Retaining Top Talent

A New Corporate Goal?

©.2006 Razi Muzadzi

Retaining Top Talent: A new corporate goal?

EXECUTIVE SUMMARY

In this frenetic knowledge-based global economy, competition has appeared on many fronts. There
is competition for home front and global markets. There is competition for financial resources and
innovation for business to stay afloat and ahead.

And there is competition for the most critical of resources that ensure any organization’s ability to
survive all the other forms of competition: human assets in the form of top talent.
Attracting and retaining talented people has become a growing challenge for business as
competition for the best minds intensifies. It is about keeping in tact the human assets that drive
innovation and work hard to make companies profitable. It is also a Human Resources
management challenge that most organizations can no longer ignore.

For an informed discussion on top talent retention, this paper begins by exploring the reasons
behind talent flight and the associated costs. It then discusses several strategies that organizations
can adopt to retain top talent and assesses their efficacy in the context of today’s highly
competitive economy. It concludes by examining the role Human Resources management can play
in retaining top talent.

TALENT FLIGHT: THE CAUSES

In the knowledge-based and labor intensive Information Technology industry, it has become a
mantra that on average, the Long Service Award is given to an employee with one year of service.
Today’s technology wizards know full well their value and loyalty has become tenacious as they
leave to join other companies or simply start up their own.

There are many reasons why some organizations are more successful than others in attracting and
retaining talented people. Research however seems to locate a common pattern which is
leadership. Building loyalty among the organization’s most talented and productive employees
begins and ends with the manager. Based on a study of over one million employees in 330
organizations world wide, the accounting management firm Ernst and Young has drawn the
conclusion that “ ineffective managers are the a major factor in increasing departure rates… poor
managers have a huge impact on turnover”.1

That research confirms the general observation that more often than not, employees leave
managers rather than the organisation. When people are thrown together in an intense
environment with high pressures and stringent deadlines, tensions are a logical inevitability. Thus,
if an employee feels sidelined or does not get due recognition and respect for his/her contribution,
discord is bound to set in and mounting disillusionment with an unresponsive manager may force
an employee to leave.

1
Jim Clammer, Retaining Top People , The Clammer Group Management Consulting

Page | 2
Retaining Top Talent: A new corporate goal?

Who is responsible for ensuring employee satisfaction in the organisation matrix? The manager of
course but more often than not, they may be busy trying to meet production deadlines and satisfy
customer needs. Who then is there is to look after employee interests? The perception that
management could not be bothered with taking care of employee interests forces them to look for
an environment where the ambience is perhaps more welcoming.

Organizations with a fixation on the company profits bottom line and satisfying shareholders may
quite deliberately ignore the interests of their employees. The typical function of organizational and
professional development may be ignored with the Human Resources Department may quite
deliberately be relegated to the role of a recruiter and nothing else. Planned activities such as
training and mentoring, career charting as well as employee progress might be secondary or
inexistent organizational objectives. The absence of personal development is a motivator for an
employee to take the quick exit decision.

It is therefore quite evident that, a corporate culture which treats it employees, particularly the best
minds, as tools to achieve profitability rather than human beings in search of a sense of belonging,
self improvement and of success, creates an environment of frustration and insecurity which
inevitably contributes to talent flight.

In the new economy, that old employer/employee contract has been rewritten with an emphasis
that employees must now work hard and be multi-skilled. That change has also brought with it job
insecurity, blurred career paths and the constant uncertainty of change is almost guaranteed. It is
therefore easy to understand why employee loyalty is on the wane and talented people feel less
bonded to their organizations.2

In an organization where payroll is not an ongoing activity, the employee that feels his
contribution is not valued and more so not compensated, will simply move on to a place where a
combination of appreciation and better pay is available.

THE COST OF TALENT FLIGHT

Corporate customers and individual consumers now have a wide range of choice and perceive
that what they are purchasing is to all intents and purposes, a commodity that can be purchased
elsewhere. The same applies to talented people who are in search of an environment where their
knowledge and skills are recognized and rewarded accordingly.

The costs of labor attrition when talented people join the competition are quite obvious. These
include productivity losses due to a vacant post and hidden costs like reduced productivity of a
departing employee who is inevitably distracted during his or her job search and hence
contributes less during this period. A Silicon Valley technical company has estimated that it costs
an average of 125.000 dollars when an employee leaves. The financial impact is also
aggravated when employees take with them customers to their new employer.

2
Lynn Ware et al, The Challenge of Retaining Top Talent, Integral Talent Systems

Page | 3
Retaining Top Talent: A new corporate goal?

Unplanned labor attrition has a high cost not only in terms of lost talent but also in terms of the
ability of the company to achieve its corporate goal of customer satisfaction and increasing
shareholders wealth3.

Departing employees are not often candid about the reasons why they leave and this subterfuge
means that organizations are unable to address the real causes of labor attrition. Thus, when
organizations misdiagnose and fail to surface the most critical factors that contribute to attrition,
their solutions fall short of the mark aggravating the cost factor.

TALENT RETENTION: A CORPORATE GOAL?

Since talent retention is a new phenomenon exercising the minds not only of HR managers but the
corporate top echelons as well, research varies widely on the best talent retention strategy an
organization must adopt.

However, since managers have been identified as the major reasons why top talent leaves in the
first place, remedial strategies have focused on them. Thus, managers as custodians of an
organization’s well being must diagnose correctly the reasons for talent departures. In order to
succeed in this enterprise, they must take responsibility for the departure of top talent and begin to
address the management methods and practices they use in their HR management.

In essence therefore, the results of any attrition intervention strategy inevitably depends on the
organization’s ability to provide managers with an awareness of those factors as well as the tools
to help them meet their personal accountability in retaining top talent. Thus a combination of senior
management, intermediate management, Human Resources and the talent itself must form the core
of any talent retention strategy. Strategies should therefore revolve around prevention rather than
crisis management3

Any retention strategy must be tied to critical business activities so that managers do not think
about retention after the fact but rather see it as an integral part of business processes designed to
achieve success and survival in a competitive market. Cowling and James argue that, a more
positive way of tackling labor wastage is to examine the reasons why people stay rather than why
the leave. Their view is that, by understanding why staff stay, management is better placed to deal
with complaints as well as improve the “positive aspects” of the employment package4

Admittedly, attrition cannot be avoided but at certain acceptable levels and may even be desirable
to correct poor recruiting decisions. It is however the organization’s deliberate effort at
understanding the causes of talent flight and taking steps to correct those causes that can
guarantee a successful retention rate. That approach must me multi-dimensional and not focus
sorely on one cause of attrition and as Cowling and James note, controlling labor wastage

3
Manpower Retention in IT: An Oxymoron, Sunil Tadwalker and M.Sen
4
Alan Cowling and Philip James, The Essence of Personnel Management and Industrial Relations p.20

Page | 4
Retaining Top Talent: A new corporate goal?

requires the “measurement, location of the problem, finding reasons, implementing measures and
reviewing progress5

It is my considered view that in devising talent retention strategies, organizations cannot choose
the one size fits all solution. Cultural factors, people factors, economic factors and the ambience in
an organization all play a crucial role in the determination of an appropriate retention strategy.
This requires a careful study of the organization’s behavior and the ultimate solution may well lie in
monitoring what can be called the appropriate measures rather than the right ones.

It should be noted that the most fundamental human value is that of the need to be valued. When
talented employees make a positive contribution to the organization and are conscious that they
are responsible for its profitability, they expect to be recognized. Hence, when members of the
corporate family are putting in a nine hour day of work, their expectations go beyond the pay
check. They have a desire to belong and to know that they are making a difference. As Vroom
and Lawler’s expectancy theory postulates, people bring expectations to the organisation and the
manner and context in which those expectations are satisfied leads employees to perform better
and in the long run bond to their employers.6

Furthermore, the employee needs a connection with the organisation-to communicate and be
communicated with and to know that his ideas and creativity do matter. Admittedly, financial
rewards as an extrinsic factor must be taken into account because it is a measure of recognition.
A structured system of rewarding deserving talent not only enhances performance, but also
motivates team members to work towards recognition. If implemented in a fair, transparent and
equitable way, it acts as a prime motivator for talent to stay with the organization.

However, a structured reward system acts as a complement to the more intangible intrinsic rewards
which include job satisfaction, praise and recognition and this is an important step in
organizational development. In this, middle management has an important role to play by
evaluating and handling properly the resources that report to them on a daily basis. Proper
handling of each person, knowing traits and assets as well as boosting them to overcome
drawbacks, identifying areas for improvement and mentoring are all important tasks of middle
management with an impact on talent retention.

Happy people work better and an organisation can be assured of improved productivity. A
corollary to that is the reciprocal symbiosis of the employee being proud to belong to the
organisation and vice versa which motivates them to work harder and thus ensure maximum
output.

5
Ibid, p.19
6
The Expectancy Theory of Victor Vroom deals with motivation and management. Vroom's theory assumes that behavior results
from conscious choices among alternatives whose purpose it is to maximize pleasure and minimize pain. Together with Edward
Lawler and Lyman Porter, Vroom suggested that the relationship between people's behavior at work and their goals was not as
simple as was first imagined by other scientists. Vroom realized that an employee's performance is based on individuals factors such
as personality, skills, knowledge, experience and abilities.

Page | 5
Retaining Top Talent: A new corporate goal?

HR: ROLE IN RETAINING TALENT

Most HR functions as we know them, deal with hiring resources rather than retaining them. Indeed
the point of hiring may well have an impact on an organization’s ability to retain its top talent. The
CEO of a successful restaurant chain in the USA put it more plainly when he said “we want
someone better than the person who has just left the job.”7 By selecting the best people and
trustworthy people within and outside through a carefully calibrated recruitment system, the
company has experienced minimal turnover. It prides itself in calling its employees “number one”
and rewarding them as well as “looking after them”

Microsoft has a penchant for aggressive hiring procedures which are said to be traumatic at times.
Apparently the company includes on the panel of interviewers people who may eventually report
to the job applicant. Microsoft is therefore sometimes seen as arrogant behemoths whose hiring
practices humiliate rather than give people their self esteem. Consequently, it fails to attract the
talent it wants and worst, is unable to keep it because of the negative perception engendered in
the minds of prospective employees. Thus a successful recruitment policy that endeavors to select
the best candidates and those whose bio-data indicates trust, motivation and a fair chance of
future bonding, is perhaps the beginning of a successful retention strategy.

Initiatives taken by HR with a focus on organizational development calls for a focus on no-core
activities that help motivate employees to get a sense of belonging to the organisation-and a
feeling of excitement to come to work everyday. These activities may include convenience services
such as daycare faculties, fun events and transport benefits all help in the bonding process.

Building trust with employees is a complex task which also calls for transparency. It forms the basis
for building confidence levels of employees and motivating them and it pays off by getting latent
energy, the extra effort employees voluntarily invest in their work. When trust permeates the entire
organisation, it is easier to harness and enlist the efforts of talented assets to achieve organization
objectives. Research has shown that organizations in which employees trust top management have
earned higher shareholder return than in those where there was a lack of confidence in
management.

Empowerment brings with it responsibility. It therefore serves as one of the most powerful tools of
employee retention. If employees are involved in organizational aspects such participation in
decision making processes, implementation of best practices for which they get ownership, it
creates a sense of belonging within the organisation and a reluctance to leave the employer.

7
How an Organisation has been successfully in recruiting, rewarding and retaining the Best Employees , Franchise Update

Page | 6
Retaining Top Talent: A new corporate goal?

The HR manager to whom the human asset reports may well be the lynchpin in influencing the
employee’s commitment level and retention. The retention practices a manager invokes should in
large measure reflect his attitude and actual relationship with his team mates. Good retention
should work on a two way basis based on what the employee contributes to the organisation and
what the employer gives back.

One such tool is for managers to be assessed on the success rate of retaining employees as one of
the key performance indicators over time and performance could be linked to incentives. Thus,
when managers are held accountable in this way, it motivates them to examine and enhance good
retention practice. Equally important is the entire organization’s effort in the retention practice
since the manager does not control all the factors that affect talent flight. An ideal combination of
the organization’s retention system and managers’ positive attitudes towards employee retention,
when working in a complementary fashion may be the best formula to achieve organizational
objectives.

In the final analysis, HR has the major role of doing a root cause analysis of attrition rates and
taking appropriate preventive action to address the causes of employees leaving the organization
and by enlisting the support of senior management.

CONCLUSION

Given the importance of talent in organizational productivity and the costs associated with its
flight, talent retention should be considered as a business goal rather than damage control. And in
order to be effective, any retention strategy not only requires a joint effort on the part of managers,
senior managers, HR managers, training and development managers and individual employees,
but also requires continuous surveillance to ensure that it sustains and succeeds in meeting
organizational objectives. Managers should do with more communication, more coaching,
mentoring and partnering to create the environment that induces employee loyalty8

Good talent retention practices must, as we have seen, reflect the manager’s behavior on the job.
They should not only focus on the human asset and what it is contributing but also focus on what
the manager is doing to create a conducive work environment that enlists the employee’s long-term
commitment to his job. Top talent employees recognize they represent a valuable asset and when
they are not recognized and rewarded in equal measure, their loyalty becomes questionable and
are quick to switch organizations.

The loss of key employees whose specialized expertise is critical and who maintain value added
customer relationships can be fatal to the organisation. Thus it is incumbent upon individual
organizations to educate their managers and above all to create that environment where top talent
can and should be allowed to flourish. Anything to the contrary only gives an organsiations’s
competition an added advantage as it capitalizes on the deserting talent.

8
Joanne Sujanky, The Private Sector: Retaining Top Talent (www.post-gazzete.com 2003)

Page | 7
Retaining Top Talent: A new corporate goal?

Charles Handy sums up the challenges organizations face in retaining top talent particularly in this
“new” economy. He argues and rightly too that “the means of production can, in practice, no
longer be owned by the people who think they own the business. It is hard to prevent brains from
walking out through the door if they want to”9

9
In his book « The Age of Padox « Charles Handy argues that intelligence is “sticky” and it not possible to take this new form of
property away from anyone.

Page | 8
Retaining Top Talent: A new corporate goal?

REFERENCES

1. Alan Cawling and Philip James (1994), The Essence of Personnel Management and Industrial
Relations p, Prentice Hall International (UK) limited

2. Charles Handy(1994), The Age of Paradox, Harvard Business School Press

3. Charles A. O'Reilly & Jeffery Pfeffer (2000) Hidden Value: How Great Companies Achieve
Extraordinary Results with Ordinary People, Harvard Business School Press

4. Jim Clammer, Retaining Top People , The Clammer Group Management Consulting

5. Joanne Sujanky, The Private Sector: Retaining Top Talent (2003) (www.post-gazzete.com )

6. Lynn Ware and Bruce Fern (2005) he Challenge of Retaining Top Talent: The Workforce
Attrition Crisis, Integral Talent Systems (www.itsinc.net)

7. Michaels, Helen Handfield-Jones, and Beth Axelrod (eds 2001) The War for Talent;
Harvard Business School Press

8. Peter Cappelli (Jan –Feb 2000) "A Market-Driven Approach to Retaining Talent," Harvard
Business Review

9. Stephanie Armour, "Firms Cook Up New Way to Keep Workers," USA Today 1/16/00

10. Sunil Tadwalkar and Manjira Sen (2005) Manpower Retention in IT: An Oxymoron?
(www.acm.org/ubiquity/views/v6i14_tadwalkar.html )

11. Tony Morden, Principles of Management, Ashgate

Page | 9