Keeping the Ones You've Got: Talent retention

Episode #101 Keeping the Ones You've Got: Talent retention

We’ve been hit with a number of questions lately about how to stop people from leaving your team. In one of these questions our listener Damien puts it this way,

“Managing people has become 80% of my daily task and trying to develop managers into leaders to ensure each location has a great culture is challenging. My industry has an extremely high staff turnover rate. So are there any methods and strategies to help retain staff?”

Thanks very much for that question Damian. We place a huge amount of emphasis on getting the right people into the right roles to ensure that can perform at its best.

However, if we don’t pay attention to the ones we already have, it may be a little counterproductive and it’s incredibly expensive.

What can you do to provide the best chance for your good people to stay?

• We’ll start by exploring the phenomenon of staff turnover a little more deeply.

• I’ll then take a quick look at how to best hire people.

• I’ll discuss why it’s important to make money, a hygiene factor in this whole equation.

• We’ll cover the concept of giving your people meaningful work and then getting out of their way and not interfering so they can actually do it.

• I’ll finish with some ideas for dealing with what I like to call “precocious talent”.

the phenomenon of staff turnover

Turning over people is extremely costly. No matter what source you look at, they’ll tell you it’s about 30-40% of the annual salary of the role that it costs you every time you turn someone over.

For a $100,000 employee, that’s around $40,000 when they turn over. But at the high end of the market, it’s easily upwards of 60% of the annual cost of the role.

In my experience, let’s just have a look at what a $500,000 base role looks like. If you have to change someone in that role, there are some very tangible costs that you have. Often, you’ll have to pay out the contractual entitlements of the outgoing executive, which can be in the range between a $100,000 to $200,000 easily. Executive search fees, to start looking for the new person, can be 30% of year one remuneration and reward. So there’s another $200,000 there.

Sometimes to secure the right person that you want for the role, you’ve got to pay a sign on bonus to entice them to come across from their existing organisation. There’s a huge amount of money right there, just in changing out the person, that’s not even counting the intangibles.

Some of these intangibles include things like a disruption to the business, loss of productivity, the cost of bringing the new executive up to speed because they’re not going to go and hit the ground running straight away, you’ve got to spend time educating them and bring them into the culture.

Then of course, they like to change direction once they have their feet under the desk, because every exec wants to make a mark and put their own stamp on things. The cost of turning over a senior executive role is enormous.

What this tells us is we want to get our hiring pretty right. We’re going to come to this in a minute, but it’s really important when we think about turnover, that we realise there are two types.

There’s desirable turnover and there’s undesirable turnover. Now, despite the cost of turnover, you do want to have a healthy level and you should be prepared to pay for it. This is in desirable turnover. This is when people leave the organisation who can’t do their job, who don’t fit the culture, or for some other reason you would prefer to replace. If this desirable turnover isn’t between 5-10% in your organisation, chances are that you’re not setting high enough standards for behaviour and performance.

Undesirable turnover on the other hand, is when people you really want to keep, decide that they want to leave the organisation.

This is the type of turnover that you want to be as low as possible or even non-existent. But you have to think about turnover in this way. It’s misleading if you don’t categorise it. Sometimes the best way to improve your organisational performance is to increase staff turnover. That’s of course, the desirable staff turnover.

I’ve led portfolios on several occasions across my career where the turnover in some parts was way too low. Our ratio of undesirable turnover to desirable turnover was way too high. The moral of the story here is, target a healthy level of turnover, and know why you’re doing it.

How TO get the right people into your organisation

The best way to get the turnover ratio right, is to hire better people. This starts with attracting the best talent. You have to be really deliberate about this.

I’m going to refer you back to an old podcast episode, Episode #12, The War for Talent. This is really important in terms of understanding who you should be targeting to hire and how you can actually get better people in through that hiring process, based on the talent pools that you have to deal with.

First of all, you’ve got to understand the pool you have available in any given role and make sure you really know your company’s employee value proposition. In other words, why on earth would someone want to come and work for your company?

You’ve got to be really deliberate about describing this so that someone who doesn’t have in-depth experience or internal experience of your organisation can understand what’s in it for them. You want to get a great fit with a great person, and so this is a selection and filtering tool that helps you to hire better. You’ll have a range of quality to choose from, and what you want to do is always head for the high end of the talent pool that you have available to you. You have to be super deliberate in that process though. Know exactly what you want before you go to market and conduct as many interviews as you need to. If you think you want to talk to someone four times, you talk to them four times so that you can ask all the questions you need to ask to do your due diligence.

Reference checking is another way of doing some sort of verification, and it’s very, very important. Now I have a little rule of thumb. When I’m hiring senior people, I want to talk to as referees their last two direct managers. Why? Because they’re the people who have the most recent experience of what this person’s performance and behaviour is like. Very often, you’ll find that people don’t offer up their last two direct managers as their referees. And this is where you have to be firm. If they won’t let you talk to their last two direct managers, that is a massive red flag. And so just bear this in the back of your mind. Another thing about reference checking is don’t delegate these to a recruiter. I mean, I love recruiters and all respect to them, but for a recruiter, this phase is a box checking, compliance exercise.

I want to sell this person into the role. They’re the preferred candidate. And I want to make sure that I’ve checked this box, which is talk to the referees and tick off the things I need to tick off. If you want to really drill down and get serious about it and start to get really diligent about finding out whether a person has any flaws, you need to do those yourself and you need to do them really, really diligently. And while we’re talking about uncovering flaws, psychological and aptitude testing, I find essential for senior roles. There’s only so much you’re going to find out in an interview room or from a resume, or even from talking to a referee. They are all geared to let you see the applicant in their best light. If you do some independent testing on them, you’ll find out more about what they’re really like and their chance of success fitting in with your organisation and performing in the role you’ve got them in to a much greater degree of accuracy. Everyone talks a good game. And from there, it’s all about values and cultural fit. You can’t change someone’s values and belief system easily, if at all. You can train them. You can give them new skills. And if they’re smart, they can learn almost anything about your business. But if you haven’t got the right behavioural and cultural and values fit, you’re already screwed and they’re not going to work out.

The role money plays in motivation

Paying people more doesn’t necessarily get you a better outcome. Although a lot of people are driven by money, this is almost never their main reason for staying in an organisation once they’ve accepted a role. Here’s a rule of thumb:

You have to pay people enough money that you take it off the table as an issue.

This is what we call a hygiene factor. It has to get to an acceptable level, and then beyond that, it’s not really the main driver. In my experience, when people become dissatisfied with what they’re paid, this is usually for non-financial reasons.

For example, in the hiring process, you may have misrepresented the role in some ways, and you’re actually asking a lot more of them than you’d indicated at interview.

For example, someone turns up in your organisation for new role and suddenly discovers, “Oh, hang on a minute, in this organisation we always come into the office on Saturdays and work for half the day”. If they didn’t know this beforehand, that could be a source of some level of dissatisfaction. Or maybe they see someone who’s a passenger getting paid more than they are. Why should I work my butt off, when you’re paying Jethro more than me to surf the internet all day, really? Or maybe perhaps in some way, you’ve broken the psychological contract with that employee, and their immediate reaction is to go to the salary issue. “I’m not getting paid enough for this shit”. This is what happens when they have a bad boss.T

here’s this cliche that says “People join organisations, but they leave bosses”, I’m sure you’ve heard that. So to take money off the table as an issue, all you really have to do, is ensure that your people feel as though the expectations that you put on them are consistent with the money you’re paying them. Don’t be unrealistic about what you can get people to do for the amount of money you’re willing to pay. I remember years ago, I actually applied for project manager role when I was a young guy, and I read this specification from a recruiter in our financial press in Australia. And the way it described the person they were looking for, it was the project manager who could walk on water and back. The skills, the qualifications required, the scale of the job, it looked like it was a top notch role. So, I spoke to the recruiter and asked him a few things about it before I put my application in. When I asked about the remuneration she hesitated, she said, “It’s paying $37,000 per annum”. After I took a second or so to let that sink in I said to her, “So do they only want me on Tuesdays?” Really?

If you want the right person in the roll, you’ve got to be prepared to pay for quality. You want the best in market, but you’re not prepared to pay in the top quartile of that role type for the location you’re in, you’re just being stupid. Not smart. If you get someone in, they won’t stick. They’ll just be looking for the next opportunity to get out and get a role that pays the right amount of money. And then you’re back to the cost of turnover problem. Pay people what they’re worth, in a way that they feel satisfied that their remuneration is fair, and the rewards are theirs if they perform. I’d always rather pay 20% above market to get the best person. Why? Because those people are the ones that outperform the rest, not by 20%, but by 200%. You know these people when you see them, I’m sure you’ve seen them in your careers, and they are absolutely invaluable. So in terms of value for money, paying more to get the Rolls Royce is really, really worthwhile in certain roles. If you pay people fairly from the outset though, and then reward them appropriately, as you see their contribution, they rarely have an issue with money.

rules for keeping your good people

Well, as we said, people leave bosses. So the number one thing, is to be a better boss. And there’s no easy way to do this, there’s no shortcut. Becoming a better leader is what this is all about. Why do people stay? You’ve probably all experienced times where you’ve simply loved your job. And those aren’t necessarily the highest paying jobs you’ve ever had. I’m sure I’ve mentioned in a previous podcast episode, Daniel Pink’s book, Drive. He bases this book predominantly on research from the Federal Reserve Bank of Boston’s research centre, in a study known as The MIT Incentive Study. And Pink distils the puzzle of motivation. He says there are three main drivers. Autonomy, mastery, and purpose, and everything you do as a leader has to tap into these things, to give people the best chance of getting satisfaction, that deep satisfaction, from having impact in their role.

I’m going to whip through five things here really quickly, just to give you an idea of the types of things that feed into this autonomy, mastery and purpose of your people, and give them that level of satisfaction. That holds them in place. That doesn’t see you have an increase in undesirable turnover.

#1 Give people clarity

Not just the what, but the why. Why am I asking you to do this? And let them work out the how as much as possible for themselves. So purpose comes from knowing the why and autonomy comes from letting people work out the how.

#2 Give people air cover

Don’t let irrational shit flow downhill. That’s when they start saying, I’m not getting paid enough to do this. So you’ve got to protect them from stupid things. Stupid requests from the board, stupid things that come from managers above you, that detract from value and just add workload with no real purpose.

#3 Don’t micromanage

“You don’t hire a dog and then bark yourself” as Jeffrey J. Fox says.

Let your people do their jobs and monitor the outcomes, not the inputs. “I still love trust, but verify”. – Ronald Reagan.

#4 Stretch your people, but don’t under resource them

There’s nothing more soul destroying than sending people off on a fool’s errand. So asking them to deliver something that’s impossible to deliver.

#5 Be appreciative

Show your people when they’re doing a good job. Show them they’re valuable. Give them a pat on the back. Tell them they’re doing a great job. This is more valuable than any bonus or pay rise can be if you’re doing this frequently, if you’re doing it genuinely, and if you’re doing it in a timely manner.

Dealing with precocious talent

These are the people who are really, really valuable. They perform super well. They seem to have an enormous potential as a future part of your organisational business.

But, the downside, is that sometimes they overestimate their value in terms of their readiness for the next promotion or pay rise. I have been guilty of this in the past myself. I got to the point in my very first job as a software developer, after two years where I said to myself, “Stuff this. I’m way better than my boss now. I’m underpaid and undervalued here. People are offering me jobs in other organisations. Why the hell should I hang around”?

Now my bosses boss was a great guy by the name of Jack McElwee. He was fantastic. He tried to explain to me what my future path would look like if I stayed in that job, which was in one of the large banks in Australia. But I wasn’t hearing any of it.

I resigned and I was happy to move on to my next adventure. Now had I stayed, my career path would have been incredibly different. Maybe not better, but definitely would have opened up a different opportunity sooner for me.

The moral of the story is this, with precocious talent, you won’t be able to explain to them why they shouldn’t be impatient. Do everything you can to keep them engaged within reason, but don’t give into their demands for more money, or more responsibility, or a faster promotion, no more so than you’d be prepared to give them in terms of what it does for your business.

More money almost never works. It doesn’t solve the underlying need for recognition and advancement. Even if you pay them more, in my experience, you’ll be back having that same conversation within three to six months. Let them go and work out for themselves that the grass isn’t always greener.

It’s normally just a sign of immaturity. They need to get a few black eyes and skinned knees to give them some perspective. Be grateful that you had them working for you, and then let them pursue their journey. If you do this right, you never know when they’re going to come back.