In-Depth

Never Let Them Go

Finding superstar employees is just the first step. Smart partner companies do everything in their power to keep them as well.

• By Fred Bayles
• May 01, 2006

The success of Berbee Information Networks Corp. can be measured in many ways. The Madison, Wis.-based Microsoft Gold Certified Partner has opened a half-dozen offices across the upper Midwest. Its customer list continues to expand. It's seen an average revenue growth of 33 percent annually for the past five years.

Berbee's success can also be measured by its growing staff. CEO Paul Shain says the company, which offers a range of IT solutions, has been adding about 20 new employees per month for the last 18 months, pushing to its current roster of 700 workers. Yet Shain is equally proud of another, smaller number: the scant two to three people who leave the company each month for other jobs in an increasingly competitive market.

Shain sees Berbee's ability to retain its people as a major key to its success. Although any lost employee is a negative, the departure of two or three a month is nothing when compared to the 45 percent to 60 percent turnover rate seen in the bloody competition for employees among Silicon Valley firms during the last economic boom of a decade ago. "Without the engineering resources, our business model really breaks down fast," he says. "That makes it very important for us to figure out what works to keep our talented people." Berbee uses a combination of tactics to maintain those admirably low turnover rates -- for instance, having employees work with supervisors to develop career plans and offering an incentive-compensation program tied to workers' contributions to the company's profitability.

Those intensive retention efforts reflect a challenge that many companies are just beginning to grasp: The world's best strategies for bringing new talent in the front door won't do you much good if you've got a steady stream of experienced employees walking out the back. For that reason, Berbee and other Microsoft partners rely on a variety of strategies to keep their employees happy -- and on the payroll.

A Changing Employment Marketplace
Two decades ago, employee turnover was seen more as a nuisance than a strategic disaster. There were plenty of other eager young candidates hitting the job market to fill an empty spot. That all changed with the IT boom of the mid-1990s, when suddenly there were more available jobs than candidates. Now, with the job market recovering from the economic downturn of earlier in this decade, it's becoming clear to many that a company's survival depends on its ability to keep its workers.

"Some of the most successful employers are adapting to the mindset that losing a talented employee is like losing a major customer," says Leigh Branham, an Overland Park, Kan., consultant who specializes in employee retention.

"Some of the most successful employers are adapting to the mindset that losing a talented employee is like losing a major customer." -- Leigh Branham, consultant and author of The 7 Hidden Reasons Employees Leave

So how do you go about retaining those assets so important to both you and your customers? Conventional wisdom emphasizes the old standbys -- a golden handcuff of higher salaries and richer perks and benefits packages. But HR experts say the increasing competition for workers raises the possibility that someone out there can always outbid you. What that means, they say, is you will have to look to other ways to keep your employees happy and engaged.

Branham enumerates some of these retention strategies in his book The 7 Hidden Reasons Employees Leave (American Management Association, 2005). Only one of those reasons, he says, has to do with money.

"Eighty-eight percent of managers still think it's mainly about salary and benefits," Branham says. "But research indicates people start disengaging from their jobs for many other reasons."

Branham's list includes less tangible causes of employee turnover, including a perceived lack of appreciation by bosses, a shortage of opportunities for personal and career advancement, a limited stake in company decisions and an out-of-whack balance between life and work.

Although some of these issues are being addressed in the industry, Branham says too many managers still have a mindset developed during the 1980s, a time when a strong worker pool meant that few employees were genuinely irreplaceable. But a look at some statistics from today and tomorrow should prove a sobering exercise for those who still fail to see the importance of an aggressive retention program.

As detailed in last month's management series article ("Hire Power," April 2006), the twin forces of demographics and a steadily growing economy have sparked increasing competition for employees, especially the IT workers and system integration engineers that populate the world of Microsoft partners.

The U.S. Bureau of Labor Statistics predicts that there will be 54.7 million jobs to fill between now and 2013 -- with the IT industry among the fastest-growing sectors. Add to that the fact that 77 million baby boomers -- people now about 42 to 60 years old -- will be hitting retirement age between 2010 and 2020, making it difficult to find the bodies to fill all the jobs. That means more competition just to keep existing employees.

Jennifer Schramm, manager for workplace trends and forecasting at the Alexandria, Va.-based Society for Human Resource Management, says there's evidence that the competition has already begun. "We've been doing ongoing research over the past few years, asking employees what their intentions would be when the job market improved," she says. "We found there was a lot of potential build-up for movement. We're beginning to see that movement now."

That movement will be costly for firms that aren't ready to stem the flow of employees out the door. According to John Challenger, a principal in Challenger, Gray & Christmas Inc., the Chicago-based employment-consulting firm, the cost of replacing a trained professional can be up to 10 times that person's annual salary.

"There are lots of repercussions and hidden costs when a key person leaves," Challenger says. "It's not only the initiatives and company-specific knowledge that's lost. It means projects are delayed and deferred."

Shain, of Berbee, agrees. He says a steady turnover can be deadly to a company when it comes to customer relations.

"We recognize this is a huge concern for our customers," he says. "They make an investment in your ability to provide consistency. If they feel you're training your people on their technology and systems, it's going to be a much less successful relationship."

Advice from the Trenches
Tamara Erickson, a co-author of Workforce Crisis: How to Beat the Coming Shortage of Skills and Talent (Harvard Business School Press, 2006), and the executive officer of Concours Group, a consulting firm with offices in Kingwood, Texas, and Watertown, Mass., says one of the most important steps in retention is making sure that you're hiring the right people in the first place. Companies, she says, must "brand" themselves as a definable culture to potential employees in order to attract the ones who will thrive in their new environment.

"Some people want to work in a slow, steady, well-defined environment, others want to work at a fast place. You can't offer both," she says. "You have to define what you are right up front." (For more tips, see "7 Tips for Keeping People on Board.")

7 Tips for Keeping People on Board In his book, The 7 Hidden Reasons Employees Leave, consultant Leigh Branham offers recommendations for companies serious about retaining their workers. The following list draws on Branham's expertise and advice from other experts: 1. Hire right in the first place. Fight the urge to fill jobs with any available warm bodies. Hiring the wrong employees increases the likelihood of their early departure -- and the cost of replacing them. 2. Make new workers feel welcome. New employees' first three months are the most precarious. Reduce turnover by checking in regularly to address potential problems. Consider ongoing initiatives such as Incremax Technology Corp.'s professional-development program to keep all employees moving forward beyond the probationary period. 3. Encourage employees to think about their futures. Most professionals want to advance in their careers. If you can tie their goals to the ompany's interests, everybody benefits. 4. Encourage employees to think about the company's future. Nothing distances people more than keeping them out of the loop. Nothing vests them in your success more than including them in strategic planning. 5. Pay attention to industry wages. Keep compensation levels current to prevent losing workers to competitors. Whatever you pay in raises is probably less than replacement costs. 6. Make their lives easier. The days of expecting employees to prove their loyalty with 80-hour weeks are over. Younger workers want a good work-life balance; older ones are deciding between retirement and less stressful jobs. Don't drive either group away by requiring more and more work. 7. Be fair. If you offer options such as flex time and telecommuting, apply the rules equally. The perception that someone is getting special treatment can send others in search of greener pastures. -- F.B.

Such is the philosophy of Jeff Grell, a senior vice president at Junction Solutions, a Lincolnshire, Ill.-based Microsoft Gold Certified Partner. Grell and the others who meet with job candidates paint a realistic, if not slightly dismal, picture of what a job with their company would entail: 100 percent travel to set up Microsoft Dynamics AX at manufacturing plants far away from the bright lights and fine dining of the big cities.

"We don't paint an overly negative picture, but we make it clear that they will always be out in some little suburb or sleepy hamlet that may be a four-hour drive from the airport," Grell says.

Very often that enticing picture will dissuade an applicant from going further. That's fine with Grell. "I'd rather them not join up than to come and leave early," he says. "It's quite an investment to bring in a consultant, train them and get them up to speed. You don't want to see that investment wasted in a couple of months when they decide, 'Hey, this isn't for me.'"

The importance of an arduous screening process for a new hire is fast becoming dogma among managers and HR professionals. But where companies often fail is in the next step: keeping in touch with the new employee's thoughts and desires.

At Incremax Technologies Corp., a Manhattan-based systems integrator and Microsoft Gold Certified Partner, president and founder Kerry Gerontianos discovered that key employees were frustrated with what they perceived as a lack of interest in how they wanted their careers to evolve and grow. That grumbling stopped, Gerontianos says, after he instituted a system of regular job reviews focused on professional development.

"When we ask engineers what they want, they are very clear about keeping their skill sets up to date," he says. "I now tell them 'I'm going to push you very hard in that direction because I need you to stay current.' It works well for all of us."

These job reviews also provide Gerontianos with other vital information. If an employee says he or she is growing bored with an established long-term project, he will rotate that person into a new job.

"To keep people, you need to keep them engaged in interesting projects that allow them to expand their knowledge bases," he says.

The promise of movement within a company is another way to hold your employees' interest. Some places encourage workers to try out new opportunities within the organization -- and while some of the best examples don't involve technology companies, their ideas can certainly apply to Microsoft partners. For instance, Charlotte, N.C.-based Duke Energy lets people swap jobs to see if it's the right fit. Lands' End, the Dodgeville, Wis.-based apparel company, allows employees to try new jobs for two weeks before they decide whether they really want to leave their old ones.

Overcoming Objections and Obstacles
Of course, some managers oppose the free flow of movement between jobs and departments because they worry about losing their own good employees.

"There are some managers who try to hoard their talent, which doesn't work for the manager or the company," Branham says. "The managers might not want to lose someone to another department, but if people feel they are at a dead end, they will leave the company anyway." For that reason, he says, it's important to offer ways to overcome such resistance. He talks of one small firm where employees can call the CEO's hotline to complain if they think their loftier career goals are being stifled by a controlling department head.
Another sure way to see a hemorrhage of departing workers is failing to recognize that the 80-hour week and constant travel demands -- seen as heroic in the last economic upturn -- are longer acceptable to many employees, especially those who are just starting families.

"Younger workers value flexibility and a work-life balance the most," says Schramm, the researcher for the Society for Human Resource Management. Schramm says programs such as flex time and telecommuting are perks that carry no real extra costs -- good news for companies struggling with the soaring price of health care and other benefits that are getting harder to finesse.

Although Schramm says most companies surveyed by the society haven't done much to add to those types of options, she expects that will change in the next few years as the baby boomers start considering retirement.
When that happens, Schramm and others say, companies must begin to come up with ways to keep this wealth of talent and experience from leaving for other less stressful venues.

The retention of those senior employees will raise a multitude of tricky issues. Challenger says that although many baby boomers may not be ready to accept retirement, few are willing to keep working in high-pressure jobs into their 60s. This creates questions that go to the heart of your workplace's social structure. How will these long-time managers be managed themselves as part-timers or contract workers? How will the younger employees relate to former bosses now working for them?

Such are the hard issues that lie ahead for managers and human relations professionals. For employees, however, the workplace will likely be a kinder, gentler place. In order to keep them at their desks, Branham says some of the tougher, my-way-or-the-highway managers will have to change into teddy bears.

"The whole structure of companies, from the board of directors on down, will come to see that you will have to communicate to the work force to show that you have their interests at heart instead of a management style that encourages a take-the-money-and-run attitude," he says. "It will be a great time to be in the workforce if you are old or young. It's just too bad that it took the economic changes to wake people up to the fact they need to treat people better."