Attracting, Retaining & Motivating Critical Talent
People make employment decisions based on economic, social and personal considerations. It is therefore incumbent on ensure the organization has both an employer brand and a value proposition that address all these considerations. Management rightfully aspires to formulating strategies that attract, retain and motivate the talent their organizations need… that is their primary role. It is sometimes suggested that rewards alone can achieve these three objectives, but there is significant evidence that other talent management strategies and programs are critical to success. Appropriate rewards strategies are necessary, but not sufficient pre-requisites for building and sustaining an effective workforce.
This article summarizes what research and experience have shown to be important to people when selecting employers, deciding whether they will stay and what they will contribute while employed. It also presents strategies and programs employers can utilize to increase their ability to get and keep the people they need and to encourage those to put forth their best efforts.
Attracting Critical Talent
Organizations need to create an attractive employer brand. It must decided what will be viewed as valuable by potential candidates. The increasing focus on the environment, especially by recent entrants in the job market, has made some organizations more appealing because of their mission. Being named one of the top organizations to work for seems to have a positive impact on the ability to recruit the required talent. “Being green” has recently been a theme used to differentiate employers from their competitors. Culture can also attract or repel candidates, based on whether a culture fits their value systems and their preferences. Although it is difficult for outsiders to really understand the culture that prevails within an organization, they will make guesses based on the information they are able to obtain. It is increasingly common for organizations to include descriptions of their culture in their branding efforts.
The reputation of an organization “on the street” will have an impact on its ability to attract talent. Organizations that have become serial downsizers, shedding personnel when revenues drop, will be viewed with suspicion by potential candidates. Research has shown that downsizing rarely accomplishes the objectives for doing it. So, treating its people as its most disposable asset, rather than its most important asset, will cause an organization’s reputation to suffer, very likely without enjoying offsetting benefits. During the pandemic organizations having the ability to provide something to those sequestered in their homes prospered… and increased staffing levels to meet demand. As the crisis subsided many downsized.
Early career people tend to be concerned about growth potential, career progression and learning opportunities, often more than about the starting salary. Mid to late career people tend to be more concerned about security. Most people will be concerned about maintaining the currency of their knowledge and skills, particularly considering the “you stay as long as you want to and as long as we want your” employment contract that exists in most private sector organizations today.
Providing employment candidates with a realistic employment preview has been shown to be one of the most important components of an effective employer value proposition. Research indicates that a realistic preview is one of the best ways to minimize unwanted turnover during the first 1-2 years of employment. Telling the truth about a candidate’s initial role and about career opportunities that are available over the longer run is a way to inoculate the person against unpleasant surprises and to begin the employment relationship on an honest basis. Providing a balanced expose of both the good and the not so good things a candidate will face once employed is critical.
The author worked with a research organization to develop a recruitment brochure that showed the entire career ladder for Scientists, sending the message “we have all the opportunity you could want… taking advantage of it is up to you.” Another organization that had call centers throughout the U.S. created a 30 minute film entitled “life as a call center operator.” People wishing to apply had to view the film before completing an application. Although a significant number of possible candidates went running out of the building during the film those were the people who would have been most likely to leave, after receiving costly training.
Another element of an effective staffing system is the process of evaluating candidates. It is important for those considered to feel that the selection process is fair and appropriate. There is considerable research in support of structured interviews as an effective selection tool, yet in the private sector the vast majority of selection is based on unstructured interviews which have very low validity and reliability. Using unstructured interviews is bad practice and the organization is very likely to make poorer selection decisions as a result of using them. Also, it is likely that the most qualified candidates will view this kind of selection process as arbitrary, reflecting poorly on the organization’s human resource practices.
The way selection interviews are structured has become even more of an issue as organizations deal with diverse candidate pools. The way people are socialized will shape their beliefs and values and shape their expectations. Treating everyone the same is challenging for organizations that recruit globally, since national/ethnic cultures will influence people’s expectations. If this is not recognized and addressed in the design of the selection process it is very likely that the quality of decisions will be adversely impacted.
The public sector uses structured panel interviews, required by laws and regulations associated with civil service. This approach has been shown to be more valid and reliable than unstructured interviews and it gives the organization an opportunity to expose the candidate to the culture of the organization and how work is done. However, this approach requires more resources and can extend the time it takes to identify the preferred candidate. When unemployment is low and when there is an inadequate supply of qualified people being able to act quickly can be important. Today’s shortage of potential hires may make it advisable to invest in ensuring the quality of the selection process.
Organizations that value specific occupations highly have an advantage when attempting to attract qualified candidates in those occupations. For example, IT professionals are central to the mission of a software company and critical to its performance. On the other hand, a hospital may view IT as a necessary but not critical occupation. Hospitals are evaluated based on the quality of the medical care they provide, not on whether they have the best computers and programmers. In fact, they may be able tp outsource IT work without diminishing the quality of the care they provide. As a result, IT professionals considering employment in a variety of organizations will be likely to consider how their occupation is viewed by each.
Paying more than competitors can have a positive impact on an organization’s ability to attract the talent needed to meet its needs. Candidates for employment generally know what rewards are on offer from potential employers and all else being the same the relative pay level is important in their selection of job offers. Rewards consist of base pay, benefits, recognition, career opportunities and the satisfaction derived from doing meaningful work. Organizations can differentiate in the rewards they offer to candidates and employees. This segmentation enables the organization to optimally allocate the available resources and to attract who they most want. The segmentation can be based on potential, performance, occupation, experience and/or the possession of critical skills.
When employees feel in control of their performance and believe that they are fairly appraised and rewarded they are more apt to be satisfied. When candidates are considering employment with an organization they will attempt to determine if these conditions are apt to exist in that organization. If what will be expected of them is made clear and is viewed as appropriate it instills a sense of confidence that their performance will be fairly assessed. If how they will be rewarded is clear and viewed as appropriate it will positively impact their assessment of the organization’s value proposition. Different value propositions will attract different people. High performers are unlikely to join an organization that pays based on longevity or that distributes rewards in an egalitarian manner. Those wishing to find stable and secure employment that does not demand high performance will find this approach to be more to their liking. So, the nature of the rewards offered will impact who organizations will be able to attract and who they will have less success in hiring.
Retaining Critical Talent
Organizations often despair when turnover exceeds some “acceptable” level. The amount of turnover that is acceptable usually varies, depending on the criticality of the skills/knowledge possessed by the leavers. Turnover of people with critical skills that are hard to replace will certainly have a greater impact on performance than people leaving who can be easily replaced. But it is important to drill down to determine the types of turnover.
The type of turnover that is most often the focus of concern is that which is voluntary, dysfunctional and avoidable. But movement within the organization that disrupts operations and impacts performance is also a concern. When programs involve rapid rotation, the effort needed to focus on their training can detract from the functioning of the units they pass through. If a role held for a short period does not result in the acquisition of knowledge and skills that will increase the individual’s value to the organization, it may not be worth the cost. Retaining those with critical talent and/or great potential can certainly be important, but the impact of development programs should be designed so they do not negatively impact day to day operations.
Labor market theory has long held that employees with skills that have value only to their current employer (firm specific skills) do not have alternative employment opportunities that would make them equally well off financially. These employees may be considered to be captive, unless there are other reasons to leave. On the other hand, employees with general skills are purported to have many more employment alternatives, since their skills are transportable to other organizations. For example, staff professionals (IT, HR, Finance) tend to be more mobile and organizations typically use market survey data that crosses industries to establish pay levels. But further research suggests this distinction between firm specific and general skills may be simplistic. There are instances when people have general skills in addition to firm specific skills and these general skills may have more value to other employers than to the current employer. There are also instances when a competitor wishes to add new skills to its repertoire that are specific to an employee’s current organization.
Utilizing rewards to retain those an organization most wants to keep is a common approach. Since employment contracts have lessened in their retention power, due to complications in enforcing them, rewards can play a role if they are appropriate. One option is to design programs that provide vesting in significant rewards only after a specified time or after achieving specific objectives. These programs can provide holding power. Defined benefit retirement programs had been widely used as a retention device, although the liabilities they create in an uncertain world has caused the majority of private sector organizations to replace them with defined contribution (DC) plans. The DC plans make funds portable, which means they do not have holding power unless they are sufficiently competitive to make them attractive.
Using restricted stock is another approach. If the stock cliff vests after five years the loss of that potential value would enter into an employee’s decision about leaving before they vest. These programs are sometimes criticized since they only require keeping one’s job, with no performance motivation, and they can result in trapping people the organization would rather say goodbye to. An alternative is to utilize stock options or deferred cash awards as a part of a long-term plan. For example, a 10 year plan could be created that included overlapping grants of non-qualified stock options with 5 year vesting at years 1, 4, and 7. This would result in a participant having something to look forward to and would communicate an orderly plan for issuing options. Long-term cash plans could also be structured to show participants the value of staying with the organization and performing well.
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Retention will also be impacted by how well an employer has lived up to the “promises” made during the realistic employment preview. Failing to provide information about both the positive and negative aspects of employment in a balanced fashion at the start of the relationship can lead to a feeling of resentment when employees encounter some undesirable realities. This can accelerate the rate at which they begin to consider other options. The employer’s commitment to development will also impact the desirability of remaining. If training is treated as a short-term cost by the organization, to be stopped or minimized during downturns, employees will begin to doubt they will be able to progress in their careers within the organization. They will also be concerned about their skills remaining current and valuable to other organizations. Organizations failing to invest in development because they fear they are training employees for better jobs elsewhere should also consider the impact of that failure on their ability to retain those with critical skills.
It is therefore unlikely that relying solely on rewards programs that are designed to retain key personnel will be effective if other conditions of employment are more important to employees when deciding whether to stay or leave. The employee-organization relationship will be significantly impacted by the quality of supervision and the quality of communication between the organization and the employees. The degree to which managers establish clear performance criteria and standards and then continuously measure results and provide feedback has been shown to impact satisfaction and retention. Managers who continuously identify and recognize “small wins” along the path to goal attainment have a positive impact in the form of positive emotions, intrinsic motivation and favorable perceptions of the work and the employer.
Motivating Critical Talent To Perform Well
Retaining talent is only part of the challenge. Employees must also be motivated to contribute to meeting organizational objectives by performing at a high level. There is an abundance of research that supports the power of rewards to motivate performance. Of course that same research suggests employees must believe rewards are based on performance and that the rewards are equitable, competitive and appropriate. Occasionally claims are made that extrinsic rewards can negatively impact the intrinsic rewards experienced by employees. But these conclusions are based on laboratory research unrelated to the world of work, and there is no evidence the results are generalizable to the field. In fact, there is considerable field research that refutes the claim.
The three most widely researched behavioral theories related to motivation are expectancy theory, equity theory and reinforcement theory. These theories prescribe four pre-requisites for performance - the employee must
1) be able to do what is required,
2) be allowed to do what is required,
3) know what is required and
4) want to do what is required.
There are numerous things an organization can do to motivate their employees to perform well. Gallup research has found that “knowing what is expected” has the most impact on employee satisfaction and effectiveness. Although it is easy to claim employees clearly understand the criteria and standards used to evaluate their performance this is very often not the case. The author’s experience with focus groups is that employees frequently admit they have a general idea of what is expected, but feel they lack the information necessary to give them confidence that they are on the same wavelength as their managers. Extensive research on goal setting and feedback establishes that a clear understanding and acceptance of stretch goals has more impact on motivation than most other factors. But even though an organization has a goal-based performance management system much can get in the way of effectiveness.
Setting too many goals can confuse employees about what the priorities should be. The old saying “if everything is important nothing is important” rings true. Also, if the priorities change frequently employees can suffer from whiplash and be unable to perform well. Poor goal-based systems can be especially frustrating if significant rewards are tied to goal attainment. On the other hand, goal-setting and feedback systems have the potential to be potent management tools and should not be avoided because of the dangers of poor execution. The author recently designed a goal-based rewards program that utilized the Olympic Diving scoring method (total score is a function of both degree of difficulty and quality of execution). The employees were given considerable latitude in setting their own goals, as long as they were consistent with organizational goals, and their performance was based on both the degree of goal difficulty and the degree to which they were met. This avoided the common conflict between managers and employees relative to how difficult goals should be and also facilitated a level playing field across employees. If one employee chooses to set easy goals, increasing the odds of making them, it is understood that the overall rating will be lower than it would have been if the goals had greater difficulty. An employee setting difficult goals will be rated higher for the same quality of achievement. Of course managers still have to evaluate goal difficulty but as with any performance standards judgment must play a big role.
Managers should pay particular attention to how their programs impact the “wants to do it” pre-requisite. For example, if a high performer finds that the “consequences” of her contribution (pay increase; incentives) bear an uncomfortable resemblance to what poor performers received it is unlikely there will be strong motivation for her to repeat the high level of performance. This situation is a common by product of the “automatic step rate” systems that have been prevalent in many public sector organizations (i.e. the GS system used by some federal agencies and the systems in many states, cities and counties). The message sent, intended or not, is “stay employed, get a satisfactory performance appraisal and you get the same step increase as those who exert more effort and perform at much higher levels.” This is probably acceptable to those who perform at lower levels but those are rarely the employees an organization most wants to keep.
There is a danger in defining, measuring and rewarding performance solely at the individual employee level. This is common practice in the “individual super hero” kind of culture that widely prevails in the U.S. Wagon Train of the Year awards are not given out in Western movies... it is the individual hero that makes things happen. Although many organizations do without any type of organization-wide or group/unit/team incentive plan this can be a lost opportunity. If employees value being a part of something larger and find working cooperatively to be preferable than working competitively having all rewards tied to individual performance may not be the best strategy. For example, when teams are used to accomplish objectives it is important to decide how results will be rewarded. If all rewards are in the form of individual pay adjustments merit pay can actually tend to have a divisive effect. However, if a team incentive plan is used in conjunction with a merit pay plan both individual performance and team results can be rewarded. If individuals are to be motivated to do their best individually and to do their work in a manner that contributes to both the effectiveness of other team members and the effectiveness of the team it is important to provide incentives to provide that motivation.
Not all teams are the same. For example, some research teams are composed of members that have a high level of proficiency in their own specialized field (i.e., physics, computer science, materials science, nuclear engineering). If they are working on unique problems that require their pooled knowledge everyone’s contribution is required. In these cases it is difficult to sort out who contributed what to the aggregated results. Yet in some cases all of the individual rewards are delivered using merit pay systems. Since management’s ability to accurately determine what each member contributed is questionable team members are typically resigned to living with a system that is of questionable validity. When management despairs that each member believes they deserve the highest performance appraisal rating it would be advisable to recognize that this is a byproduct of a flawed system. The problems are exacerbated when management insists on a forced distribution of performance appraisal ratings each year. In this case raters who realize they cannot measure performance credibly often default to having employees take turns receiving the higher ratings.
There are of course teams that are structured such that individual contributions can be measured and rewarded, lessening the need to emphasize team level rewards. But “performance” needs to be defined appropriately. For example, the number of skills possessed by a production team member may impact the value of that employee, so adopting a skill-based pay plan may be appropriate. If a team incentive plan is used to augment the skill-based plan the employee is also rewarded for contributing to team performance. Lincoln Electric has successfully used Gainsharing plans to augment their productivity-based base pay plans for individuals and has remained competitive due to its productivity levels and its ability to align compensation costs with organizational performance. But Lincoln Electric’s avoidance of layoffs and their elaborate employee suggestion program augment their rewards strategy, making them a preferred employer that must sort through many more employment applications than they have jobs available. Attraction and retention have not been problems for them, in part due to their rewards strategy but also to the other HR programs and processes. Their productivity levels suggest high levels of motivation as well.
Conclusions
Retention of critical talent can be impacted by how well an organization selects and onboards new entrants, develops career management systems, invests in developing talent and communicates growth opportunities to those it wishes to keep. Performance management and rewards management strategies also play a key role in retaining the people the organization most needs in order to succeed. Again, employees must believe their performance is defined, measured and rewarded equitably, competitively and appropriately. Rewards programs that build in retentive power can help to keep key people, or at least to make them think twice about leaving. It also has been found helpful to treat employees with respect and remind them often that their contributions to the organization are valued and appreciated.
bout the Author: Robert Greene, PhD, is CEO at Reward $ystems, Inc., a Consulting Principal at Pontifex and a faculty member for DePaul University in their MSHR and MBA programs. Greene speaks and teaches globally on human resource management. His consulting practice is focused on helping organizations succeed through people. Greene has written 4 books and hundreds of articles about human resource management throughout his career.