By Vistage Editor
Your most important corporate resource is talented people.
Finding that talent, however, can be extremely difficult with the 35 to 45 age group rapidly decreasing in size while the demand for their skills and experience rapidly increases. According to employee retention expert Malcolm Moore, your best recourse is to work hard at keeping the talent you already have in-house.
“As a CEO, you only have to do two things exceptionally well,” Moore said. “Set the vision and strategic direction of the company and find and retain the key people who will help you attain that vision. Most CEOs spend a fair amount of time finding people, but not nearly enough on keeping them. In the future, employees will come and go. By focusing on the key players who truly make or break your business, you can get the most leverage from your employee retention efforts.”
Moore recommends five steps for retaining key employees:
1. Identify key employees and positions.
According to Moore, key employees:
- Usually have something to do with your core competencies
- Are uniquely valued by customers
- Have real power in the company because of their product knowledge, expertise or influence over others
- Are very difficult to replace
Identify the four or five people in your company that meet these criteria and have the most impact on the performance of your business. Next, list the key positions in your company, the ones that truly make the difference between marginal performance and resounding success. A key position may not necessarily have a key person in it, especially if you have performance problems in that position. Ideally, however, your key players will match your key positions.
2. Know what motivates your key employees on an individual level.
To retain key employees, get rid of the notion that you can talk about broad categories of benefits and reward programs. Instead, focus on those most dear to your organization and understand — one employee at a time — what you need to do to retain them. This understanding comes from a continual, ongoing dialog, not from one 30-minute interview. Do not rely on the performance review process to provide this information, because those typically involve emotionally charged events that focus more on compensation than performance.
“Spend some time with each key employee and really understand what they’re looking for in the workplace,” Moore suggested. “Initially, most will talk about compensation, but evidence continues to pile up that says otherwise. In technology positions, for example, retention factors often include the tools, the software and the work itself. With salespeople, it typically means a lot of feedback, open-ended commissions and room to expand their territories. The key is to look at retention on a functional and individual basis.
“One of the things you will frequently hear when attempting to recruit senior executives is, ‘Nice offer, but I love my job.’ When you probe deeper they will say things like, ‘It’s a great place to work,’ or ‘I have a great boss,’ or ‘They keep giving me challenging projects.’ The secret to retention is understanding that ‘I love my job’ means something different for everyone. Your job is to drill down and understand what each individual values most in the workplace and make the best effort to satisfy those needs. Usually, they have to do with things other than money.”
3. Provide a deferred compensation plan.
According to Moore, recruiters who get turned down also frequently hear, “Your offer sounds great, but I’m participating in a profit sharing, stock option or deferred compensation plan. I can’t afford to leave.”
To hold onto your key employees, consider putting in a compensation plan for key executives that meets three essential criteria:
- The compensation is deferred.
- Vesting in the plan takes place over a number of years (but not so long as to be a disincentive).
- The key employee has a substantial amount of money at stake (at least 50 percent of one year’s compensation).
“The plan depends on the company and the employee,” Moore advised. “Programs that vest incrementally over a minimum of three years tend to work best. And the amount at stake has to be large enough to make a difference. Keep in mind that if the deferred compensation can be matched in the marketplace in the form of a hiring bonus, it loses its punch. Also, deferred compensation tends to work better with senior managers and those highly motivated by monetary issues, such as sales people.”
4. Monitor and manage key employee performance.
Know what kind of job your key players are doing. Create a performance rating (one being lowest, 10 being highest) for each key player. If someone scores a nine or 10, your role is to defend and keep them by making sure the salary administration and performance feedback matches their performance. If they are good performers (seven or eight), your role is to develop them into nines or 10s.
Never accept less than eight in a key position because that inhibits the growth and profitability of your company. If key players perform at marginal levels (six or less), move them into another position or out of the company. Do not block key positions with marginal performers.
“Make sure all key employees get proper performance reviews, at least once a year but preferably more often,” Moore said. “Performance reviews can be written or verbal, formal or informal. Do what fits your style and corporate culture. Check their salary once or twice a year, set career development goals and review those goals in progress. Doing these things on a regular basis will dramatically improve your retention rates with your key players.
“To get nines and 10s into key positions, you may have to monitor the hiring process because supervisors often fear hiring people who have stronger skills. In fact, if your supervisors don’t hire to your standards, get involved in the hiring process and the performance review process. Generally speaking, marginal supervisors do not give good reviews to top performers.”
5. Make key employee review an annual process.
At least once a year, review your key player “inventory.” Bring your HR manager and supervisors together for a half-day meeting that has three objectives:
- Conduct a performance review, written or verbal, of all key employees.
- Create a key personnel action plan that identifies what you want to accomplish over the next year with your key players.
- Discuss key employee succession and contingency planning.
“An annual employee review allows you to take stock of how your key players are doing personally and what they are doing for the organization,” Moore explained. “Far more than a performance review tool, however, it also serves as a vehicle that forces you to devote your time and attention to the people who have the most impact on your business.
“Most CEOs spend far too much time with their marginal or poor performers and not nearly enough with their top performers, including their key players. If you want your most valuable assets to stick with you, give them your most precious assets — your time and attention. Find out what they want and hope to get from working for you and do your best to give it to them.”
Originally published: Aug 29, 2011