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Retaining Employees-Harvard business course

By Christina Price,2014-08-28 20:14
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Retaining Employees-Harvard business course

In today's knowledge-based economy, people not machines, land, or financial assets are your

    company's most valuable resource. Why? Because it's the people who acquire, build on, and use their knowledge and skills to innovate and create top-notch products and services.

    Whenever your firm's employees leave, the company loses their hard-won wisdom and acquired skills. Even worse, when those employees go to a competitor, the damage gets compounded not only has

    your firm lost an important part of its knowledge base, your competitors have gained it.

    In sheer dollars, the cost of employee turnover may shock you: Replacing an employee is likely to cost your firm at least twice the departee's annual salary. So for that $60,000 employee who just walked out the door, that's $120,000 just to hire and train a replacement. That doesn't take into account the fact that the departed employee is now using her brainpower and any special skills she may have learned at your firm somewhere else.

    Losing a good employee carries another potential price tag as well: the erosion of customer satisfaction and ultimately profitability. Why? Because the longer employees stay with your

    firm, the more they get to know your customers and learn how to keep them happy. When familiar employees leave, customers may not get the same quality of service they're used to. If those customers become dissatisfied, they may defect to other companies. Just as losing employees can get expensive, so can losing customers! In an era when every dependable customer counts, your firm can't afford to lose the high-quality employees who keep those customers loyal.

    Retaining valuable employees is among the most essential ingredients for success in today's business world. And the responsibility for keeping those employees rests with you. Every manager plays a

    direct role in retaining top talent.

    So how can you make a difference? Strategies for retaining good employees generally fall into three

    categories:

    Asking employees for feedback

    Creating great work environments, and

    Creating great jobs

    Let's consider an example to explore these categories in practice.

    Lorenzo was a manager at a mid-sized company with a team of 20 direct reports. The company had been doing great sales and profits were up. Lorenzo expected substantial year-end bonuses for his group. He was caught by surprise when Marcia, one of his top performers, came to him with her resignation. Lorenzo offered Marcia more money to stay, but she declined the counteroffer. A bit puzzled, Lorenzo decided that Marcia's departure was unfortunate, but inevitable. He figured there's always some turnover, even at a company that's doing well. But soon after Marcia's departure, Greg was at Lorenzo's door with his resignation letter in hand. And a few months later, Walter gave notice, too. Each time, Lorenzo offered more money. But each time the employee left. And, worse, Lorenzo learned that all three had taken jobs at a direct competitor!

    Typically, the exit interviews with Marcia, Walter, and Greg revealed little about the root causes for

the departures. The conversations were pleasant, and even complimentary. But Lorenzo knew he had a

    problem he had lost three employees in less than a year. How was he going to prevent further defections?

    After consulting with HR and reading some articles on retaining talent, Lorenzo decided to tackle the problem head on. He started with the first recommendation for retaining valuable employees: asking

    for feedback.

    He conducted some informal interviews with his remaining employees. He asked why they thought Marcia, Greg, and Walter had left. He hoped to get to the heart of the problem. Instead, he got answers like, "I don't know. They seemed happy. Maybe they just needed a change." And when he asked for input on whether the work environment played a role, he got answers ranging from, "I don't think so" to "Beats me...though I hear Marcia's new company is in a great location."

    Frustrated, but not deterred, Lorenzo decided he needed help. He knew that creating a great work

    environment was the second key to retaining employees. But how could he do that when he didn't know what people wanted? He decided to hire an outside firm to carry out an informal survey, inviting employees to describe their ideal work culture. Some of the employees framed their answers in terms like "casual" and "fun." Others were more specific, with responses like: "I want to have some room to make my own decisions" or "I like working in an environment that encourages creativity." Whether general or specific, the feedback suggested employees wanted a more relaxed environment in which they felt they could make meaningful contributions.

    The results surprised Lorenzo. He thought his group appreciated his direct, serious style. And he viewed his involvement in their projects as helpful. But he was willing to look for ways to respond to the feedback and change his supervisory style and the work environment. In the following weeks, he organized some group outings, instituted an informal dress code, and made an effort to be less hands-on and more relaxed in his interactions. He tried to give employees more freedom to define how they did their jobs.

    And instead of assuming that good compensation was enough of a reward, Lorenzo looked for additional ways to show people how he appreciated them. He frequently thanked individuals when they did a superior job, and looked for opportunities to provide them with "comp time" when they had to put in extra hours.

    Gradually, the work environment became more relaxed and fun. Lorenzo noticed people were more inclined to ask for his advice maybe because he wasn't interjecting it at every turn. He felt like he was gaining his group's trust, and that people were more candid.

    Encouraged by this, Lorenzo decided he was ready to tackle the third category of any retention

    strategy: creating great jobs. He started by meeting with his most talented employees to help them clarify their career goals, and he committed to looking for "stretch" assignments to help them develop new skills. He also said he'd try to allow for more flexible work arrangements such as telecommuting and virtual teams.

    It turned out that tweaking existing jobs wasn't easy. The virtual team idea didn't work at all. But perhaps because Lorenzo had been so committed to improving the work environment, the employees

    recognized his good intentions and were patient as he tinkered with their assignments. To make sure people weren't getting frustrated and to stay abreast of any issues, Lorenzo continued to ask for feedback. He regularly asked people how they were doing. He also conducted "stay interviews," to let top performers know how important they were to the company and to make sure they continued to feel fulfilled by their jobs.

    In this example, Lorenzo learned from his mistakes and you can, too. Don't fall into the

    all-too-common trap of taking valued employees for granted or assuming that, because they work for you now, they'll be working for you later. Instead, assume you need to consistently "re-recruit" them. Focus on asking for feedback to create a great environment and great jobs to help retain your most

    important business assets your employees.

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