How to Keep Your Top Talent

Practically every company these days has some form of program designed to nurture high-potential employees. But a recent study by the Corporate Executive Board demonstrates that nearly 40% of internal job moves made by people identified by their companies as "high potentials" end in failure. Disengagement within this cohort of employees also is remarkable: One in three emerging stars reported feeling disengaged from his or her company. Even more striking, 12% of all the high potentials in the study said they were actively searching for a new job--suggesting that as the economy rebounds and the labor market warms up, organizations may see their most promising employees take flight in large numbers. Why do companies have so much trouble bringing along their next generation of leaders? The Corporate Executive Board's research showed that senior managers make misguided assumptions about these employees and take actions on their behalf that actually hinder their development. When dealing with high-potential employees, firms tend to make six common errors: assuming that all of them are highly engaged, equating current performance with future potential, delegating the management of high potentials down in the organization, shielding promising employees from early derailment, expecting stars to share the pain of organization-wide cutbacks, and failing to link high potentials and their careers to corporate strategy. These mistakes can doom a company's talent investments to irrelevance--or worse.

Here are some things you should do to keep your top talent on track:

1. don't just assume they are engaged - give them stimulating work, a chance to prosper, and recognition or they will walk
2. don't mistake current high performance for future potential - test candidates for ability, engagement, and aspiration
3. don't delegate talent development to line managers - this will limit the talents access to senior members
4. don't shield talent - place talent in live fire roles
5. don't assume top talent will take one for the team - compensate top talent differently and creatively
6. don't keep young leaders in the dark - share strategy with them

How does your talent management program stack up against these areas? If you think your program needs a thorough review you should click on the link above and read this article in detail.

Top Human Resources Issues for the Future

HR has been at the proverbial crossroads for far too long. Walking the fine line between demonstrating strategic value and providing traditional HR services, the industry remains stuck, as the business environment around it grows increasingly global and complex.



While there is no silver bullet, Hewitt believes HR’s survival and success depends on four “bold bets” that not only provide a solid foundation and add organizational value, but also work to expand the influence of HR leaders. While HR’s soft side is still important in today’s post-Enron business world, in order to thrive in tomorrow’s HR environment, companies need to take bold steps to provide holistic, business-focused, data-driven human capital solutions.
 

Four Bold Bets on Where HR Is Headed

Based on Hewitt research, HR must place their bets on four key areas: performing predictive analysis on human capital processes, delivering a steady talent supply, driving organizational performance, and building integrity and trust in the workplace. What makes these bets particularly bold is not so much the focus itself, but the fact that the HR of the future will drive and be held accountable for these areas in their entirety. Rather than reduce the role of HR, these four bets broaden the scope and impact of the role, pushing HR to operate more like a business unto itself—a business focused on driving organizational capability. All four areas bring a holistic approach to addressing human capital challenges with a clear tie to fact-based results and metrics, and produce a more strategic, business-focused HR organization.
 
Human Capital Research and Development



HR of the future is taking the lead in advanced data mining and predictive modeling of human capital processes to identify new business insights. Moving beyond traditional scorecards or dashboards that provide a static snapshot of progress, these HR functions are taking a true R&D approach using systematic, fact-based, and scientific methods, to uncover new relationships and opportunities for human capital to drive organizational performance.
 
Driving the Talent Engine



HR of the future is also redefining and expanding its focus in the area of talent by managing a seamless “human capital supply chain” to ensure the organization’s talent engine is always humming with a ready supply of top talent. This includes the challenge of harnessing the capabilities of a more diverse, global, and virtual workforce. Leading HR organizations are breaking down barriers and taking a holistic approach to managing the sourcing, development, and mobility of their top talent and inventing new approaches to accessing required skills for both today and tomorrow.
 
Organizational High Performance



HR of the future is taking accountability for driving performance at the organization, team, and individual levels. By managing performance as an end-to-end process and focusing on business outcomes, HR has an opportunity to integrate the various components that impact performance into one framework. This means a much more rigorous approach to establishing performance expectations, tying opportunity to potential, and ensuring rewards are tailored by population. This includes newer HR areas such as space management and organizational design that impact employee engagement and productivity.
 
Organizational Stewardship



HR of the future is also assuming a renewed role in building a sense of community, trust, integrity, and even spiritual meaning for the organization. In response to the anxieties of a post-9/11 and Enron world and the growing awareness that people want more meaning out of their work life, more and more companies are striving to build a stronger connection with employees and their communities. What HR brings to the table is not merely employee advocacy experience, but a unique ability to weave together the various components of stewardship, build a stronger bond between employer and employee, and prove the long-term benefits of investing in employees.
 
Pass along your thoughts to me at wgstevens2@gmail.com or kulshaan.singh@hewitt.com at Hewitt

Have You Protected Your Assets

Having worked closely with sales teams for the past 20 years one area that seems to get missed is keeping your sales force up to date on basic skills and expertise. As the economy changed, the means to market and sales approach has to change to deal with the customers economic condition. The old "hi Charlie, how much can I put you down for" has all but disappeared. For that matter it did a long time ago and top sales people did not know how to adjust.

So you as a manager need to focus on the following:

• identify weak spots - does your sale team and for that matter customer service people know the company's strategy?
• climate - sales people want new ideas and products so keep the pipeline full including software that will make their job easier and more efficient;
• check for complacency - management should keep communication lines full from strategy to daily updates on sales activity. Keep sales teams motivated through impact marketing, coaching, and weed out poor performers if they continue after development investment;
• adjust territories if needed.

A couple of other housekeeping initiatives such as:

• continue to evaluate your resources
• focus on service excellence
• get people out of their comfort zones
• train towards peak performance
• continuous measurement - post results
• keep their eye on the ball
• create a theme

As a manager are you doing these things to keep your sales team at peak levels and if not you will experience the recession and you will lose the dream for your team. What are your thoughts?

Stop Your Best People From Walking When the Economy Recovers

Today, enough cannot be said about retaining your employees. When the economy turns around you will see people leaving and most of the time it is your star performers. The Hay Group article below identifies this trident issue (economy, money, advancement)

Increasing engagement means making greater use of non-monetary rewards. Providing better support for success involves looking for ways to remove those organizational hurdles that hinder employees during their working day. But it's crucial that organizations focus on two key concerns to retain and motivate their talent: increasing employee engagement and developing systems that provide better support for the success of their employees. Doing one without the other will not lead to effective employees who are ready to go the extra mile for the organization.


Retention of top talent is an important concern in both good times and bad. While a soft labor market may have depressed turnover rates in many organizations today, retention issues can be expected to surface once labor markets strengthen. Even in the present environment, options are still available to top performers. Savvy organizational leaders recognize that their best people work for their organizations because they want to, not because they have to, and treat them like 'volunteers' regardless of market conditions.


While compensation is often a factor for employees when they consider new employment, it is seldom the precipitating factor. Nonetheless, retention strategies commonly focus on compensation, for example, retention bonuses and stock options.


The downturn has made it more difficult to rely on pay to keep key people committed, so how should companies react?

To foster high levels of engagement, companies must make greater use of non-monetary rewards such as career growth opportunities, meaningful job designs, training, and recognition programs. For these measures to be effective, there must be a clear link between performance and rewards in the minds of employees. The best way to do this is to make sure there is clear differentiation in performance ratings between employees. Those differences in performance should be reflected in meaningful differences in pay and advancement prospects.

Our employee opinion research shows that high employee engagement alone does not guarantee an organization's effectiveness. What's missing is real employee enablement to position motivated employees to succeed. In fact, our findings suggest that while organizations in the top quartile on engagement demonstrate revenue growth 2.5 times that of organizations in the bottom quartile, companies in the top quartile on both engagement and enablement achieve revenue growth 4.5 times greater. But how do you ensure that you're doing the best possible job of enabling your employees? The first step is to make sure you're putting the right people in the right jobs, as employees in the wrong role can quickly become disillusioned and unproductive.

In deploying talent, leaders must consider both the requirements of the job and the employee's ability to meet them. They also have to think about the extent to which the job will draw upon the employee's distinctive competencies and make the most of them. It's also crucial to root out bad business practices, such as unnecessary or duplicated work, to ensure that work environments are supportive of high levels of productivity.

Create the right climate

Finally, organizations have to understand and manage the work climate. The benefit of a positive work climate is often underestimated, but our research shows that business results can vary by as much as 30 percent purely due to differences in the work climate created by a manager. We will provide further insights into how organizations can create positive work climates in one of our upcoming ‘rethinking reward’ articles.

Six steps to better engagement and motivation

In order to succeed in engaging and motivating employees, organizations should:

• ensure that there is a clearly communicated link between performance and rewards within the organization
  
• ensure that there is proper differentiation in performance ratings between employees


• root out bad business practices, such as unnecessary work and duplication, that can adversely affect employee enablement


• put the right people in the right jobs by focusing on job sizing and the kind of person that best fits the role


• monitor and improve the work climate within the organization by ensuring that leaders have the right competencies and management styles to motivate employees


• focus on non-monetary rewards such as career growth opportunities, development, and recognition programs
  

If you look back on the posts regarding retention (4/2/09, 3/5/09, 2/23/09, 12/15/08) you will see how important I think this issue is. Check it out.

Executive Pay for Sustainable Performance

The recent financial crisis has exposed financial services companies that have not effectively managed risk. Bear Stearns, Merrill Lynch, and Lehman Brothers, three titans that had weathered the Great Depression, World War II, and September 11, could not survive the current economic turbulence. In the aftermath of 2008, survivors must redesign risk management and employee rewards to ensure sustainable performance. Investors will increasingly require that executive pay be tied to sustainable performance measured by economic profit to take account of both total capital deployed and risk.

Despite unprecedented fiscal and monetary interventions by governments and central banks, the global economy remains highly volatile. Uncertainty in markets persists because investor and creditor trust has been breached in a way that has not been experienced in generations. While governments, central banks, and regulators have taken aggressive actions to combat the painful symptoms of 'frozen credit' and 'toxic assets,' they are reactive, insufficient, and have long-term inflationary consequences. Resolution can only occur by addressing the root causes of the breach in trust.

A concentration of risk

Although the current financial crisis may be the broadest and most severe in many years, financial emergencies requiring government intervention have been a pattern in the sector. In the recent past we have seen Russian and Latin American sovereign debt defaults, the reinsurance spiral and Lloyds of London failure, the collapse of Long Term Capital Management (whose principals were supposedly the experts on risk!), and the US savings and loans debacle. The common factor in these crises was the concentration of risk in a few areas that appeared to be producing high returns, without providing adequately for the possibility of a disaster. The concentration of risk often has been disguised by the recycling of the same risks among industry players. Reward programs that pay out a substantial proportion of nominal profits (or even of revenues) have operated to encourage this process, as short-term revenues and nominal profits tend to be highest from the highest risk investments – for so long as the risks do not materialize. Even companies that recognized the risks were afraid to change their reward systems for fear of losing out in the war for talent.

The transparency challenge

Post 2008, investors are demanding from management greater transparency, accountability, and long-term performance sustainability than ever before. But transparency in financial services is a difficult goal to attain. Financial instruments are pioneered daily, and it is difficult to adequately describe the complexities of a single transaction, let alone a diverse global portfolio. The credit default swap market illustrates the problem, as it took the dramatic and sudden decline in the housing market to expose the riskiness of the assets. Timeliness is challenging (as we witnessed in 2008) because asset values change on a tick-by-tick basis. Determining the impact of a single change in the bid/ask spread of a highly leveraged asset can be misleading if not presented with great care. The continuing debate on marking to market centers on this issue, and is further complicated by the significant claims attached to any one asset at any point in time.

Finally, the issue of risk-adjusted performance in financial institutions is difficult since there are three categories of risk in financial institutions – credit, market, and operating risk. While Basel II has provided a useful standard for 'value at risk' and 'risk-adjusted return on risk-adjusted capital,' even the savviest investors can find these calculations difficult to interpret. Furthermore, transparency and timeliness are critical to these measures having any utility at all from an investor perspective. For example, highlighting in the 2009 Bear Stearns annual report that the company was overly leveraged by credit default swaps would not be of much use.

Keeping reward in context

Reward systems have certainly contributed to the problem and need to be radically overhauled. However, changing reward so that executives suffer if there is a financial crisis is not the whole solution. Financial crises are infrequent, so they only affect the executives in place at the time; they are also generally (almost by definition) not anticipated, so the possibility of a collapse tends not to affect executive behavior. Therefore, in addition to changing rewards:

• Financial services companies need to improve their risk assessment and to ensure that they are not betting the company on a single investment or on investments that are likely to be correlated in an economic or financial crisis. Given the long timescales, this has to be a governance and regulatory responsibility, not driven by reward - although part of top executive reward should be for doing this well.



• Companies also need to build up reserves against the inevitable losses from time to time, as insurance companies do. Arguably the excess of the risk-adjusted required return over the risk-free rate is an 'insurance premium' that should be reserved against future losses, not paid out in bonuses (or dividends).

Achieving risk-adjusted reward

Executive rewards must be based on measures of corporate performance that take account of the risks to shareholders' capital inherent in the business strategy. Notwithstanding complexity, investors will no longer be satisfied with the 'too complicated' excuse on risk-adjusted performance management.

Corporate performance must be assessed based on a broad framework of interrelated metrics that influence current expectations. To succeed, the framework must first and foremost be economically sound. The 'performance mathematics' must ensure that as levers are pressed, expected values are achieved and perceptions influenced accordingly. Second, it must be comprehensive and balanced. As Drucker reminded us, 'we manage what we measure.' History is replete with pay-for-performance issues stemming from improvement in 'measured' revenue growth offset by 'non-measured' expansion in assets or risk. And finally, it must be easy to implement. If it cannot be readily understood and tracked by all stakeholders, it will not work.

The two measures that should be used to tie executive pay to performance are total shareholder return (TSR) and economic profit (EP). TSR is the best de facto measure of long-term corporate performance, despite the difficulties of defining a peer group to measure relative performance and the potential impact of short-term price fluctuations.

EP is fundamentally the return on capital deployed net of its risk-adjusted cost. It is an essential measure because it ensures that return is calculated in the context of both the scale of capital deployed and its inherent riskiness. While this is a more complicated calculation for financial services companies since these companies are essentially 'spread' businesses, EP is superior to other metrics like earnings per share (EPS) and earnings before interest, tax, depreciation and amortization (EBITDA) since these do not consider risk and capital deployed.

However, TSR and EP must be managed through a performance framework. Exhibit I is an illustrative example of a performance management framework that connects TSR and EP with actionable enterprise operating metrics. From a board and investor point of view, the framework provides a holistic approach that enables effective assessment of 'performance' in the context of executive pay.

While this approach is not immune from the aforementioned issues of comparability and complexity, it is a useful paradigm for establishing a standardized approach to performance management. Investors made their voices clear in 2008 and a failure to tackle the problem will no longer be tolerated. The restoration of trust begins with executive pay for sustainable risk-adjusted performance.

Exhibit I. Performance management framework (illustrative above)

Cost Effective Strategies for Retaining Your Top Employees

Even given today’s economic uncertainty, creating a reward system that attracts and retains talented employees is important for the success of any organization. While you may not be able to afford to offer your employees regular pay increases, there are some other simple and cost effective ways to reward your workers.

To help keep your best workers around, consider implementing some of the initiatives found below:

1. Find out what your employees want. Pay isn’t always most important. For many employees what is most important at work is the satisfaction that comes from a job well done, being recognized and appreciated for one’s efforts, and having the flexibility to balance work with personal obligations. Get a feel for what your employees want before implementing a new reward system. All that may be necessary are some simple changes, such as putting more effort into recognizing your employees or providing your workers with the autonomy that they desire.
2. Extra time off. Providing extra time off is a simple way to offer a desired benefit without cutting into your bottom line. The extra time off is a win-win; it provides employees with an opportunity to catch up on personal business or just get some much needed R&R. And when your employees return, they’ll come back with a renewed commitment to their work and a feeling of rejuvenation.
3. Bonuses for meeting targets. Offering employees a bonus for reaching certain sales targets is a simple motivator to ensure an employee’s hard work is rewarded. With the revenue made from reaching company sales goals, you can afford to share the reward with the employees who made it happen – and who will likely make it happen again.
4. Flexible schedules. Most employees desire a work schedule that easily enables them to balance work with their personal life. To meet these demands, consider offering options such as telecommuting, flextime, job sharing, and shift swapping when appropriate. Employers that fail to offer their employees the flexibility to leave work early to care for a sick child or to attend a parent-teacher conference are not likely to keep quality employees around for very long.
5. Increased responsibilities. Most employees are interested in performing work that is challenging. Whereas, work that is repetitive or requires little thought often results in disengagement. Increase job responsibilities and you will likely see an increase in dedication and commitment.
6. Make advancement opportunities known. Employees that work toward a personal goal, such as career growth are motivated to work hard. So, let your employees know they’re doing well, inform them of advancement opportunities, and work with them to help them reach their career goals.
7. Just say “thank you”. It’s the thought that counts. So if you can’t afford a pay increase this year, think of other creative ways to show your employees that they’re appreciated. Simple forms of recognition, such as praise, thank you notes, and “employee of the month” awardscan go a long way in keeping your employees happy.
8. Tie rewards to performance. When rewards are tied to job performance, employees are more likely to put forth the effort and produce quality results. On the contrary, when employees come to expect pay increases or other rewards “just because”, their performance is likely to remain marginal. It’s important to reward employee performance soon after a job well done so that the employee makes the connection between their hard work and the reward received.

Given the circumstances of the current economy, pay increases may not be on the top of your company’s to-do list. But to be effective, employee rewards don’t have to dip into your company’s budget. Alternatives to pay increases, such as a formal employee recognition program, an extra day off, or even a simple “thank you” go a long way in showing employees that they’re appreciated – and that may be all that’s needed to keep your top performers around.

Are you doing any of these things at your company today?