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Employee Retention – Critical Skill at a Critical Time

By Mike Goldman


Many of you have probably heard about the "pending" labor shortage. The Herman Group predicts that by 2010, there will be a shortage of over 10 million employees in the U.S. This is not a problem that will magically appear in 5 years. The problem is NOW!!


We are currently in the tightest labor market of the past 40 years. Data already suggests we have a shortage of almost 5 million employees. Much of this is due to the impact of the 20% drop in birth rate we saw after the Baby Boomer generation. At the same time these Baby Boomers begin to retire, fewer people are entering the job force. Unemployment rates are at their lowest levels since early 2001 and they will only get lower.


If you haven’t given this problem much thought, you’re not alone. Most companies have been lulled to sleep by the up and down economy and fickle job market of the last few years. That’s great news for those of you reading this because the few companies who understand the importance of this problem, and proactively do something about it, will gain incredible competitive advantage.


The Impact

You will feel this impact in two ways:

  1. Increased employee turnover

According to the Gallop organization, only 29% of employees are truly engaged in the work they do. That means 71% of your employees would probably not think twice before leaving for a better (or maybe just different) opportunity. At the same time, the current positive state of the economy, low unemployment rate and flexible work arrangements have given employees more choices than ever before.  And, by the way, your best employees have the most choices, and therefore more reason to leave! Think about the impact that would have on your customers, employee morale, hiring costs, training and number of non-gray hairs on your head.


If you haven’t begun to see this problem in your organization, you will. If you don’t tackle this problem today, you will pay dearly to solve it tomorrow.


  1. Increased difficulty in recruiting

Some of you may have already experienced the increased time it takes to find qualified employees. Two years ago, a job candidate was happy to have one good job opportunity. Today, most good job candidates have several opportunities to choose from.


This will cause two types of problems: either your company will be understaffed as you wait longer to fill those open spots, or you’ll rush to fill open spots by settling for employees that are not really qualified for the job.


The Solution

So how do you weather this storm?


What follows are eight ways to dramatically increase the chances of keeping and maximizing your best employees.


  1. Hire the right people

The first step for any company hoping to become great is to hire superior people.  "A" players breed more "A" players. Companies filled with "B" and "C" employees will not have the ability to attract "A" players. In addition, the "A" players you do have will be de-motivated and/or leave.  


Research has shown that companies mis-hire 75% of the time! That means most companies need to hire four mediocre or under-performing employees in order to find one "A" player. The cost of this poor performance is astounding when you estimate the impact on company performance and/or employee turnover costs. 


Therefore, the first step in your retention process should be to improve your hiring process. You will need to develop a system for recruiting, evaluating and hiring superior people. This is an extensive topic unto itself, which has spawned hundreds of books. I suggest you read "Hire With Your Head" by Lou Adler or "Topgrading" by Bradford Smart as a great starting point.


  1. Know your employees

Do you adhere to the adage that all employees should be treated equally? If so, your employees will never achieve their true potential, and never be truly happy in their work.  


Each one of your employees has different strengths, weaknesses, likes, dislikes, goals, motivations and learning styles. By understanding and acting on these differences you will be able to bring the best out of your team.


Let’s look at an example concerning motivations&ldots;

One employee is motivated by money and/or status while the second employee is motivated by free-time and flexibility.  Should both be offered the same type of work incentives? Of course not.


Let’s look at one more example. This time concerning learning styles…

Some employees learn best by studying everything there is to know about task before trying it. Forcing them to begin a task before they’re ready will result in poor execution and diminished confidence. Other employees like to learn by doing. They like to understand the basics of the task and then be "let loose" to learn from their mistakes. Studying the details of a task for too long only bores and de-motivates them.  Would you train these different types of employees in the same manner?  I hope not.


The sad thing is that most managers don’t know their employees well enough to understand these differences. If that’s the case in your situation, the first step is incredibly easy. Just ask them. Ask them what they like and dislike about the job. Ask them what motivates them and how they like to learn best. Not only will you find out an incredible amount of useful information, you’ll also show them how much you care.


  1. Focus on employee strengths

When creating and giving employee evaluations, how much time do you spend on strengths versus weaknesses? If you’re like most managers, you rack your brain to find every possible weakness and development need for the employee you’re evaluating. I remember having a hard time writing reviews for my best performers since it was more difficult to find areas of weakness. Telling them where they were doing a great job was almost an afterthought and not much more than a pat on the back.


Focusing on weaknesses might help an employee become a bit more "well rounded", however, being "well rounded" is incredibly overrated.  Employees will rarely become strong in an area of weakness. The best we can hope for is that they will rise to become mediocre. However, where an employee has talent, they can become world-class.  In addition, focusing on maximizing those areas where we have true talent is incredibly motivating.


This doesn’t mean we should ignore weaknesses. By all means, if weaknesses are getting in the way of doing the job, you need to find ways to manage around those weaknesses. These can include looking for ways to get them to acceptable levels of performance, changing their responsibilities or counseling them out of your organization. But don’t expect them to become "expert" tomorrow in those areas they’re weak in today.


Your return on investment will be significantly greater by focusing the employee’s efforts on continuing to build on their talents by adding new knowledge, experience and tools. Would you rather have a "well rounded" employee or a world-class employee? 


  1. Create a compelling mission

I’m not talking here about your typical mission statement, created by high level executives during a 2-day retreat. I’m talking about something your employees feel in their gut. Something that makes them believe their work is important.  Something that gives them pride in what they do.


If you work for a brokerage firm, wouldn’t it be more powerful to state your mission as "We help our clients provide for their children and live comfortably into their old age" than to say "We will be the leading brokerage firm in our industry". If your company makes smoke alarms, wouldn’t it be more powerful to have a mission to keep families safe instead of a mission to be the #1 provider of smoke alarms.


Think about what makes your work important and make that your mission.


  1. Trust your people

Conventional management wisdom says you’ll get the most out of your employees by defining specific goals and detailed procedures for getting there. This is only half right. Creating challenging goals is critical, however, let your employees figure out how to get there.


Most of us know it’s the people on the front lines who truly understand the best way to get things done. Defining every detailed procedure for them not only stifles their motivation and creativity, but also lowers the chance they’ll create break-thru performance.


If you’ve hired the right people and given them the tools necessary to do the job, you should give them the freedom to get the job done. Giving them ownership will allow them to reach their true potential.


  1. Show your appreciation

There’s a reason why teams play better in front of a home town crowd. There’s a reason why stand up comics feed off the laughter of the crowd. Appreciation works!


Find ways to measure and reward positive outcomes. Compliment and celebrate your teams’ accomplishments big and small. There’s no such thing as too much praise as long as it’s genuine.


  1. Cultivate strong managers

Research shows that employees leave their managers, not the companies they work for. It does no good for a company to invest in great compensation plans, mission statements and performance management systems if front line managers can’t execute against the previous six ideas.


Simply put, managers need to know how to effectively select, manage, develop and reward their employees. Missing any one these pieces will lead to poor performance and high employee turnover.


Therefore, a company’s biggest investment should be in the selection and development of great managers.


  1. Have fun!

We spend half our waking lives at work. Shouldn’t we figure out how to make it fun?  Not only will a fun work environment breed happier employees, it’ll breed creativity, outstanding service and tremendous teamwork.


Allow your employees to play, have fun and experiment. Encourage them to contribute to others (employees, customers and the community) in extraordinary ways. Most of all loosen up. Let people bring their true selves to work and have a good time. Your customers, employees and bottom-line will be better for it.



Following these eight steps will actually do a great deal more than help you keep your best employees. Happier, more productive employees will lead to improved innovation, quality, customer service and, best of all, profitability.

This Personnel Management article was written by Mike Goldman on 12/12/2005

Mike Goldman is the owner of Pridestaff of Paramus, providing workforce solutions to companies in Northern New Jersey. Mike also spent 17 years consulting to Fortune 500 companies and is a writer and speaker in the areas of career management and workforce strategies.