as a competitive advantage, realizing that, in the end, the engine that drives an organization’s success is its people. Harnessing the power of that engine is the key to creating a competitive advantage through people.