Executive Corner Proactive approach to retaining your best talent by Charles Mak As the economy gets stronger, employee retention is becoming a top HR priority Staff turnover is not necessarily bad for a company — it prevents stagnation and ensures that new talent brings a flow of new ideas and perspectives. However, when the turnover rate gets too high, problems inevitably follow. Additional management time and resources must be spent on recruitment and training, and efficiency can be dramatically reduced. "The hidden cost of replacing people is very high," says Erika Morton, country manager of executive recruitment firm, Hudson Hong Kong. "For an executive, you could spend up to three times their annual salary by investing a considerable amount of management time on interviewing, training and familiarisation." Depending on the role and previous experience, it usually takes a new recruit between six months and a year to settle in and become effective. Therefore, leading companies have now made matters relating to the retention of key employees a major priority on their corporate agendas. "It is important that employers identify the people with high potential and that they facilitate their growth within the organisation," Ms Morton says. "That is an effective first step. Studies have shown that most individuals place a high importance on learning and progressing. If you know what staff want and give them the opportunity to do it, they tend to stay longer." The rapid growth of the economy has made retention programmes more necessary than ever. Ms Morton explains that business success increasingly relies on the knowledge, skills and personal attributes of individual employees who cannot be easily replaced. We start by focusing on the employees and identify their development needs Competitors, though, will always be looking to attract such staff, seeing their recruitment as an investment in talent and a possible way of saving on training and development costs. For these reasons, experienced executive search firms have now started to offer advice on retention programmes, each of which is specifically tailored to the needs of companies operating in different industry sectors. Individual focus "We start by focusing on the employees and identify their development needs," states Ms Morton. "Training, coaching or mentoring can all be factors, or it can be a combination of all three. There is no one solution, and the best thing about this approach is that it takes account of an individual's needs." Once those are identified, the process then measures the skill sets possessed by particular executives and establishes their relative value for the company. This also makes it possible to assess an employee's future potential. Ms Morton explains that it is a delicate process which must take careful consideration of market conditions. "For example, some clients only want to give a certain package, but if we know that higher salaries are available in the market, we feed back that information. This is usually followed by an evaluation of what each person can contribute in order to find the right balance between the individual and the employer." When devising a retention programme, a great deal of confidential information is discussed, which means that the highest level of trust and integrity must exist. "We may be made aware who is going to be promoted and who may be let go. Since this information can have an impact on a company's competitive advantage, confidentiality agreements may be signed," Ms Morton adds. She notes that, when planning retention programmes, the importance of personal relationships is often overlooked. "Resignation is similar to a divorce. Personal relationships may reduce the desire to leave and can make a counter-offer more effective," she says. Facing reality Even with the best retention plans, some employees will decide to move on. When that happens, the current employer may make a counter-offer. "Sometimes it takes a resignation before a company accepts they have to pay more," she says. "However, a counter-offer is basically a reactive measure. It can persuade employees to stay, but research shows that the majority of executives who have once thought about resigning will leave within 12 months anyway." Ms Morton believes that executive recruitment firms such as Hudson can also play an important role as a mediator in the difficult process of coming up with a suitable offer. This can involve putting together a package and offer in anticipation of a counter-offer being made. "We try to anticipate and understand the motives of an executive who is being considered for the new role. We maintain regular communication to be sure what that person wants and how the employer can match their expectations," she says. Thinking ahead In a strong economy, companies realise that retention programmes are a sensible investment An effective programme should consider remuneration plus training and personal circumstances Recruitment consultants can help employers to assess the skills and relative value of their staff A proactive approach to retention anticipates possible motives for resignation Employers should be ready to make counter-offers but realise that most staff who have once thought of resigning will leave within 12 months Taken from Career Times 19 August 2005 Your comments are welcome at [email protected]