Recent Trends in Human Resource Management

Monday, October 6, 2008

Retention Problems Begin During the Hiring Process

In most organizations the recruiting function is entirely separate from the retention effort, yet the design of the hiring process has a dramatic and direct impact on future turnover. More than one-third of the factors that drive future turnover have their roots in the recruiting, hiring, and on-boarding process.

Recruiting Factors That Impact Future Retention

If you're interested in reducing turnover, here are some of the hiring-related factors that impact future retention:

1. The source where you found the candidate. Employees who make referrals have a personal interest in the individuals they refer succeeding on the job. As a result, the employee making the referral has a tendency to mentor or guide that individual and will intervene to help the candidate if he or she gets frustrated. Sources of recruits who don't have that mentoring connection, like large job boards, almost always produce hires who quit at a much higher rate. Look at each of your early turnover cases and see which of your sources have above-normal turnover rates.

2. Their average tenure in other jobs. Calculate how long, on average, any "serial quitters" stayed in their last several jobs as an indicator of how long they are likely to stay in this job. I am not saying you shouldn't hire people who change jobs frequently. They might be top performers who are simply in high demand or who work on projects with relatively short lifecycles. However, you should estimate their likely tenure, then mark it on your calendar, and then later, actively "re-recruit" them around the time they are "overdue" for change and are likely to begin looking for a new job.

3. Hiring candidates who are focused on money. Every candidate has his or her own set of motivators for taking and remaining in a job, and a significant percentage of people are motivated primarily by money. Money is the offer component that is the easiest to compare between firms, but it is also a factor that can change fast. Individuals whose primary motivator is money tend to be at the top of the turnover pyramid because they frequently "jump" to a new job as soon as a higher monetary offer comes in. No matter how good your initial starting salary, if your organization is slow to give raises, bonuses, stock rewards, or to counter outside offers, you will inevitably lose these individuals when more money comes along. Leading firms like Ernst & Young and Southwest Airlines understand this relationship and as a result, they specifically target hiring individuals who don't have the "give me the money" mentality. Incidentally, individuals hired from executive search firms can fall into this "money first" category. If they left the last job because an executive search professional presented a "better money" offer, don't be surprised when they leave again when the next executive search professional calls with slightly more money to offer. Solutions include targeting individuals from not-for-profits, government, education, and medicine. Also, share information on the maximum and minimum salary, stock options, and bonus amounts (based on actual new-hire experience over the last two years). By providing only trend information from actual experience and carefully avoiding any direct promises to individual candidates, you can minimize legal issues and any misperceptions about the actual amounts that they "will" actually make. To determine a candidate's top motivators, give them a simple, one-page survey that requires them to force-rank the top and bottom factors that motivate them to change jobs. By forcing them to rank the top and bottom three "job change" motivators, you can get a good (though not perfect) idea of whether exceptional money is a critical factor. Options could include high base pay, bonus percentage, exceptional benefits, challenging work, learning and growth, working in a team, working independently, the opportunity to innovate, job security, a directive manager, a hands-off manager, a product they believe in, the desire to help others, recognition, and two-way communications.

4. On-boarding and orientation. The first few days on the job have a dramatic impact on future retention (one firm found that weak orientation could increase future turnover by as much as 20%). Research shows that individuals make a "mental decision" during their first month as to how long they expect to stay with the organization (Note: this phenomenon is highlighted in the popular book, Blink). New hires subconsciously judge whether the organization meets, exceeds, or fails to meet the expectations they have based on how they were treated during the first week and month. If they are under the belief that your organization promised exciting work but are told during their first week on the job to sit in their cubical and "read the manual," they are likely to conclude (and also to tell their colleagues) that while the organization may talk a good game, it is not reflected in the actual job. To avoid mixed messages, make sure that your "local" on-boarding is stimulating and gets them up to the expected level of productivity quickly. Such a program might focus on coordinating meetings with the top people right away, providing new hires with a mentor, and periodically asking them what can be done to bring them up to productivity faster. During orientation, ask candidates specifically "what is the best way to manage you?" By identifying what management approaches they personally have found to be effective with them in the past, you can avoid the need for a lot of trial and error on the part of their manager. Some of the "factors" you want to identify relating to "how to best manage them" include what motivates them, what frustrates them, what is the best way to communicate with them, how often they like to see their manager, what challenges them, and what would they like to learn during orientation. With this information, you can provide their new manager with insights into the management approaches that make them the most productive (note: managers can also provide new hires with a profile outlining how they manage their employees). Ask new hires during on-boarding why they accepted the job and what led them to quit their last two jobs. Passing those reasons on to their current manager can help ensure that they know which factors might cause the new hire to leave again.

5. Recruiter involvement after the hire. If you want to reduce future turnover, maintain a relationship with new hires during their first six months in order to ensure that they don't become frustrated (this approach was championed by Michael Homula at FirstMerit Bank with great success). Recruiters can add value because good recruiters routinely know what motivates and frustrates their candidates. It only makes sense that they maintain a relationship with new hires for a few months after they come on board to gauge whether the candidates' expectations are being met. I call this process "closing the sale." In this case, recruiters don't take over a manager's role in retention; instead, they only supplement it. Recruiters can be a source of advice and information, help reduce new hire frustration, and provide insight on how to navigate inside the company. Recruiters can also help new hires understand the "what" and "why's" within the firm. As many as 60% of new hires fail, not because they're bad hires, but instead because of a bad initial job placement. Recruiters who keep in touch can help to speed up internal redeployment of initially "mis-placed" individuals.

6. The lack of diversity orientation and retention. Many organizations have a diversity recruiting function that endeavors to hire diverse individuals. Unfortunately, once they are hired, diverse individuals frequently receive no further special attention. This is unfortunate, because by definition, diverse individuals have different expectations and needs than the average hire. If you treat all new hires exactly the same, you should not be surprised when you find that diversity turnover rates are higher than your average turnover rates. The solution is simple: offer variations in on-boarding to ensure that the unique needs of diverse people are met. Next, add a diversity retention function or process to ensure that your organization gets direct feedback from diverse new hires about factors that might cause them to be frustrated or to begin looking for another job.

7. Manager rewards for great retention. Less than one in three organizations reward managers for having low turnover rates among new hires. If you want managers to pay attention to retention both during and after a new hire's induction period, show them the impact that turnover has on their business results. Then, tie every manager's bonus to "performance turnover." Performance turnover differs from traditional turnover in that the loss of a top performer, a diverse individual, or an individual in a mission-critical job is weighted significantly higher than the turnover of an average performer. There is no punishment for losing a bottom performer.

8. Being aware of the most common causes of turnover. If your organization conducts delayed or "post-exit" interviews, you probably already know that most top performers leave because they had a bad manager, were not challenged, were not growing, or were mistreated. Don't place a top candidate with a mediocre or bad manager. If your organization doesn't have a bad manager identification program, look at the processes pioneered by FedEx and Dell.

Shifting to other turnover causes, if you want to ensure that new hires are challenged, learning, and growing, ensure that all new hires have an individualized plan for learning, growth, and challenge (Qualcomm, for example, requires every employee to have a learning plan). Next, focus on the lack of differentiation.

In my experience, it's hard to get compensation professionals to realize the important role they play in great recruiting and retention, but every effort must be made to convince them that you can satisfy most top performers' need for differentiation by ensuring that a significant portion of pay and bonuses are based on performance.

Few things frustrate top performers more than being paid, recognized, and treated exactly the same as poor performers like Homer Simpson.

Final Thoughts

HR has justifiably been accused of creating numerous functional "silos" that hinder cooperation between the different HR departments. New hires must be "maintained" just like any other new asset. There needs to be a planned maintenance schedule that is personalized to the needs of each new hire. That maintenance process must be coordinated and systematic and must "force" integration of the actions of the various silos. Almost without exception, one of the thickest walls between HR functions is the one that separates the recruiting function from the retention effort.
In my experience, the interaction between these two functions is, all too often, minimal to nonexistent even though bad recruiting directly "causes" future turnover and conversely, poor retention efforts unnecessarily increase the future workload of all recruiters.

To avoid this common problem, identify the direct connections between how you recruit and orient and future turnover. Then take the necessary steps to stop this wasteful, preventable turnover.

Ref: Dr. John Sullivan


Things That said...

Have you read the new book "Who: the A Method for Hiring"? It is currently #1 on the Amazon business list. I personally think it will be THE definitive book on hiring over the next decade. It clearly addresses the issues and pitfalls that a company can encounter in the hiring process. As the economist says, unsuccessful hiring is the single biggest problem in business today.

Professional Consultant said...

Thanks a ton dear follower. I was unable to locate the book on Amazon. please send me the link of the same.

I want to make this blog a success ans would require help to do so.

The idea of running this online forum is to make it a ready reference for its followers for the long time.

Please suggest some topics for discussion.