Retaining Workers in 2014 Requires A Clear Talent-Retention Strategy, Counteroffer Guide

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By Larry Reynolds  

The improved economic activity that is expected in 2014 is likely also to prompt increased employee turnover this year, John Reed, senior director of the recruiting firm Robert Half Technology, told Bloomberg BNA Jan. 6.

Companies that fail to devise a coherent talent-retention strategy will be the most hurt by employee turnover as the economy improves, said Hay Group senior principal Mark Royal, during a recent talent-management webinar.

“Employers should start sitting down with their top people throughout the organization, today, to get a fix on where those people stand, if they are happy and if they still consider their job a good fit,” Reed said.

Workforce Growth

“The U.S. workforce is projected to grow 4.4 percent from 2013 to 2017,” said the “America's Job Outlook: Occupational Projections 2013-2017” report from CareerBuilder and Economic Modeling Specialists International.

The projected pace of 4.4. percent is “faster than the 2009 to 2013 period (3.5 percent), but still down from the pre-recession 2003 to 2007 period (5.8 percent),” the CareerBuilder report said.

“As growth builds and employment opportunities increase, worldwide employee turnover is set to accelerate in 2014, after broadly flat levels in recent years,” said the June 5, 2013, news release for the “Preparing for Take-Off” study from the global management consultant firm the Hay Group and the Centre for Economics and Business Research.

Worldwide, the trend toward accelerated turnover is expected to continue. Average employee turnover rates over the next five years are predicted to rise to 23.4 percent from 20.6 percent, the Hay Group news release said. In 2018, the number of workers departing from companies is predicted to stand at 192 million worldwide, it said.

Globally, 161.7 million workers are expected to depart from companies in 2014, a 12.9 percent increase from the number of departing workers in 2012, the Hay Group news release said.

Increased workforce turnover can be expensive, Royal said at the Aug. 6, 2013, “Are You Ready for the Talent Exodus?” webinar presented by the Human Capital Institute and Hay Group.

For a company with 10,000 employees, turnover costs for entry-level workers, alone, could reach $17.3 million, Royal said.

Counteroffer Options

When top-performing employees with critical skills indicate that they plan to resign, companies' first reaction is often to offer an incentive for them to stay, Hay Group's practice leader for rewards management Tom McMullen told Bloomberg BNA Jan. 6.

Typically, employers have a 48-hour window to decide whether to present a counteroffer, yet only 14 percent of companies have official counteroffer policies or templates for preparing and evaluating offers, and 4 percent of such policies or templates are documented, McMullen said.

To create a workable counteroffer policy, a company's first step is to articulate the types of workers it seeks to retain and then to identify the employees with critical skills, high performers or those who have potential to be high performers, he said.

Counteroffer guidelines should include allowable short- and long-term salary and benefits increases, how the counteroffer is to be determined and who is to present it, in addition to providing a description of the people and the positions eligible for counteroffer proposals, McMullen said.

When a company is giving consideration to whether it should make a counteroffer to a departing worker, “it is important to remember that not every manager or employee is necessarily a keeper,” he said.

Tailoring Attractive Plans

Retention plans should then be tailored to match different, specific skill sets and talent types that are needed by the company and crafted to appeal to the general workforce population and to specific age groups, according to Deloitte Consulting's Talent Edge 2020 study, issued in 2012.

Overall, 44 percent of employees ready to resign would stay for additional bonuses and financial incentives, 42 percent would like a promotion or other job advancement and 41 percent would remain for a raise in base pay, said the Deloitte study, which is one in a series of studies conducted from 2009 to 2012 on talent management during and after the recent recession.

The study's findings, broken down by demographics, indicate that bonuses and added compensation are the most influential factors in middle-aged baby boomers' decision whether to remain with a company.

For millennials, the most influential factors are opportunities for promotion, job advancement and additional compensation, the Deloitte study said.

Flexible work arrangements ranked high in importance to all employees, the study said.

A flexible work environment would keep 26 percent of those surveyed from leaving their current job and would keep 45 percent of older employees working beyond normal retirement, it said.

A pay increase, bonus or perk contained in a counteroffer should be large enough to be obvious, which generally translates into above-market rates, McMullen said.

Assembling a counteroffer package that makes a worker feel wanted without alienating other employees may be tricky, McMullen said. It does little good to create a package that persuades one employee to stay but that spurs the employee's colleagues to look for new opportunities elsewhere, he said.

Experts disagree about whether trying to dissuade a top employee from leaving is sound policy, Reed said.

“Making a counteroffer is generally not a good idea, even if the company is short staffed, in my opinion, because it's often like placing a band-aid on a head wound,” he said.

“The real reason most employees quit is because of issues with their direct manager or supervisor,” Reed said, noting that rarely are these issues addressed or even known by those developing the counteroffer.

As a result, most employees who are successfully convinced not to resign subsequently leave within a year of accepting the counteroffer because the underlying interpersonal problems do not get resolved, Reed said.

Positive Attitude

Employers sometimes forget that their success is tied to how positively workers view their roles and their likelihood of being personally successful, Royal said.

Five critical factors influence employee retention: trust in the company and its leaders, career-development opportunities, a fair exchange of rewards for effort, the degree to which the employee is given authority and independence and an environment that permits success, Royal said.

The best countermeasure to losing an outstanding employee is to create a work environment that makes top employees want to stay, Royal said.


Managers should be trained to identify and address potential problems that could result in a top performer leaving, Reed said.

Personal issues may have a major effect on retention, so companies should consider holding managers partly accountable for the retention of their top direct reports as an incentive for them to work out any problems before superior performers decide to take their talent and experience elsewhere, he said.

Implementing a kind of reverse performance review called a stay review of the company by its employees is one way to do this, said consulting firm the Work Institute in its “Essential Guide for the Process of Conducting Stay Interviews.”

In a stay review, a worker and manager meet several times a year to discuss and document what the worker thinks about company practices and the most valued aspects of the employee's relationship with the organization, as well as possible workplace issues to be addressed.


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